FTC investigates companies’ use of surveillance pricing

The Federal Trade Commission recently announced an investigation into surveillance pricing — which is when companies charge you a different price than someone else for the same product or service based on data they have about you.

The FTC has asked eight companies for information about how they do this, including Mastercard, JPMorgan Chase and McKinsey. These are companies that are effectively third-party intermediaries that offer troves of personal data and surveillance pricing algorithms and technology to all sorts of big retailers and businesses.

If you’ve ever used Uber or Lyft, you’ve probably noticed how the same trip can be much more expensive just from one hour to the next. That’s dynamic pricing — when companies change the price for all customers based on demand.

“Surveillance pricing goes a step further, to collect not only information on the general market, but on the specific consumer and their preferences,” said Brett House, a professor of professional at Columbia Business School.

That includes information like where you live, how much you make and where you shop.

There’s lots of anecdotal evidence that this is happening, per Zephyr Teachout at Fordham Law School. Take airfare, for example.

Still, “the truth is that what we don’t know about surveillance pricing could fill an ocean,” she said. “And right now a lot of consumers are in a state of rational paranoia.”

Consumers know their data is being collected and shared and that prices are changing, but they don’t know if those two things are connected.

“The reason we’re doing this is we don’t know a lot,” said the FTC’s Douglas Farrar.

The commission’s hoping to learn what kinds of data and technology companies are using and how they’re using it to set prices, he said.

“Do we want to live in a world where everyone pays a different price because businesses know everything about you?”

And are we living in that world right now?