As I blogged about back in August, the FTC issued orders under its Section 6(b) authority to several companies that offer “surveillance pricing products and services” in order to help the FTC better understand how surveillance pricing is affecting consumers.  The FTC sought information from “intermediary companies,” i.e., the “middlemen” hired by retailers who can algorithmically tweak and target their prices for individual consumers. These intermediary companies advertise to their potential customers (retailers) the use of artificial intelligence and other technologies, as well as customer data, to help those retailers target their prices. 

The orders requested information from these intermediary companies in four major areas: the types of surveillance products and services each company offers to other companies; the data sources for these products and services; the companies to whom these products and services are offered and their intended use of them; and the potential impact of these products and services on “surveilled consumers,” including the prices they pay.

The FTC staff’s “initial insights” have now been announced, published in the form of Research Summaries (with heavy redactions), and highlighting what the staff has learned to date from the Surveillance Pricing 6(b) study. Notably, the document states that the Research Summaries report is intended “to highlight initial observations” and “does not reflect or suggest any assessment as to whether anyone has engaged in illegal conduct.” 

The Research Summaries reveal that “details like a person’s precise location or browser history can be frequently used to target individual consumers with different prices for the same goods and services.”  FTC staff also found that “consumer behaviors ranging from mouse movements on a webpage to the type of products that consumers leave unpurchased in an online shopping cart can be tracked and used by retailers to tailor consumer pricing.” 

Specifically, the Research Summaries address the five topics noted above, as follows: 

(1) the types of products and services being offered by the intermediary companies. On this topic, the staff noted that the tools offered appear to be used for a variety of targeting practices, from more generalized store-level pricing (such as aggregated transaction data about goods like eggs or halal meat to set prices for a group of stores) to more individually targeted outputs and prices (such as real-time information about a person’s browsing and transaction history that enables a company to offer—or not offer— promotions based on that consumer’s perceived affinity for particular products).

(2) how these tools work to target prices or segment users.  Here, the staff found that mechanisms can be used to offer discounts to specific customer groups, tailor the prices each group sees, and/or curate the product selection made immediately available to each. To do so, the tools can take into account where the consumer is, who the consumer is, what the consumer is doing, and prior actions a consumer has taken, such as clicking on a specific button or element on webpage, watching a video, or adding a particular item to their cart or wish list.

(3) the customers and industries involved. The staff learned that intermediaries work with companies in a variety of industries, including grocery stores, apparel retailers, health and beauty retailers, home goods and furnishing stores, convenience stores, building and hardware stores, and general merchandise retailers such as department or discount stores, as well as financial services companies, travel companies, and a variety of B2B providers.

(4) the data sources and the types of data collected.  Here, the staff found that some companies use their own data and some use the data provided by the intermediary companies. Data can include information about the products being sold, the locations where consumers can buy them, historical sales data, and geolocational data. They can also use data about how competitors are pricing the same or similar items.  Some tools also allow for collection of direct or inferred individual customer behavior, like whether a customer is likely to be price sensitive or an impulse shopper or eligible for food assistance benefits, or have a particular skin tone.  In addition, some tools offer the capability to merge data from disparate sources into a unique profile about a specific consumer.

(5) products’ effects on prices, sales and revenue, and consumers. Finally, the summaries address, though not in depth, the potential impact of pricing surveillance tools. Several of the companies included in the study reported that the tools increase revenue and lower costs. 

In addition, the FTC staff also published an Issue Spotlight, which provides an overview of the related academic literature and public reporting on the topic of surveillance pricing.  The Spotlight highlights the technological shifts that have enabled the “ecosystem” and describes its foundations.  Unlike the Research Summaries, the Spotlight also discusses the potential harms of surveillance pricing, namely that it can “violate consumers’ privacy through both inferred attributes that consumers may wish to not reveal as well as inadvertent data leaks that can affect hundreds of millions of Americans.” 

In addition, the Spotlight reports, “the potential harms of surveillance pricing are not limited to data collection: in the quest for maximizing returns, the decisions made by surveillance pricing systems can discriminate to the detriment of historically disadvantaged groups. The use of common data and algorithms by multiple sellers to set offers and prices also raises new competition concerns.”  These potential harms are detailed in the Spotlight, which concludes with a call for additional research and analysis.

What the FTC will do with this information is unclear.  Although now-Chair Ferguson noted when the orders were originally issued that “consumers may well see personalized pricing as unfair or even manipulative, and it may undermine their trust in the digital marketplace,” he (along with Commissioner Holyoak) dissented from the decision to release the staff report, stating that the staff’s premature publication of a report based on its initial observations “may undermine the trust placed in the Commission’s Section 6(b) work.”  As Chair, he then closed the comment period for the Request for Information regarding surveillance pricing over two months early. Apparently, his preferred target for enforcement – as he announced on his first day as Chair and as commented upon by a fellow Commissioner – is DEI.