The FTC is cracking down on companies that charge you a "personalized price"

The Federal Trade Commission is putting companies on notice over their use of personal consumer data to set individualized prices. In a bulletin issued Wednesday, the FTC said businesses must clearly disclose when they use detailed information about a consumer to generate a personalized price offer, including the types of data used. The agency said it cannot ban personalized pricing under its current authority, but it will pursue enforcement action against companies that fail to meet its disclosure requirements.

How personalized pricing works

The warning addresses the growing use of automated pricing systems that rely on consumer data. Companies can use browsing histories, location, device type, shopping behavior, and other signals to estimate how much a person may be willing to pay. AI-based pricing software can process that information quickly and adjust offers for individual users.

The FTC cited several examples:

• A food-delivery company would need to disclose if it charges a consumer more based on personal data.
• A ride-share company would face the same requirement if it increases a fare because it knows a customer does not have a competing app installed on their phone.

The practice differs from traditional discounts offered to broad groups, such as students or senior citizens. Personalized pricing uses data to make decisions at the individual level. This has become easier as retailers and platforms collect more information through websites, apps, and connected devices.

FTC study and criticism

The FTC began studying the practice during the Biden administration. The agency found that companies could use personal data to charge more when shoppers appear unfamiliar with a market, including new parents and first-time car buyers. The commission has not released a full report from that study. FTC Chairman Andrew Ferguson, who was then a Republican minority commissioner, criticized the earlier release of the preliminary findings. He also closed a public-comment effort on surveillance pricing that former FTC Chair Lina Khan had opened during her final week in office.

Instacart tests

Personalized pricing drew more attention after Instacart allowed retailers to test different prices for individual shoppers in four cities. Consumers who added the same products to their carts at the same time could receive different prices. Instacart said the tests were intended to help retailers understand consumer preferences. The company ended the tests after customers objected.

Consumer harm

The FTC said it does not know how widely businesses use individualized pricing. However, it said consumers can suffer "substantial injury" when they pay more because a company used their personal information without disclosing it. "The more sophisticated personalized pricing practices become, the less likely consumers are to benefit," the commission added.

Critics say the action falls short

Some Democrats and consumer advocates say the FTC's action does not go far enough. Sen. Elizabeth Warren has criticized dynamic pricing as a way for companies to extract more money from consumers. "Today's announcement by the FTC is two years too late and not nearly enough," said Nidhi Hegde, executive director of the American Economic Liberties Project, a progressive group focused on antitrust and other consumer issues.

State action

States have taken a more direct approach. New York last year required companies to disclose their use of personalized pricing, while Maryland prohibited algorithms from changing food prices at the individual level.

Now, at the national level, the FTC's message is clear: Companies that use personal information to determine what a customer pays must tell that customer.