What if a company could analyze all your personal information, setting its price based on the data available? The Federal Trade Commission worries this might already be a reality. 

The FTC has ordered eight companies—Mastercard, Revionics, Bloomreach, Chase, Task, Pros, Accenture, and McKinsey & Co.—to submit information about their effects pricing schemes have on privacy and competition. In their initial release, the FTC cited ??location, demographics, credit history, and browsing or shopping history as some of the information possibly being used to establish personalized prices. 

Surveillance pricing has long been a black box of information. Uber has for years been accused of the tactic, with rumors floating that the company could charge users based on their phone battery. (The company has denied these allegations.) But as analysts point out, in opening these recent investigations, the FTC aims to conclude not only which companies are using the tactic, but whether it’s used at all. “We know that there’s opportunity and we know that there’s the capacity to both collect the data and target prices,” says Zephyr Teachout, a professor at Fordham Law School. “But it’s pretty much a mystery what’s actually going on.”

What is surveillance pricing?

Price discrimination is nothing new. Movie theaters charge different prices for different age groups, and airlines charge different prices based on the time of purchase. What separates surveillance pricing, then, is the individualized nature of that price personalization. A surveillance pricing system amasses data about each specific consumer, and feeds them a price based on the information it’s learned. 

“A company responding to market conditions like a spike in demand causing a price to go up is different from the price of something going up because an individual consumer is able to pay more,” says Lee Hepner, senior legal counsel at the American Economic Liberties Project, a nonprofit advocacy group. “It’s the individualized aspect of this that is particularly nefarious and offensive to working people.” 

This is also where AI comes into the pricing picture. Given AI’s ability to rapidly collect and analyze data, some advocates are worried that firms might use the tool to collect sensitive information about consumers before offering them a price. 

On the flip side, University of Chicago professor Sanjog Misra argues that AI expedites a process that was already in place. “[AI] doesn’t complicate it, it simplifies it,” Misra says. “We used to just have a sales person do it for us. That wasn’t AI, it was just human intelligence that was personalizing prices. We go to a travel agent and they figure out what’s the best vacation for you and what to charge you.”