On January 17, 2025, the US Federal Trade Commission (FTC) released the preliminary observations and findings from its ongoing study of surveillance pricing. According to the FTC, surveillance pricing occurs when companies leverage advanced data collection technologies to adjust the prices of goods and services for individual consumers based on competitor pricing, precise location, browser history, purchase history, consumer preferences, demographics, and other sources of real-time data.
In July 2024, the FTC ordered eight intermediary firms to provide information regarding their development and use of surveillance pricing products and services to support an FTC study of the issue (the study). Section 6(b) of the Federal Trade Commission Act (FTCA) provides, the FTC with, among other things, the authority to conduct wide-ranging market studies and investigations, even in the absence of a specific enforcement action. The study summarizes the documents received from six intermediary firms and is an attempt by the FTC to highlight market trends and emerging technologies and their impact on consumers, fulfilling one of the original mandates for its new Office of Technology
The FTC, in a 3-2 vote along party lines, approved the release of the study, with the Democratic majority voting in favor. Republican commissioners Andrew Ferguson (who became chairman of the FTC on January 20, 2025) and Melissa Holyoak objected to the manner and timing of the release and issued a dissenting statement in which they accused “the outgoing Democratic majority” of “slowly dripping out information…rather than carefully studying the material produced and issuing a comprehensive final report” and of not acting in the public interest.
Summary of Findings
For context, the FTC provided the following example of surveillance pricing: products that may be of interest to new parents, where the seller can confirm that the buyer is a new parent through their recent purchases of baby goods and that the buyer’s baby is ill through a review of their recent searches. Using this surveillance information, the seller can market “fast-delivery” of baby products such as baby thermometers to the buyer at a price premium. After all, babies wait for no one, and desperate parents will pay a premium.
As this example shows and as the preliminary findings confirm, companies that collect information about their customers can use a variety of features identify individuals to charge particular groups higher prices or use those features to generate greater profits. The study aims to catalog the types of data that companies use to create their algorithms and where the data is sourced, and includes what the FTC staff (the staff) has learned so far about (1) the types of products and services being offered; (2) how these tools work to target prices or segment users; (3) the customers and industries involved; (4) the data sources and types of data collected to power surveillance pricing products and services; and (5) the tools’ effect on prices, sales, revenue, or consumers, as further explained below.
Types of Products and Services Being Offered
The staff has reviewed a variety of tools that assist businesses with adjusting pricing and marketing strategies based on consumer data, including:
- Price targeting tools, which set prices according to consumer behavior and market conditions.
- Consumer segmentation and consumer profiling tools, which categorize customers for personalized promotions.
- Search and product ranking tools, which customize how products appear on websites.
How These Tools Work to Target Prices or Segment Users
The staff has learned that advances in artificial intelligence, machine learning, and access to specialized pricing tools allow companies to create highly personalized pricing and segmentation strategies. These tools use a range of consumer data such as behavior, location, and previous interactions to target specific users with tailored pricing, promotions, and product recommendations.
For example, sports betting websites can track a hesitant user’s actions and trigger prompts to encourage engagement. Businesses can also adjust offers based on factors like a consumer’s perceived price sensitivity or specific needs, such as promoting stress-relief products to homeowners in a flood zone. This enables companies to dynamically customize their pricing and marketing to maximize consumer engagement.
The Customers and Industries Involved
Respondents were asked to disclose their current and top clients. The staff has determined that the intermediaries serve a wide range of clients across diverse industries, which include consumer-facing businesses, such as grocery stores, apparel retailers, and health and beauty stores. Many clients operate both online and in brick-and-mortar stores. Additionally, some intermediaries sell to other businesses, which include distributors and wholesalers.
The Data Sources and Types of Data Collected to Power Surveillance Pricing Products and Services
Some examples of data types that are collected include:
- Direct Consumer or Behavioral Data—Refers to information collected from a consumer’s online actions, such as their IP address, device type, browser settings, language settings, and interactions with the website. This can also include micro-interactions, such as mouse movement or how far down they scroll on a page. This data is used to draw conclusions about the offerings a consumer might be most interested in.
- Inferred Data—Information can be inferred based on a consumer’s online behavioral data, such as using an IP address to infer the consumer’s location, leaving items in a cart, or sorting a feed of products from low to high price. This data can be used to infer the consumer’s purchase intent, emotional state, or financial sensitivity.
- Other Company Data Sources (Third-Party or First-Party Sources)—Intermediaries can provide additional data they have on hand, such as previous purchases or a consumer’s gender or age.
- Consumer Profiles—Companies create unique consumer profiles by linking identifiers such as unique browser cookies or email addresses provided by consumers during checkout. Once a consumer profile is created, the profile is supplemented based on the consumer’s ongoing interactions, whether on websites, apps, or in-store kiosks. Based on their consumer profiles, a company can segment consumers into different categories, such as a shopper’s loyalty, spending potential, or purchase frequency. This allows the company to tailor products and promotions and offers to the particular consumer.
The Tools’ Effect on Prices, Sales, Revenue, or Consumers
These tools typically offer two kinds of “business value”: (1) boosting revenue through increasing prices, and (2) lowering costs through automated pricing and marketing. These pricing tools allow companies to make prices more fluid and less static. The same product may have a different price in a different location, or for different consumers, based on the data gathered.
Limitations of the Study
The findings in the study are preliminary, non-exhaustive, and intended to highlight initial observations. The FTC is still gathering and analyzing information. The views expressed in the study are the views of the staff and do not necessarily reflect the views of the FTC.
In addition to the study, the FTC website includes a blog post for further engagement, and an “issue spotlight” with other background and research. The issue spotlight notes that potential harms of surveillance pricing include consumer exploitation through pricing and promotions, privacy risks, data obfuscation, and discrimination.
Implications and Next Steps
As is the case for Section 6 studies, the purpose of this study is to collect information and not to assert wrongdoing by the reviewed companies. Surveillance pricing has not been determined to violate antitrust or consumer protection laws. Surveillance pricing is not straightforward, and the FTC is in the process of improving its understanding of the practice while considering its implications relating to competition, consumer protection, transparency and fairness, and data collection and use.
Broadly, retailers and vendors should note the requirements of Section 6(b) of the FTCA. As even the dissenting statement notes, the FTC conducts numerous studies and requires a number of companies to submit documentation for investigation. As this study showcases, information gathered during the study phase can inform the FTC’s understanding and potentially shape policy. Companies targeted by studies should work with counsel in the collection and production of individualized information about actual or potential customers to ensure proper information is provided and confidentiality is maintained.
Specific to this study, companies that collect individualized customer information should consider the following next steps in light of the FTC’s initial findings:
- Work with antitrust counsel to review their surveillance pricing policies, program, and strategy implementation.
- Consider certain strategies deployed in one area in light of strategies deployed elsewhere—varied pricing in and of itself is not a violation, but companies should be proactive to avoid a pattern or practice of price discrimination).
- Review promotion and privacy practices in light of other regulatory regimes, and measure the impact of surveillance pricing on consumers.
For more information on the study, or to review your pricing strategies for any potential antitrust liabilities, contact McCarter partner Robin Crauthers.