By Jody Godoy
Oct 28 (Reuters) – The US Federal Trade Commission is demanding information from Walmart, Uber and seven other companies on whether and how they use consumers’ personal data such as location, browsing history and income to set individual prices, wages and job offers, the FTC said on Wednesday.
The FTC is flexing its consumer protection powers ahead of the US congressional elections next week, as voters consistently rank the cost of living as the most important issue.
Target, along with app services Lyft, DoorDash and Instacart, and airlines Delta, United and JetBlue are also receiving demands, the agency said.
The FTC will use the information to eventually publish a study to help inform regulators and lawmakers about personalized pricing and wage-setting practices.
FTC Chairman Andrew Ferguson said the agency will “scrutinize the opaque methodology that some companies in these industries may be using to determine how much consumers pay or how much gig workers are paid for the same product or service.”
A Delta spokesperson said, “There is no fare product Delta has ever used, is testing or plans to use that targets customers with individualized offers based on personal data.”
A JetBlue spokesperson said all customers have access to the same fares and that it does not use personal information to set prices.
Representatives for the other companies did not immediately respond to requests for comment.
The advance of algorithmic pricing technology, including tools that incorporate AI, has fueled concern that companies are able to set prices for shoppers on an individual basis in order to extract the maximum price each shopper would be willing to pay.
Personalized pricing strategies are difficult to observe from the outside, because they serve different prices to different people. Pay for gig workers such as delivery and ride-hailing app drivers presents a similar situation, with some studies suggesting that analysis across many drivers’ data shows platforms learn and exploit driver willingness to accept lower pay for the same work.
The FTC study aims to fill in that knowledge gap, demanding comprehensive information about the tools, strategies, and data companies use, as well as how they affect prices, wages and job offers.
AI-DRIVEN PRICING FACES CRITICISM
Efforts by state lawmakers to ban personalized pricing, along with the use of algorithms to individually tailor wages, have taken off in recent years.
The National Retail Federation has criticized the laws and defended retailers’ use of data-driven discounts as a means of incentivizing loyalty.
Ferguson has said personalized pricing could violate consumer protection laws where consumers do not expect it and that companies should expect enforcement.
After the FTC called for public comment, hundreds of commenters urged the FTC to ban the practice outright. The FTC has said it does not have the authority to issue a blanket prohibition against the practice.
Some deep dives have shown ways in which companies are using AI tools to maximize price, even without the use of individuals’ data.
Reuters reported in September how McDonald’s is using AI tools to guide menu prices across the US and gauge how much each store’s patrons are willing to pay.
A study by Consumer Reports and nonprofit groups last year showed Instacart was conducting random price experiments that led to some shoppers paying more for the same orders. Instacart ended the experiments after pushback and FTC scrutiny.
(Reporting by Jody Godoy in New York; editing by Chris Sanders, Nick Zieminski and Aurora Ellis)
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