The Federal Trade Commission requested information from Mastercard, and seven other companies, in a quest to better understand differential pricing strategies based on personal consumer data, the federal agency said in a Tuesday press release.

The federal agency is focused on how third-party firms are using consumer demographics and observed behaviors in tailoring pricing to shoppers, especially those using digital tools to purchase. The agency wants to better understand those methods in the interest of making sure consumers don’t face discrimination in pricing, or have their privacy put at risk.

The agency is particularly interested in how the intermediaries may be using technology in these pricing strategies and how those actions may be impacting “privacy, competition, and consumer protection,” the FTC said in the release. 

“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 release said.

Mastercard, and the other companies, received civil investigative demands from the federal agency as part of the inquiry, according to a federal official who spoke during a briefing with reporters on Monday. 

“We have just received the request and are currently reviewing it,” a spokesperson for Mastercard said. “While we do not have a comment on the order at this time, we will cooperate with the FTC in this process.”

The other companies that received the order include JPMorgan Chase, the largest U.S. bank; the software firm Revionics; the e-commerce services company Bloomreach; Task Software; the pricing optimization company PROS; and the consulting firms Accenture and McKinsey.

While it’s not clear exactly what the FTC may be examining with respect to Mastercard, the Purchase, New York-based card network in one instance advertises what it refers to as “actionable insights” on its website, which tap key metrics to “analyze data by time period, product type, spend channel, merchant category, merchant, geography and more.”

Consumer feelings about targeted advertising vary, with some seeing it as potentially invasive and others viewing it as potentially beneficial and some that don’t care, but the issue becomes potentially more fraught when information is being used for pricing, the FTC official said. The eight companies that received the orders have demonstrated some use of such pricing approaches at grocery and dollar stores, as well as other retailers, and at fast-food restaurants.

The personal data being tapped may include a consumer’s “location, demographics, credit history, and browsing or shopping history — to categorize individuals and set a targeted price for a product or service,” the release said.

The agency wants to ensure that the pricing based on such surveillance is not causing harm to certain groups, such as women or those in rural communities, the official said on the call. 

The official noted the agency has been hearing about the possibility of such pricing for years, but it’s only now that the data and technology are making it more of a reality, based on what it’s seeing in advertising pitches and on corporate earnings calls. 

The growth of e-commerce activity, particularly since the deadly COVID-19 pandemic, as well as the arrival of digitized pricing, and other technology use in stores, also spurred the agency’s action now. An imbalance in the use of that data among companies is also a concern for the agency.

Still, the FTC official emphasized the eight companies were not being singled out for having done anything wrong, or being uncooperative. On the contrary, these types of orders are fairly routine in allowing the agency to better understand an evolving practice, the official said. In responding to reporters’ questions, the official also said the commission hasn’t formed an opinion at this point about whether these practices are good or bad.

“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,” FTC Chair Lina Khan said in the release.

Ultimately, the agency seeks to provide findings from the information gathered so that Congress, researchers and the public can have a clearer understanding of the practices.

By Lynne Marek on July 23, 2024
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