FTC Orders Firms to Provide Information on "Surveillance Pricing" Practices

The FTC issued Orders requesting information from firms offering "surveillance pricing products and services that incorporate data about consumers' characteristics and behavior."

The FTC unanimously voted to issue the Orders under the FTC Act Section 6(b) ("Reports of persons, partnerships, and corporations") to eight firms that use AI and other technologies "to target prices for individual consumers," including Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture and McKinsey & Co.

Under its Section 6(b) authority, the FTC can conduct wide-ranging studies "that allow enforcers to gain a deeper understanding of market trends and business practices." The FTC also passed a resolution directing that "any and all compulsory process available to it be used in connection with this inquiry," and which "specifically authorizes the filing or continuation of actions to enforce any such compulsory process."

The FTC Order requires firms to:

• list each "Targeted Pricing Solution" ("Solution") produced, developed or in development, licensed in, from, or out, to a third party, sold or provided by the firm and to describe in detail its intended uses, technical approach and design (e.g., type of algorithmic model used), features and data inputs;
• list all data sources used by the Solution, including any platform used to collect data, how the platform obtains or collects data, how long the data is retained for and whether the data are collected by the firm or other third parties;
• provide the firms' annual aggregate sales to all customers and identify how customers use the firms' Solution; and
• submit all reports and studies that analyzed "the actual, evaluated, or projected effects" of the Solution on any surveilled customer's pricing.

FTC Chair Lina M. Khan said that "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." She said that the FTC's inquiry "will shed light on this shadowy ecosystem of pricing middlemen."

In a concurring statement, Commissioner Melissa Holyoak said that information and documents from this inquiry "may reveal more about the behind-the-scenes work of data brokers and other data intermediaries." She cautioned, however, on using language that implies negative connotations or that "may suggest that personalized pricing is necessarily a nefarious practice. In my view, we should be careful to use neutral terminology that does not suggest any prejudgment of difficult issues."

In a concurring statement, Commissioner Andrew N. Ferguson said that "Congress and the American people should be made aware of whether and how consumers' private data may be used to affect their pocketbooks. Even if this practice does not violate any existing law, consumers may well see personalized pricing as unfair or even manipulative, and it may undermine their trust in the digital marketplace."