WASHINGTON: The US Federal Trade Commission on July 23 said it was opening an inquiry into companies that use AI and personal data to help retailers set prices for consumers, potentially thwarting competition.

“Surveillance” or “dynamic” pricing methods are often highly unpopular with customers, who accuse companies of taking advantage of higher demand situations much like Uber with its surge pricing for car rides.

FTC Chair Lina M. Khan said the inquiry aims to “shed light on this shadowy ecosystem of pricing middlemen” and determine whether firms are “exploiting this vast trove of personal information to charge people higher prices”.

The agency said it had issued orders to eight companies, including Mastercard, JPMorgan Chase, and McKinsey, seeking information on how they use personal data such as financial information, location, and browsing history to determine pricing.

The agency’s studies are made with the purpose of better understanding an industry and can eventually inform future FTC actions, including potential enforcement.

A blog post by the FTC pointed to recent media reports that indicated that a growing number of grocery stores and retailers in the US “may be using algorithms to establish targeted prices”.

These could be unfairly charging higher prices to certain population segments like women or consumers living in rural areas, the FTC said.

“Advancements in machine learning make it cheaper for these systems to collect and process large volumes of personal data,” the FTC said.

This “can open the door for price changes based on information like your precise location, your shopping habits, or your web browsing history”, the FTC added.

The investigation follows previous FTC examinations of data brokers and digital health platforms, reflecting the agency’s interest in addressing privacy concerns in the increasingly online marketplace.

 - AFP