US FTC looking into targeted pricing based on personal data
The U.S. Federal Trade Commission (FTC) has initiated a study on products that enable companies to set different prices for consumers based on their locations, past purchases, and other personal data.
On Tuesday, the FTC announced that it had ordered Mastercard (NYSE), JPMorgan Chase (NYSE), and six other companies to provide information about targeted pricing products, the data they use, their clients, and the impact on prices.
The FTC is also seeking similar information from IT services provider Accenture (NYSE), consulting firm McKinsey & Co., and software providers Pros Holdings Inc, Revionics, Bloomreach, and Task Software.
All these companies offer products that use consumer data and artificial intelligence or other technologies to tailor prices for individual consumers, according to the agency. None of the companies are currently accused of any wrongdoing.
FTC Chair Lina Khan stated that the study aims to shed light on the “shadowy ecosystem of pricing middlemen.”
“Firms that harvest Americans’ personal data can put people’s privacy at risk. Now, firms could be exploiting this vast trove of personal information to charge people higher prices,” Khan said in a statement.
A spokesperson for Revionics responded, saying the company does not use individual consumer data or develop software to target prices to individuals. Instead, its software considers market-level factors when recommending prices to retailers.
“We are confident that the FTC will affirm the benefits of Revionics’ AI price optimization software following its research into this matter,” the spokesperson added.
A Mastercard spokesperson said the company is reviewing the order and will cooperate with the FTC. Other companies did not immediately comment on the orders.
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Online advertising has long used data such as browsing history and device location to determine which ads consumers see. The FTC is concerned that similar technology could now be used to set disparate prices, which it refers to as “surveillance pricing,” or potentially collude with competitors, according to FTC officials.
The FTC voted 5-0 to authorize the study, though the agency’s two Republican commissioners disagreed with the term “surveillance pricing,” preferring “personalized pricing.”
The products under scrutiny are known by various names, including data-driven pricing, price optimization consulting, and location-based predictive targeting.
R.J. Cross, a consumer advocate at the U.S. Public Interest Research Group (PIRG), expressed concerns about fairness and privacy regarding these practices.
Last year, PIRG and other groups urged Mastercard to limit its use of cardholder data to providing card services.
The FTC is already considering rules aimed at protecting consumer privacy and limiting the data businesses can collect without consent.
In parallel, the U.S. Consumer Financial Protection Bureau is also contemplating potential rules to expand privacy protections for consumers.
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