‘Woah!’: FTC Applauded for Launching Inquiry Into Surveillance Pricing

Yves here. It’s encouraging to see Lina Khan at the FTC launch a new front in investigating corporate abuse of market power, here of using profiles of consumer behavior to engage in price discrimination. Note that the FTC seems to be relying on multiple types of consumer protection to make this case. Props to the FTC for coming up with branding, here “surveillance pricing”.

Keep in mind that vendors have been engaged in this type of activity for a very long time, with airlines the leaders. I have annoyingly and regularly found that Delta will increase its prices if I have searched for a particular city pair and date and then return as little as a day later for the same trip. Clearing cookies was no cure.

I was able to get around this annoying practice with the use of a VPN set outside the US (which then resulted in Delta wanting to ticket me in foreign currency, which I would have to override). There were probably less extreme measures that would have worked, but this one usually succeeded.

Better-known cases of airlines using granular information to price gouge include showing higher fares to presumed-more-affluent Apple product users and for searches from wealthier districts.

I suspect but cannot prove that the FTC focus on this issue was in part due to the recent report of a clear case of price collusion, that of a national rent fixing cartel, which has generated scorched-earth level legal responses. As Conor Gallagher wrote in June:

After becoming the target of multiple state attorney general lawsuits and investigations, nationwide class action lawsuits, a Department of Justice criminal probe, and the likely target of a recent FBI raid in Atlanta, RealPage – a private equity-owned corporation that creates software programs for property management – is finally responding to allegations it orchestrated a national rent price-fixing cartel that has sent rent prices through the roof.

Texas-based RealPage is accused of acting as an information-sharing middleman for real estate rental giants. The lawsuits against it and large property managers [1] contend that the latter agreed to set prices through RealPage’s software, which also allowed the companies to share data on vacancy rates and prices in many of the US’ most expensive markets.

Admittedly, RealPage was sharing property-level information. However, this does open a can of worms regarding the many other forms of information that companies buy or share in order to get a big leg up on hapless consumers. So even if this case did not directly generate the FTC’s action, it may have moved it up on the agency’s priority list.

I may be unduly optimistic. Lina Khan would almost certainly continue at the FTC as part of a Harris Administration, since she’s one of the few agency picks the Dems can brag about. Even though the odds are slim, I don’t think it is impossible that a Trump Administration would keep her on. Trump (and arguably more so) Vance are wont to make some populist gestures. They are also not tied into Silicon Valley or Big Finance to the degree Team Biden has been….which nevertheless picked Kahn.

By Edward Carver, staff writer at Common Dreams. Originally published at Common Dreams

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.

1. Firms harvest a trove of Americans’ personal data, from your browsing history to your biometrics. Now firms could be using this data to target you with an individualized price.

Today @FTC launched an inquiry into these surveillance pricing tactics. https://t.co/G4uc8lHWOV

— Lina Khan (@linakhanFTC) July 23, 2024

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.

7/ Even @jimcramer agrees that surveillance pricing is not an honest or ethical way to treat customers.

“How could you live with yourself?” if you’re a business that uses this strategy, he asked this morning.

“That is a great report. I agree with [@FTC].” pic.twitter.com/23HEDk8Yqf

— American Economic Liberties Project (@econliberties) July 23, 2024

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.