Consumers may be paying more for products due to insights businesses glean from their personal data, including geolocation, demographics, shopping habits, or even how they interact with a webpage. This practice, referred to as “surveillance pricing,” was highlighted in a preliminary report released by the Federal Trade Commission (FTC) on Friday.
The report draws on information provided by six companies—Mastercard, Accenture, PROS, Bloomreach, Revionics, and McKinsey & Co.—that were ordered by the FTC in July to disclose details about their pricing tools. These companies sell software that enables businesses to dynamically adjust and target pricing based on various consumer characteristics.
How Surveillance Pricing Works
The report reveals that these tools allow businesses to algorithmically modify prices in real time, leveraging granular consumer data. For example, a retailer might adjust prices or offer promotions based on factors such as skin type, skin tone, or even whether a consumer is identified as a new parent. Hypothetical scenarios cited in the report suggest that such profiling could lead to certain consumers being charged higher prices for the same products.
According to the FTC, the six companies studied have up to 250 clients, ranging from grocery stores to clothing franchises. However, the extent to which these companies profile consumers and adjust prices remains unclear, as the report omits specific examples to protect confidential trade secrets.
Divided Opinions on the Report’s Release
The report, initiated by the FTC’s outgoing Democratic majority, is still in its preliminary “staff perspective” stage. Incoming FTC Chair Andrew Ferguson and Commissioner Melissa Holyoak, both Republicans, objected to its publication, arguing that the investigation should be concluded before releasing findings.
Despite these objections, the FTC emphasized the importance of transparency. “Americans deserve to know how their private data is being used to set the prices they pay and whether firms are charging different people different prices for the same good or service,” outgoing Chair Lina Khan said in a statement.
The FTC has also called for public comments from consumers and businesses regarding their experiences with surveillance pricing practices.
Corporate Responses
Two of the six companies involved—Mastercard and Revionics—responded to the report.
- Mastercard stated, “We do not provide surveillance pricing services. Our platforms help customers better understand trends and insights related to their businesses.”
- Revionics asserted that its AI software does not recommend prices targeted to individuals, stating, “Revionics’ AI price optimization software considers numerous market-level factors when recommending optimal prices to retailers.”
Other companies studied by the FTC have pushed back against claims that their tools are designed or used to enable individualized pricing.
The Bigger Picture
The preliminary report underscores growing concerns about how consumer data is used in the digital age. It raises questions about fairness, transparency, and whether certain groups are disproportionately burdened by these pricing practices. While some companies defend their use of AI-driven tools as market-level optimizations, the potential for misuse remains a significant issue.
What Comes Next
The FTC’s investigation into surveillance pricing is ongoing, with further scrutiny likely. As the agency continues to gather public comments and evaluate business practices, the findings could shape future regulatory actions to protect consumers.
For now, the report highlights the critical need for consumers to be informed about how their data is being used and to demand accountability from businesses that rely on such pricing practices.
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