They are aware of your identity, your residence, your income, and the location of your most recent vacation.
They are monitoring the websites you access, observing your mouse activity on those sites, and noting the items you’ve abandoned in online shopping carts. Mac or PC? iPhone or Android? Your preferences have been collected and recorded.
They have the necessary tools, driven by artificial intelligence software, to gather all this data and pinpoint precisely how much you would be willing to pay for any product or service that catches your interest.
The term “they” refers to a mix of retailers and service providers, social media platforms, app creators, large data companies, and various other organizations with which you have shared your personal and behavioral information, both intentionally and unintentionally. They have also introduced new terms to help you feel more at ease with the systems that use your personal data to determine customized pricing.
Variable pricing. Customized rates. Also “promotional pricing.”
FTC investigates surveillance pricing
However, the Federal Trade Commission and others refer to it as: surveillance pricing.
During an investigation that began last year, the FTC is examining the concept of surveillance pricing, which refers to systems that utilize personal consumer data to determine customized prices—indicating that two individuals might receive different quotes for the same product or service, depending on what a company forecasts they are willing or able to pay.
A portion of the FTC’s responsibilities involves combating fraudulent, misleading, and unjust business activities, as well as offering guidance to assist consumers in recognizing and steering clear of scams and fraud, as stated by the organization.
In a preliminary reportIn January, the agency pointed out measures it has already implemented to address the increase in surveillance pricing as part of its initiative to obtain more detailed information on the issue:
- A concern raised by the FTC involved claims that a mobile data broker was collecting consumer details and private location information, such as visits to medical facilities and religious institutions, which was then sold to external entities.
- The agency stated that it imposed the first-ever restriction on the use and distribution of sensitive location data by a data broker, which is accused of selling consumer location information gathered from third-party applications and by acquiring location data from other data brokers and aggregators.
- A separate FTC complaint claimed that the data broker InMarket utilized consumers’ location information to categorize them into specific audience groups — including “parents of preschoolers,” “Christian church attendees,” and “affluent but unhealthy” — which it subsequently shared with advertisers.
Last year, the FTC sent requests to eight companies that provide surveillance pricing solutions which use data on consumers’ traits and actions. The agency states these requests aim to gather details regarding the possible effects these methods have on privacy, market competition, and consumer safety.
Companies that collect personal data from Americans may endanger individuals’ privacy. Now, these companies might be using this large amount of personal information to charge consumers higher prices,” stated former FTC Chair Lina M. Khan. “Americans should be informed if businesses are utilizing detailed consumer data for surveillance pricing, and the FTC’s investigation will reveal this hidden system of pricing intermediaries.
AI-driven consumer profiling
George Slover, general counsel and senior advisor on competition policy at theCenter for Democracy and Technology, has his own term for the practice of using personal data to set individual prices: “bespoke pricing.” He stated that it presents a significant risk to consumer well-being and free market values.
Supporters of personalized pricing models claim that this approach can result in both increased and decreased prices for different individuals. However, Slover cautioned that, unlike standard pricing, tailored pricing made possible through “big data” and artificial intelligence reduces companies’ motivation to provide discounts to those who cannot afford standard market rates.
Potentially, yes,” Slover said to the Deseret News. “But in reality, what sellers will do is set their prices as high as possible. There’s much less motivation to reduce the price for a buyer than to increase it.
Slover described the FTC inquiry as “highly beneficial” and mentioned that it might uncover further details regarding the techniques used in custom pricing, possibly resulting in suitable limitations under current legislation.
For the time being, he stated, consumers have limited options other than concealing their information.
“Consumers can alter their profiles by utilizing a (virtual private network) internet connection, employing an anonymized middleman, or creating a fake, fictional profile… aiming to lower their expenses,” Slover stated.
However, he warned that large amounts of consumer data on nearly every internet user have already been collected and resold by intermediaries.
Slover, who has spent over 35 years working in antitrust and competition law, including positions with the U.S. Department of Justice and the U.S. House of Representatives’ Judiciary Committee, connected the discussion about surveillance costs to the larger requirement for thorough privacy safeguards.
