On Tuesday, the Federal Trade Commission announced that it’s investigating if and how companies use Artificial Intelligence (AI) to target consumers with individualized prices based on their personal data, a tactic known as surveillance pricing.
What is Surveillance Pricing?
Surveillance pricing uses customer information like home address, demographic makeup, and shopping habits to categorize individuals and determine what prices to charge for services or products. This is not to be confused with dynamic pricing, which involves actively changing the price of something based on demand and other factors.
Eight companies that offer services to track real-time customer information using AI and other technology were sent orders to provide information about their tracking products to the FTC. The companies – Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture and McKinsey & Co – advertise targeted pricing products to clients like Starbucks, McDonald’s, Home Depot, and Kirkland’s.
While the investigation is not meant to accuse any of the companies of wrongdoing, the agency said it’s trying to find out what these pricing products are, what data they collect, who uses them, and how this affects prices. The FTC wants to know if, for example, you’re charged more for cheddar cheese because an algorithm determined you’re really into fondue.
The FTC is already considering rules aimed at protecting consumer privacy and limiting what data businesses can collect without consent.
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