FTC: ‘Personal consumer data can lead to higher prices for consumers’

According to the Federal Trade Commission (FTC), personal data from consumers is frequently used to target individual customers, leading to different prices for the same set of goods and services.

In July 2024, the market supervisor decided to launch an investigation into what it calls ‘the shadowy market’ of third-party intermediaries that set individualized prices for products and services based on personal information of consumers, such as location, demographics, browsing patterns, mouse movements on a webpage, and shopping history.

These practices are called ‘surveillance pricing’, because prices aren’t determined by static features of a product. Instead they are being based on consumer-related data, behavior, and preferences. This means that some customers most likely overpay for what they buy, while others benefit from a lower price.

The inquiry hasn’t been rounded up, but the FTC has come up with some preliminary conclusions.

FTC Chair Lina Khan states that initial findings show that retailers frequently use people’s personal information to set targeted and tailored prices for goods and services.

As an example, she mentions parents of a newborn baby. A consumer who is profiled as a new parent may intentionally be shown higher priced baby thermometers on the first page of their search results.

Something similar also happens in the cosmetics industry. Companies selling cosmetic products may vary their prices based on specific skin types and skin colors. Furthermore, search history and previous purchases may also lead to higher prices.

“The FTC found that widespread adoption of this practice may fundamentally upend how consumers buy products and how companies compete,” the market supervisor concludes.

The FTC will continue its research on surveillance pricing because “Americans deserve to know how their private data is being used to set the prices they pay and whether firms are charging different people different prices for the same good or service,” Khan says.

When the final report will be finished remains unclear.