FTC Report: Surveillance Pricing Used to Charge Consumers Individualized Prices
The Federal Trade Commission released a preliminary report on surveillance pricing, describing how six companies provide algorithmic tools that allow retailers to charge individual consumers different prices based on personal data including location, demographics, and online behavior. The FTC found that these practices could result in higher prices for targeted consumers and said it would continue investigating the issue.
What happened
The Federal Trade Commission released a preliminary staff report on surveillance pricing practices in which six companies — Mastercard, Accenture, PROS, Bloomreach, Revionics and McKinsey & Co. — were ordered to provide information about their surveillance pricing products in July.
Businesses use these algorithmic tools to constantly adjust and target what they charge consumers based on a variety of individual characteristics, including geolocation, demographics, shopping habits, and consumer behavior data such as mouse movements on webpages.
Reported impact
The FTC report indicates that surveillance pricing means higher costs for consumers, with companies able to determine individualized and different pricing and discounts based on granular consumer data. A hypothetical example involves a consumer profiled as a new parent being shown higher prices for baby products.
The six studied companies work with as many as 250 customers, ranging from grocery stores to clothing franchises, potentially affecting pricing across multiple retail sectors.
Index analysis
The report is at the 'staff perspective' stage and is not yet final. It only offers hypothetical examples due to the FTC's requirement that it not reveal confidential trade secrets and does not make clear how extensively each of the six companies profile consumers.
Governance controls
Outgoing FTC Chair Lina Khan stated that 'The FTC should continue to investigate surveillance pricing practices because Americans deserve to know how their private data is being used to set the prices they pay and whether firms are charging different people different prices for the same good or service.'
Classification
Sources and evidence
This record was researched and written by the Index, based on the following original reporting.