FTC Orders Companies to Disclose ‘Monitoring Prices’

Hello Readers,

President Joe Biden drops out of the race.

And FTC Chair Lina Khan shows no signs of slowing down.

“Sure,” you say. “But why is this relevant to the AdExchanger Commerce Media newsletter?”

Because Khan, an aggressive antitrust enforcer, is ordering data from eight companies she describes as a “mysterious ecosystem of price intermediaries” to gain insight into “monitoring prices.”

“Surveillance pricing” is a term used by the FTC to describe a new retail and e-commerce practice of dynamic pricing.

People describe the practice as “data-driven pricing, pricing optimization, location-based pricing, predictive pricing or personalized pricing, and so on,” an FTC official told reporters during a press conference this week before the news went public.

The companies with insight into the surveillance prices are a mix of software companies, banks and consulting firms. The FTC used its subpoena-level data authority to order Mastercard, Revionics, Bloomreach, JPMorgan Chase, TASK Software, PROS, Accenture and McKinsey to provide data on the dynamic pricing services they provide. During the briefing, two FTC officials from the agency’s antitrust and technology teams talked about the background to the subpoenas and a potential report to be released or even submitted to Congress on the pricing practices.

“We hope to learn more about the products and what is being offered; the inputs and who the customers are,” one official said, emphasizing that none of the eight companies were found guilty of bad practices, only of having the required information.

Data-driven advertising—what the FTC often calls commercial surveillance—came into play as a necessary parallel to new plans to improve online pricing. It’s also how the companies got on the FTC’s radar. All eight companies advertised their solutions as such and touted their AI capabilities as drivers of their pricing tactics, one official said.

The extent to which personalized pricing currently exists in the marketplace is unknown, according to the FTC. But enough vendors boast about it on their websites and in earnings reports to suggest the idea has a chance of success. And dynamic pricing mechanisms, including in-store technologies such as digitized price tags on shelves and shopping carts that track cart contents, make it easier to give change or personalize prices in real time.

“The federal government is often accused of fighting the last war, but we are trying to be at the forefront on behalf of consumers and businesses because they understand this new phenomenon.”

It is worth quoting the report in its entirety, although it is not possible to mention both FTC officials by name.

Press Question: How can this be communicated? Creation of regulations regarding commercial supervision (FTC and Congressional investigation into targeted advertising practices began three years ago)?

FTC: These are separate endeavors, but they stem from our expertise and attention to data practices across the economy.

We know that targeted advertising, for example, is becoming more and more micro-targeted to individuals, and also to certain consumers in certain places, at certain times, or meeting certain demographic characteristics. But I really think the next frontier of this could be not just personalized advertising, but personalized pricing.

The same data that has fueled this huge, huge, huge business model of targeted advertising for the last two decades can also be used to set target prices. The technology is there and I think the incentive is there.

Is there anything you think Congress should do to prevent this type of action?

As you all know, Congress has been trying to pass privacy legislation for a long time. And the committee is calling on them to do so.

This is where theory and practice collide in data extraction.

Different consumers have different feelings about targeted advertising. Some find it helpful, some find it creepy, and some have no strong opinion.

But when we tell the average customer that the data collected about them online could impact the prices they pay for goods and services, privacy concerns become very real.

I hope the study will help connect the actual amount of data being collected with the real-world impacts of decades of unchecked commercial surveillance.

Is this a result of recent complaints?

To be honest, I haven’t checked our complaint database on this yet.

But I wouldn’t expect we’d have complaints about it because people don’t know. That’s the whole concern.

If a company advertises an item on TV for $4.99, I know I’m paying $4.99 and my neighbor is paying $4.99. If I buy something on my phone, I don’t know that the price I’m paying is the same as the price my neighbor is paying.

This is evidence of information asymmetry. The company and the vendor know that they are charging me more than my neighbor. I don’t know this, and neither does my neighbor.

People may have already filed complaints. But I don’t think we can wait for that.

The interview has been edited and condensed.