FTC Probes Pricing Practices Based on Personal Data

The U.S. Federal Trade Commission (FTC) has initiated a study on products that potentially adjust pricing for consumers based on personal data, including location and past purchases. Companies like Mastercard, JPMorgan Chase, and several software providers are being scrutinized for their use of consumer data in pricing strategies. The FTC's investigation aims to uncover the impact of these practices on consumer pricing and privacy.

The U.S. Federal Trade Commission has launched a study of products that could allow companies to set different prices for consumers based on their locations, past purchases, and other personal data. The agency said on Tuesday it had ordered Mastercard, JPMorgan Chase, and six other companies to provide information about targeted pricing products, the data they use, who uses them and the effect on prices.

The FTC is seeking the same information from IT services provider Accenture, consulting firm McKinsey & Co., and software providers Pros Holdings Inc, Revionics, Bloomreach, and Task Software. All of the companies offer products that use consumer data and artificial intelligence or other technology to target prices for individual consumers, the agency said. None of the companies are accused of wrongdoing.

FTC Chair Lina Khan said the study will illuminate a "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 said the company does not use individual consumer data or develop software to target prices to individuals, and that 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 pending its research into this matter," the spokesperson said.

A spokesperson for Mastercard said it was reviewing the order and would cooperate with the FTC. Other companies did not immediately comment on the orders.

Online advertising has long used data such as browsing history and device location to determine what ads consumers see. The agency is concerned similar technology can now be used to set disparate prices, which it calls "surveillance pricing," or potentially collude with competitors, FTC officials said.

The FTC voted 5-0 to authorize the study, though the agency's two Republican commissioners disagreed with the term "surveillance pricing," calling it "personalized pricing." The products the FTC is concerned about go 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), said they raise concerns about fairness and privacy. PIRG and other groups last year called on 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 what data businesses can collect without consent. The U.S. Consumer Financial Protection Bureau is also weighing potential rules to expand privacy protections for consumers.

(With inputs from agencies.)