NEW YORK (AP) — The Federal Trade Commission has ordered information from eight companies that the agency says offer products and services that use personal data to set prices based on a shopper’s individual characteristics.
PROS Holdings, also known as Pros.ai, is one of the eight companies ordered to supply information to the FTC. PROS is a NAED-member company, and part of the association’s Preferred Provider Program. Earlier this month, Microsoft named PROS as its Independent Software Vendor Partner of the Year. tED magazine has reached out to PROS for a comment on the FTC investigation, and is waiting on a response.
In a Tuesday announcement, the FTC said it was seeking to better understand the “opaque market” of “surveillance pricing” practices using consumer data — including credit information, location and browsing history — to charge different customers different prices for the same goods.
To do this, the agency noted, third-party intermediaries claim to use advanced algorithms, artificial intelligence and other technology.
“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,” FTC Chair Lina M. Khan said in a prepared statement.
Khan added that the FTC’s inquiry “will shed light on this shadowy ecosystem of pricing middlemen.”
The FTC said it sent orders to Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture and McKinsey & Co.
The agency says its “study” will aim to understand how surveillance pricing works and investigate potential impacts on privacy and consumer protection.
The orders requested information on the “types of surveillance pricing” that each company has produced, developed or licensed — as well as details on data collection methods, which customers were offered such products or services and other potential impacts, such as different prices paid, the FTC said.
In a statement sent to The Associated Press Tuesday, Revionics said that it “does not develop software that recommends pricing targeted to specific individuals” — or use individual consumer data “in any manner.”
The software company said its AI price optimization software considers several “market-level factors” to recommend optimal prices, such as historical sales data. Revionics added that its data is often sourced from retail partners — reiterating that it “does not, in any way, conduct operations related to the surveillance of consumers.”
Mastercard did not comment when reached by the AP Tuesday afternoon, but confirmed that it received the FTC’s request and would cooperate in the process. The remaining companies did not immediately release additional statements.
What is “Surveillance Pricing”?
While we all have come across a situation where we paid a different price to sit next to someone on an airplane, “surveillance pricing” is different. It uses personal information to set a different price that may be the result of an instant need, like an Uber, or tracks individual web searches to determine a customer’s demand for a product. AI would then set a separate price based on the number of searches. The FTC is concerned that the “surveillance pricing” can go as far as tracking when people receive paychecks, and raise prices just before or just after paydays. Instead of monitoring supply and demand, “surveillance pricing” relies on the indicators of your willingness to pay for goods or services.
While the FTC called the practice surveillance pricing, two commissioners wanted to use the term “personalized pricing”. It borders on the legality and strategy of collecting customer data vs. the over-collection of data that invades security and privacy.