FTC Targets Companies That Secretly Tailor Prices Using Personal Consumer Data

A view of signage at the Federal Trade Commission headquarters in Washington on Nov. 24, 2024. Benoit Tessier/Reuters

The Federal Trade Commission (FTC) has proposed penalties for companies that use personal data to tailor prices to individual customers.

The FTC, in an Aug. 19 announcement, cited growing public concern about retailers’ use of massive amounts of personal data gathered to charge prices based on the potential expenditure of the individual.

“When consumers see a listed price, they expect it to be [the] same price that everyone else sees, not the retailer’s estimate of how much they are willing to pay based on their personal data,” said FTC Chairman Andrew Ferguson.

Surveillance pricing is a growing practice nationwide, where businesses use individualized prices to maximize profits, based on calculations about what the customer is willing to pay.

This differs from dynamic pricing in that it bases prices on the individual customer’s data profile, including browsing history.

Dynamic pricing changes according to market conditions, including demand, supply, and timing. Some examples are transportation costs during high-demand seasons, such as holidays, or an Uber ride after a major concert.

Dynamic pricing adjusts to the market, while surveillance pricing adjusts to the individual.

“The FTC does not have the legal authority to ban personalized pricing in all circumstances, but businesses that fail to tell consumers how their personal data is being used to set a price may be in violation of the FTC Act and other laws we enforce,” Ferguson said.

“We are seeking public input on this draft statement, which would put businesses engaged in or considering personalized pricing on notice that the Trump-Vance FTC will not hesitate to enforce the law in this space.”

The proposed policy, under the FTC Act, would prohibit unfair or deceptive practices where companies engage in personalized pricing without revealing the data behind the variances.

The agency is opening the policy for public comment for the next 30 days.

American Economic Liberties Project’s Lee Hepner voiced skepticism about the move on social media: “The FTC solution to surveillance pricing is more labels, as if consumers can meaningfully consent to the use of technology that is unfair and abusive by design.”

However, Consumer Reports’ senior policy analyst Grace Gedye said it’s “encouraging to see the FTC tackle this bipartisan issue. Nobody should have to pay more for groceries or other essential goods because a company knows what they’re searching for online, what their income is, the makeup of their household, or where they go.”