Are you being exploited by AI-powered surveillance pricing?

Nearly a decade ago, Uber revealed that customers are more willing to pay surge prices when their phones are about to die. That data point sparked a pervasive belief that Uber and other ridehailing apps use algorithms to tailor each passenger’s price to their behavior and willingness to pay — a practice known as “surveillance pricing.” A related myth — that airlines use your search history to jack up prices for flights you’re interested in — is similarly ubiquitous even though it’s not true.

Surveillance pricing may not be widespread yet, but experts say it’s on the horizon, and consultants are starting to offer surveillance pricing models to businesses across various industries. The Federal Trade Commission announced today that it’s ordering eight companies that offer AI surveillance pricing products and services to turn over information about the impact these pricing schemes have on privacy, competition, and consumer protection, the FTC announced today.

Surveillance pricing — often called “dynamic pricing,” “personalized pricing,” or “price optimization” — involves offering individual consumers different prices for the same products based on a combination of factors, including the device they’re shopping on, their location, demographic information, credit history, and browsing and shopping history.

“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 Khan said in a statement. “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.”

Companies have already experimented with implementing Uber-style surge pricing. JetBlue quietly implemented “peak” and “off-peak” pricing to its checked bag fees in March. Walmart plans on bringing digital price tags to 2,300 stores over the next several years that will let it change products’ prices depending on a number of factors, including the weather, whether items are closer to their expiration date, and more. Wendy’s said it would roll out “dynamic pricing” in 2025. Amazon had a secret algorithm called Project Nessie that let it gauge how much it could raise its prices before its competitors took notice and changed theirs, too.

These pricing models, while variable, are a bit different from surveillance pricing, which relies on using an individual consumer’s information to determine how much they’re willing to pay for a specific product. 

The FTC orders were sent to Mastercard, Revionics, Bloomreach, Chase, Task, Pros, Accenture, and McKinsey & Co., the FTC announced in a press release. They were issued under the FTC’s 6(b) authority, which lets it conduct studies without any specific law enforcement purpose. 

“These eight firms advertise their use of AI and machine learning as part of the services they offer, often claiming they can use historical and real-time customer information to drive unique purchasing experiences,” an FTC official said on a call with reporters ahead of the announcement, adding that none of the firms issued orders have been accused of any wrongdoing. “What we’re trying to do is lift the hood on opaque practices that have the potential to profoundly reshape how consumers purchase goods and services. We want to make sure that surveillance pricing isn’t resulting in harm to certain communities, like women and rural consumers.”

The companies are being asked to turn over information on:

• Types of surveillance pricing products and services they’ve produced, developed, or licensed to a third party
• Data sources used for each product or service
• Who they’re offering surveillance pricing products and services to
• How this impacts surveilled consumers and pricing

On a call with reporters, an FTC official said a study is necessary because the extent to which businesses use surveillance pricing is currently unknown. Media reports suggest that companies across a wide variety of sectors — including grocery stores, restaurant chains, travel, and hospitality — are considering implementing surveillance pricing or have already done so.

“The technology is there, the incentives are there, the data certainly is there to do this targeting,” the FTC official told reporters. “And now we actually see this industry of consultancies potentially offer to help companies personalize pricing, which gives us a strong reason to believe that this practice is likely to grow.”