The Federal Trade Commission today announced it’s seeking information from eight companies that use artificial intelligence to set prices based on customers’ behavior and characteristics.

It’s known as “surveillance pricing,” in which the companies’ third-party AI systems leverage mountains of personal data to effectively ascertain a person’s ability to pay for something. The systems sift through data related to credit information, browsing history, demographics and location, and based on this will come up with a price for a certain product.

As a result, different customers might pay differing amounts for the same product. The FTC said it wants to better understand how this “opaque” type of surveillance works.

“Firms that harvest Americans’ personal data can put people’s privacy at risk,” said FTC Chair Lina M. Khan (pictured). “Now firms could be exploiting this vast trove of personal information to charge people higher prices. Americans deserve to know whether businesses are using detailed consumer data to deploy surveillance pricing, and the FTC’s inquiry will shed light on this shadowy ecosystem of pricing middlemen.”

Businesses that use surveillance pricing might believe they are simply following the basics of capitalism and maximizing what they can get for their products based on meaningful data. For critics, there’s something predatory about the practice, and naturally, there’s the question of whether such discrimination is fair to consumers.

Khan called the practice a “thought experiment,” adding, “We’re now in an environment that technologically it actually is much more possible to be serving every individual person an individual price based on everything they know about you.”

The companies the FTC has chosen to investigate are Mastercard Inc., Revionics, Inc., Bloomreach, Inc., JPMorgan Chase & Co., Task Software Inc. and PROS Holdings. The agency says it will focus its probe on consumer protection and the impacts the practice has on privacy.

Some of the companies have already released public statements. Revionics, a California-based software firm that offers price optimization software for retailers, said it doesn’t actually “develop software that recommends pricing targeted to specific individuals” and doesn’t exploit people’s data whatsoever — rather it concentrates “market-level factors” to set prices.

Photo: E Gillet/Flickr