The FTC announced an investigation into the practice of surveillance pricing, listing concerns about how companies are using personal data to set individualized prices for consumers. The FTC sent 6(b) orders to eight companies to gather information about their data surveillance pricing practices and data collection. 

Surveillance pricing has been making the news as companies move to take old systems, such as paper printed with prices on store shelves, and experiment with new systems such as digital price tags that can be changed multiple times per day.  Online companies are also investigating the ability to charge different customers different prices based on personal information they know about the consumer. 

The FTC Inquiry on Surveillance Pricing 

The FTC’s inquiry focuses on several key areas: 

• Transparency and Fairness: The FTC wants to determine whether consumers are being charged different prices based on their personal data, which could lead to unfair or discriminatory pricing practices. 
• Data Collection and Use: The investigation seeks to uncover data types being collected, how they are used, and whether consumers are aware their data is being part of price setting. 
• Impact on Competition: The FTC is concerned that surveillance pricing could give companies an unfair advantage in the marketplace, harming competition. 
• Consumer Protection: The study aims to assess whether consumers are adequately protected from potential exploitation through surveillance pricing, particularly regarding privacy and data security. 

What is Surveillance Pricing? 

Surveillance pricing involves using data collected from consumers—such as their location, browsing history, and other personal characteristics—to determine the price they are charged for goods or services. The FTC is particularly interested in understanding the implications of this practice for consumer privacy, competition, and fairness. 

Consumers are already becoming wary after seeing reports of changes such as digital price tags, or companies asserting they will be implementing “surge” pricing or other changes to previously static menu prices. 

The FTC Commissioner Andrew N. Ferguson, in a concurring statement, said: 

All Americans generate tremendous amounts of personal data online. These data often include information that reflects, or from which can be gleaned, some of our most intimate details—our identities, interests, locations, credit histories, medical conditions…. 

…Consumers are generally unaware that merchants and brokers are gathering those data. And those who are aware generally have no idea how and to whom those data are packaged and sold, or how they are used.

And he also noted as a reason for the inquiry: 

“Congress and the American people should be made aware of whether and how consumers’ private data may be used to affect their pocketbooks. Even if this practice does not violate any existing law, consumers may well see personalized pricing as unfair or even manipulative, and it may undermine their trust in the digital marketplace. 

Surveillance Pricing Issues 

Surveillance pricing, beyond upsetting consumers, can also lead to unfair business practices, privacy violations, or price discrimination. 

Unfair discrimination, such as charging those of one gender more than another for the same product, can be illegal.  Privacy protection laws, including both federal and state laws, can be undermined by the data gathering and sharing occurring behind the scenes to power surveillance pricing schemes.  And anti-competitive behavior, such as price fixing or market distortions can occur based on how the data is used and shared between parties including competitors. 

Surveillance Pricing 6(b) Orders 

The FTC is requesting the following specific types of information from companies: 

User Segmentation and Targeted Pricing Solutions: 

• Descriptions: 
• Detailed description of each solution, including intended uses, technical approach, algorithmic models, features, and data inputs. 
• Copies of all promotional materials. 
• Plans, business strategies, research, product roadmaps, and competitive positioning. 

Data Sources: 

• Internal and External Data Sources: 
• Detailed list of all data sources used. 
• Data collection methods, platforms used, retention periods, and whether data is collected by the company, data brokers, or third parties. 
• Information on external parties providing data, including costs and data sharing agreements. 
• Oversight and due diligence practices for data sources, including consumer notice and consent for data use. 
• Data maps showing all data fields used, with details on data origins, alterations, proprietary status, compliance efforts, and retention periods. 

Technical Documentation: 

• Segmentation and Pricing Determination: 
• Technical documentation on how segmentation or pricing is determined for individual consumers, including design documentation, input parameters, system diagrams, model validation, and APIs. 
• Details of any changes to the solutions over time, including model training frequency. 
• Copies of all privacy notices, disclosures, consent forms, terms of use, and end-user license agreements related to consumer data collection or use. 

Business Customer Information: 

• Sales and Customer Information: 
• Annual aggregate sales to all business customers, including units and dollars. 
• Lists of all business customers and prospective customers, with contract details. 
• Names and addresses of top business customers, with details of purchases, contracts, and service agreements. 
• Contractual limitations on business customers’ use of solutions and enforcement mechanisms. 
• Understanding of how business customers use the company’s solutions. 
• Instances of multiple business customers in the same industry using the same solutions or data sources. 

Analyses and Reports: 

• Effects on Pricing and Consumers: 
• All analyses, reports, studies, communications, promotional materials, and surveys evaluating the effects of segmentation or pricing solutions on business customers’ pricing, sales, or revenue, and on targeted consumers. 

Compliance and Confidentiality: 

• Compliance with Privacy and Data Protection: 
• Representations made to business customers about data use compliance with privacy laws, consumer notice and consent, and the accuracy and reliability of the solutions. 

Unfair Competition Lawyers 

If you believe you were subject to illegal price discrimination, or have any other questions for our antitrust and competition attorneys, we invite you to schedule a consultation with an employment law attorney in our California, Texas or Puerto Rico offices. Schneider Wallace Cottrell Konecky LLP is a national law firm that represents employees in a wide range of employment law cases, including class action lawsuits involving the failure to pay wages, overtime pay and commissions. Contact us at 1-800-689-0024.