President Joe Biden is out of the race.
And FTC Chair Lina Khan isn’t slowing down at all.
“Sure,” you say. “But why is that relevant to the AdExchanger Commerce Media newsletter?”
Because Khan, an aggressive antitrust enforcer, is ordering data from eight companies, which she describes as a “shadowy ecosystem of pricing middlemen,” in pursuit of visibility into “surveillance pricing.”
“Surveillance pricing” is the FTC’s term for the emerging retail and ecommerce practice of dynamic pricing.
People describe the practice as “data-driven pricing, price optimization, location-based, predictive or personalized pricing, and the list goes on,” an FTC official told reporters during a press briefing this week before the news went live.
The companies who have insight into surveillance pricing are a mixture of software companies, banks and consultancies. The FTC called up its subpoena-level data request powers to order Mastercard, Revionics, Bloomreach, JPMorgan Chase, TASK Software, PROS, Accenture, and McKinsey to provide data on dynamic pricing services they provide. During the briefing, two FTC officials from the agency’s antitrust law and technology teams spoke on background about the request orders and the potential report to be published or even presented to Congress on pricing practices.
“We’re hoping to learn more about the products and what is being offered; about the inputs and the data; about who the customers are,” one official said, reinforcing that none of the eight companies are cited for a bad practice, just for having the requisite information.
Data-driven advertising – what the FTC often dubs commercial surveillance – came into play as a necessary parallel to new plans to finesse online prices. It’s also how the companies may have ended up on the FTC’s radar. These eight all marketed their solutions as such and touted their own AI capabilities as drivers of price-changing tactics, one official said.
The extent to which personalized pricing exists in market right now is unknown, according to the FTC. But enough vendors are bragging about it on their websites and earnings reports to indicate the idea has legs. And the mechanisms to set dynamic prices, including in-store tech like digitized price tags on shelves and shopping carts that monitor what’s in the cart, make it easier to issue change or personalize prices in real time.
“The federal government is often accused of fighting the last war, but we’re trying to stay ahead here on behalf of consumers and businesses as they understand this new phenomenon.”
The briefing is worth quoting at length, though the pair of FTC officials cannot be cited by name.
Press question: How might this inform the commercial surveillance rulemaking [an FTC and Congressional inquiry into targeted advertising practices that began three years ago]?
FTC: These are separate efforts, but they stem from our same expertise and concern with data practices throughout the economy.
We know that targeted advertising, for example, is becoming increasingly micro-targeted to individuals, as well as certain consumers in certain locations, at certain times, or who meet certain demographic characteristics. But I really think the next frontier of that might be not only individualized ads, but individualized prices.
The same data that’s fed this massive, massive, massive targeted advertising business model over the last two decades can also be used to target prices. The technology is there, and I think the incentive is there.
Is there anything you’d want to see Congress do to head off this activity?
As all of you know, Congress has been trying to pass privacy legislation for a long time. And the commission has been calling on them to do so.
This is where the rubber hits the road for data extraction.
Different consumers have different feelings about targeted advertising. Some find it useful; some find it creepy; some don’t have a strong view.
But when we tell a consumer on the street that the data collected about them online could affect prices they pay for goods and services, that makes the privacy concerns quite real.
I hope the study helps connect the dots between how much data is collected and the real-world result of now decades of unchecked commercial surveillance.
Did this rise out of recent complaints?
I haven’t checked our complaint database about this actually.
But I would not expect that we would get complaints about it, because people don’t know. That’s the whole concern.
If companies advertise a good on TV for $4.99, I know I’m paying $4.99 and my neighbor’s paying $4.99. If I’m buying something on my phone, I don’t know that the price I’m being charged is the same as the price that my neighbor’s being charged.
This speaks to an information asymmetry. The company and the seller know they’re charging me more than my neighbor. I don’t know that, nor does my neighbor.
It’s possible people already have filed complaints. But I don’t think we can wait for that.
This interview has been edited and condensed.
