Surveillance capitalism: US authority investigates price algorithms
Algorithms use data like browsing history and location to maximize prices from consumers.
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Data is valuable. It can indicate what price a particular consumer is willing to pay for a product or service. Data sets include, for example, browsing history, software or devices used, credit ratings, previous purchases or orders, movement patterns and much more. Providers such as Accenture, McKinsey and Mastercard have combined corresponding data collections and algorithms and offer surveillance pricing as a service (surveillance pricing). Third parties should charge as much as possible with dynamic prices – adapted to the respective customer. The US Federal Trade Commission (FTC) now fears negative effects on competition and is opening an investigation (case no. P246202).
This is because those who have such algorithms not only harm the consumers specifically affected, but also gain a competitive advantage over more data protection-friendly competitors. This increases the pressure on them to also collect and analyze all kinds of personal data. A vicious circle. "Companies that harvest the personal data of Americans risk their privacy. Now companies can use this significant amount of personal information to charge people higher prices," said FTC Chairwoman Lina M. Khan, "Americans deserve to know which companies are using their detailed consumer data to charge surveillance prices."
Mastercard & Co should provide insight
Her agency is now focusing on eight companies that offer the calculation of the highest possible prices as a service. Accenture, Bloomreach, JPMorgan Chase, Mastercard, McKinsey & Co, PROS, Revionics and Task Software are to provide the FTC with extensive information,
The questions relate to four areas:
- What types of surveillance pricing each company has specifically developed or rolled out, how it is technically implemented, and how it is used or intended to be used.
- Where the data used in each case comes from and who has collected it and how
- Which companies they have offered surveillance pricing to and how they intend to use it
- The potential impact on prices paid by consumers
However, much of the information is likely to be classified as a trade secret and therefore not made public. Companies that actually charge surveillance prices are not currently being questioned. The usual suspects include airlines and all kinds of companies that only make their offers digitally or urge their customers to use a smartphone app.
The ride broker Uber revealed an interesting detail back in 2016: According to it, customers are willing to pay a higher price for transportation if the battery level of their cell phone is low. Last year, the Belgian daily newspaper La Dernière Heure conducted a small field test and found that Uber's prices for the same route at the same time actually differ for different consumers. One feature, according to the report: the battery level. However, Uber denied evaluating the charge status of the devices used.
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