FTC issues orders on surveillance pricing

Surge pricing sneaking into more consumer purchases

Would you pay more for an Uber if your phone battery was at 5 per cent power and you feared being stranded when it died?

Would you cough up more money for concert tickets if you saw the show was almost sold out?

Would you pay a higher price for a hotel room on your anniversary?

Welcome to the world of “surveillance pricing,” in which some corporations use personal data and browser history combined with artificial intelligence and algorithms to set individualized prices for goods or services.

Rideshare drivers are already familiar with this concept as one of Uber’s defining features when it launched was its ability to enact “surge pricing” to coax more drivers onto the roads during peak periods. However, earlier this year, Uber CEO Dara Khosrowshahi boasted the firm also has the ability to offer trips to the driver most likely to accept lower payment amounts in a process called “algorithmic wage discrimination.”

The U.S. Federal Trade Commission announced on July 23rd that it is seeking information about products and services that use personal data, including finances and browser history, to set individualized prices for the same goods or services

The Federal Trade Commission issued orders to eight companies offering surveillance pricing products and services that incorporate data about consumers’ characteristics and behavior. The orders seek information about the potential impact these practices have on privacy, competition, and consumer protection.

The orders are aimed at helping the FTC better understand the opaque market for products by third-party intermediaries that claim to use advanced algorithms, artificial intelligence and other technologies, along with personal information about consumers—such as their location, demographics, credit history, and browsing or shopping history—to categorize individuals and set a targeted price for a product or service. The study is aimed at helping the FTC better understand how surveillance pricing is affecting consumers, especially when the pricing is based on surveillance of an individual’s personal characteristics and behavior.

“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,” said FTC Chair Lina M. Khan. “Americans deserve to know whether businesses are using detailed consumer data to deploy surveillance pricing, and the FTC’s inquiry will shed light on this shadowy ecosystem of pricing middlemen.”

The FTC is using its 6(b) authority, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose, to obtain information from eight firms that advertise their use of AI and other technologies along with historical and real-time customer information to target prices for individual consumers. The orders were sent to: Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture, and McKinsey & Co.

The orders are seeking information on four major areas:

• Types of products and services being offered: The types of surveillance pricing products and services that each company has produced, developed, or licensed to a third party, as well as details about the technical implementation and current and intended uses of this technology;
• Data collection and inputs: Information on the data sources used for each product or service, including the data collection methods for each data source, the platforms and methods that were used to collect such data, and whether that data is collected by other parties (such as other companies or other third parties);
• Customer and sales information: Information about whom the products and services were offered to and what those customers planned to do with those products or services; and
• Impacts on consumers and prices: Information on the potential impact of these products and services on surveilled consumers including the prices they pay.