FTC Report Examines Surveillance Pricing and Its Impact on Consumers

The Federal Trade Commission (FTC) released a preliminary report on January 17 exploring “surveillance pricing,” a practice in which businesses adjust prices for individual consumers based on personal data and behaviors. Suzanne Smalley reports in The Record that the report’s information came from six companies: Mastercard, Accenture, PROS, Bloomreach, Revionics, and McKinsey & Co.

Those companies provide tools enabling businesses to algorithmically tailor prices based on geolocation, shopping habits, and even how users interact online. The report raises concerns about transparency and the potential for consumer exploitation.

The FTC initiated the study in July, requiring the six firms to disclose information about their pricing tools. While the report is still in its preliminary stage, it highlights the use of granular consumer data to inform pricing decisions.

The report found that businesses use surveillance pricing tools to offer dynamic pricing tailored to specific consumer characteristics. This can lead to different consumers paying varying prices for the same goods.

The FTC could not reveal detailed case studies due to confidentiality constraints, but the findings suggest that many companies use these tools to refine their pricing strategies. Examples include targeting discounts for specific skin types or raising baby product prices for new parents. 

However, the extent to which each company uses or enables this surveillance pricing strategy remains unclear. The six companies collectively work with up to 250 clients across various industries, including grocery stores and retail chains, illustrating the widespread use of such technologies.

Incoming FTC Chair Andrew Ferguson objected to its publication, saying it should not have been released before the agency’s investigation had concluded.

Outgoing Chair Lina Khan said, “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.”

Some firms disputed the characterization, asserting that their software does not focus on individual pricing.

The FTC has urged consumers and businesses to share their experiences with surveillance pricing. Businesses using these tools should consider reviewing their pricing models for fairness and transparency to maintain customer trust and meet potential regulatory expectations.