A price just for you, specifically

Miami Herald

a day ago

Imagine that an airline notices you've booked a five-star hotel, so it charges you more for your ticket than it would have if you had booked a four- or three-star hotel. That's the vision of personalized pricing, a concept that has for years intrigued companies and enraged consumer advocates.
While consumer backlash may still give companies pause, some roadblocks to widespread use of the strategy may be clearing.
The Trump administration introduced a plan this past week to clear the way for artificial intelligenceinnovation, reinforcing its embrace of AI and raising questions about whether inquiries into the practice that Biden-era regulators started will be given any priority. At the same time, the technology has developed at a rapid pace.
'It's going to be: Whatever you can get away with, it's legal,' Robert W. Mann, an independent airline industry analyst and former airline executive, said. When it comes to regulatory scrutiny, he added, 'from curious to none is probably the transition.'
Delta Air Lines promoted its plans this month to ramp up its use of AI to set prices. And while it's not clear what data the airline is using -- and whether it constitutes personalized pricing -- privacy experts and industry analysts say many companies may see an opportunity to open what they've long considered to be an untapped gold mine.
Delta has been met with swift backlash. It said on its latest earnings call that it was working with Fetcherr, an AI startup, and planned to use AI to price 20% of domestic routes by the end of this year. But it has pushed back against claims that it's turning to 'personalized' pricing. In a statement, it said it was leaning into new technology to streamline existing dynamic pricing models, which are based on market factors, not personal information.
'Fetcherr's technology has been developed to streamline processes already in place at companies and does not allow for individualized or personalized pricing,' the startup said in a statement.
Regardless of the consumer data that Fetcherr is offering Delta specifically, an archived version of a Fetcherr blog post, reported earlier by the Thrifty Traveler blog, hailed the startup's ability to offer 'truly personalized' prices to travelers, based in part on their past purchases.
Under the Biden administration, regulatory scrutiny of personalized pricing started to build. Members of Congress and data privacy experts have raised concerns about the strategy in industries such as groceries and travel. Last year, the Federal Trade Commission, under its previous chair, Lina Khan, opened an inquiry into 'surveillance pricing' -- another term for the use of personal data to set prices. The market study examined practices at several companies, including Mastercard, JPMorgan Chase and Accenture.
Initial findings released in January said that 'consumer behaviors ranging from mouse movements on a webpage to the type of products that consumers leave unpurchased in an online shopping cart can be tracked and used by retailers to tailor consumer pricing.'
It's not clear whether the Trump administration will make those inquiries a priority. The FTC under its new chair, Andrew Ferguson, withdrew public comment on surveillance pricing. Joe Simonson, an agency spokesperson, said that the study was ongoing.
'If Democrats are complaining about this practice, we're actually doing something about it. We're looking into this issue,' he said.
An 'AI Action Plan' that President Donald Trump outlined this past week recommends that the FTC review prior investigations to make sure they don't 'unduly burden AI innovation.'
'All of that does lead to an opening for surveillance pricing, and emboldening,' Ben Winters, the director of AI and privacy at the Consumer Federation of America, said.
Public backlash could still thwart AI pricing ambitions. After the uproar over Delta's public embrace of AI to set airfares, American Airlines called the practice inappropriate. 'Consumers need to know that they can trust American,' the CEO, Robert Isom, said on an earnings call.
But Gene Burrus, a law and policy consultant who worked as American Airlines' competition lawyer 25 years ago, said consumer backlash was less of a concern for airlines than it used to be, in part because of consolidation in the industry. Mergers have left just a handful of major airlines, which means travelers have fewer places to turn if they're upset with an airline's pricing, he said.
Will Congress step in? Three Democratic senators sent Delta a letter this past week raising concern about the airline's AI plans and the impact on travelers. A Republican senator, Josh Hawley of Missouri, said in a social media post that Delta's plans were 'the worst thing I have heard from the already awful airline industry.'
Also this past week, Rep. Greg Casar, D-Texas, introduced legislation to ban surveillance pricing at the federal level. It's unclear how far that bill will go. A handful of states, including California, Georgia and New York, have introduced bills to regulate the practice, too, though several have stalled or been watered down.
It's difficult to tell exactly what data companies are using. While critics worry about privacy breaches and higher prices, consumer companies have countered that AI-driven pricing won't harm already strained shoppers -- and could even lead to more discounts. For regulators, the competing claims pose a challenge, said Victoria Noble, a staff attorney at the Electronic Frontier Foundation. She added: 'They would have to peer under the hood to look at what these tools are actually doing.'
This article originally appeared in The New York Times.
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