My organization, the Center for Democracy and Technology, was established 30 years ago as the internet was beginning to take shape,” he stated. “One of the key areas we have concentrated on from the start is data privacy… and urging Congress to enact a robust, thorough privacy law.
Seeking to safeguard data confidentiality
Utah state Representative Tyler Clancy, a Republican from Provo, stated he is unwilling to wait for Congress to address data privacy, which he considers the key issue behind surveillance-based pricing.
The privacy concern is my main issue,” Clancy said to the Deseret News. “Companies utilize that data for their operations… but this is a field where we require some guidelines.
If you’re setting a price based on unchangeable traits — race, religion, gender, ethnicity — it raises constitutional issues.
Clancy mentioned he is looking into “consent clauses” to help Utah residents understand if their data is being utilized in pricing models. He referenced the reaction to recent news reports that followed a statement from a Delta Air Lines executive during an earnings call, where the executive mentioned the airline was experimenting with artificial intelligence technology that could determine ticket prices based on “how much people are willing to pay for premium features related to the base fares.” Delta provided a subsequent clarification.statement, emphasizing that it was not employing any form of “individualized pricing” to determine airfares based on customer information.
“No fare product that Delta has ever utilized, is currently testing, or intends to use targets customers with personalized pricing based on personal data,” stated Peter Carter, Delta’s chief external affairs officer.
However, this qualification occurred after an outcry had already started, Clancy stated, and the matter has attracted attention from various points on the political spectrum.
“When this news story first emerged, it came as a surprise to individuals on both the political right and the political left,” Clancy stated.
Clancy mentioned that he is developing a proposal for the 2026 Utah Legislature session, with the goal of enforcing openness regarding how companies utilize personal data in their pricing models for goods and services.
Sunshine is the best disinfectant, and that’s ultimately what I’m aiming for,” Clancy stated. “It will result in a more improved and open market, which is a victory for all.
Targeted advertising came first
Regarding names, John Howell, a marketing professor at BYU, doesn’t support the use of surveillance pricing, a phrase he thinks is overly provocative. However, he notes that the increasing debate around this practice isn’t about its feasibility, but rather about whether customers will accept it.
This isn’t something that’s just emerged recently,” Howell mentioned during an interview with the Deseret News. “We’ve been observing this since the early 2000s, specifically regarding individual pricing, which is also known as first-degree price discrimination. This involves setting a unique price for each person based on their ability or willingness to pay.
Howel stated that economists have long anticipated the emergence of these models, but pointed out that the industry took its initial step in the advertising sector.
It has been speculated for at least 20 years,” he stated. “The industry adopted targeted advertising before implementing targeted pricing. I’m surprised they chose that approach when targeted pricing is more lucrative.
Although the practice makes sense from a business standpoint, Howell noted that consumer response is also consistently unfavorable.
“Whenever customers begin to notice price reductions or personalized rates, they strongly dislike it,” he stated.
And this conflict is not recent either. Howell pointed out that the Sherman Antitrust Act, enacted in 1890, was “mainly driven by price discrimination from the railroad sector at the start of the 20th century.”
From an academic standpoint, Howell stated, price discrimination could advantage more consumers than it disadvantages.
The idea is that price discrimination typically results in lower average prices,” Howell stated. “This doesn’t imply that everyone will pay less. Additionally, it usually makes goods and services more accessible to those with lower incomes.
If you implement price discrimination, you can charge individuals who are able to pay a significant amount more, while charging less to those who cannot afford it. This is typically how it works.
In reality, Howell points out that organizations with the largest amount of data, and consequently the greatest influence over individual pricing structures, can readily undermine the competitive landscape.
It’s not the concept of price discrimination that has been disrupted,” he stated. “What the data has accomplished within our current economic system is to favor large entities with greater power and exclude smaller competitors. Once they lose their competitiveness, the theory no longer holds. If I were a policymaker, that’s what I would focus on—preventing big tech companies from gaining excessive influence.
