'Woah!': FTC Applauded for Launching Inquiry Into Surveillance Pricing

The U.S. Federal Trade Commission on Tuesday launched an investigation into surveillance pricing and requested information from eight companies on the practice.

The FTC inquiry will look at the effect of surveillance pricing—using data on consumers' behavior or characteristics to manipulate the price for them as individuals—on privacy, competition, and consumer protection.

The agency asked Mastercard, JPMorgan Chase, Accenture, and McKinsey for information on the practice, as well as four less well-known companies that service major corporations.

"Firms that harvest Americans' personal data can put people's privacy at risk," FTC Chair Lina Khan said in a statement. "Now firms could be exploiting this vast trove of personal information to charge people higher prices."

"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," she added.

Progressive advocacy groups, which have long considered Khan to be one of their strongest allies in the Biden administration, and which argue that discriminatory pricing is unfair, celebrated the FTC's announcement.

"We're thrilled to see the FTC crack down on the dystopian practice of surveillance pricing," Lee Hepner, legal counsel at the American Economic Liberties Project, said in a statement. "It's chilling to think that companies have so much control over our lives that they can leverage personal data they've harvested—including your location, demographic, and shopping history—to turn our habits against us and hike up prices on essential goods. But it's already happening."

Groundwork Collaborative executive director Lindsay Owens also praised the FTC move, warning that "a personalized price might sound nice, but it is actually a three-part corporate strategy to spy on you, isolate you, and overcharge you."

"Today's investigation is an important step in cracking down on the methods big corporations use to spy on consumers to rip them off," Owens said in a statement.

Emily Peterson-Cassin, a director at Demand Progress Education Fund, said in a statement that Tuesday's announcement was "another strong sign that the FTC is fighting for consumer power over corporate power."

Zephyr Teachout, a law professor at Fordham University who has helped lead the opposition to surveillance pricing, reacted with excitement on Tuesday.

"Woah!" she wrote on social media. "The FTC is going there! So excited to see the FTC launching a full study into how companies use data to serve different prices to different people. We know the incentive and capacity is there, but the reality of surveillance pricing has been a triple-locked black box!"

Advocates of surveillance pricing sometimes call it personalized pricing and argue that it efficiently allocates resources. Such pricing questions are the subject of great interest among business school academics, especially at elite institutions such as the Massachusetts Institute of Technology and Harvard University, according to a detailed article in The American Prospect last month.

A crackdown on the practice could conceivably have support across the political spectrum. Stock guru Jim Cramer of CNBC—a frequent and vociferous critic of Khan—praised the FTC's announcement on air on Tuesday, while expressing disbelief that he was doing so.

All five FTC commissioners, including two Republicans, voted to move forward with the investigation, which will focus on intermediary firms—"the middlemen enabling firms to algorithmically tweak and target their prices," according to a blog post the FTC also published Tuesday.

The requests for information don't indicate that the eight firms engaged in wrongdoing, but rather that they can be useful sources of information, an unnamed FTC official toldThe Hill.