FTC launches probe into how companies use data to tailor what each customer pays

🌈 Abstract

The article discusses the Federal Trade Commission's (FTC) inquiry into how companies use consumer data to set individualized pricing for products and services, a practice known as "surveillance pricing." The FTC has ordered eight companies, including major firms like Mastercard, JPMorgan Chase, and Accenture, to explain how they gather and use consumer data to determine pricing, which could undermine consumer privacy and marketplace competition.

🙋 Q&A

[01] FTC's Inquiry into "Surveillance Pricing"

1. What is the FTC's inquiry about?

• The FTC has launched an inquiry into how companies use consumer data, such as demographics, web browsing history, credit history, and geolocation, to set individualized pricing for products and services, a practice known as "surveillance pricing."
• The FTC has ordered eight companies, including major firms like Mastercard, JPMorgan Chase, Accenture, and McKinsey, to explain how they gather and use consumer data to determine pricing.
• The FTC is concerned that this practice could undermine consumer privacy and marketplace competition.

2. What is the nature of the FTC's probe?

• The FTC's probe is known as a 6(b) inquiry, which sometimes precedes enforcement action and allows the FTC to conduct broad inquiries into companies' business models.
• The inquiry is designed to enhance the FTC's understanding of the "opaque market" for third-party products that use advanced algorithms, AI, and other technologies to categorize individuals and set targeted prices.

3. What are the key details about the companies involved in the FTC's inquiry?

• In addition to the major firms mentioned, the FTC also sent inquiry letters to the software companies PROS, Bloomreach, Revionics, and Task Software.
• Revionics stated that it does not use individual consumer data or develop software that recommends pricing targeted to specific individuals, but rather its AI-powered price optimization software considers market-level factors.
• The other six companies did not immediately respond to requests for comment.

[02] FTC's Broader Focus on Data Exploitation

1. How does the FTC's inquiry fit into its broader focus?

• The FTC framed the inquiry as part of its ongoing focus on the "hidden ecosystem of data brokers, digital platforms, and other intermediaries that specialize in monitoring and selling user data."
• Under FTC Chair Lina Khan, the agency has taken unprecedented steps to target data brokers and other companies exploiting consumer data, with a particular focus on how companies gather and sell geolocation and health data.
• Khan stated that "firms that harvest Americans' personal data can put people's privacy at risk" and that companies could be "exploiting this vast trove of personal information to charge people higher prices."