Federal Trade Commission (FTC) Chair Lina Khan has issued a stark warning about the potential for artificial intelligence to enable widespread price discrimination against consumers. Speaking at the 2024 Fast Company Innovation Festival, Khan highlighted how AI technology is not only turbocharging traditional fraud schemes but also creating new risks through personalized pricing strategies that could charge different consumers different prices based on their personal data.
Khan explained that while AI offers benefits, it has already become central to the FTC’s “bread and butter fraud work.” AI tools are accelerating scams by allowing fraudsters to disseminate phishing attacks and voice cloning schemes more quickly, cheaply, and at broader scale than ever before. However, her primary concern focused on a more insidious application: retailers using surveillance technology and customer data to implement targeted pricing.
The FTC chair distinguished between price discrimination and dynamic pricing—the latter adjusts prices based on supply and demand market conditions, while the former varies prices based on individual consumer characteristics. Khan warned that the proliferation of AI could lead to scenarios where “each of us being charged a different price based on what firms know about us.”
Khan offered troubling hypothetical examples: people with nut allergies being charged more for nut-free granola bars, restaurants using QR codes to create personalized menus with individualized pricing, or airlines charging higher fares to someone who just experienced a family death and needs to travel urgently. These scenarios leverage the intimate personal information that digital companies collect on consumers.
In July, the FTC issued a market inquiry ordering eight companies to provide information on “surveillance pricing products and services” that incorporate consumer data including location, demographics, credit history, and browsing or shopping habits. The inquiry aims to determine whether targeted pricing is occurring and to what extent it might harm consumers.
Khan suggested that dynamic pricing—already common in ride-sharing services—may have normalized the concept of variable pricing, making consumers more accepting of price fluctuations. This normalization could pave the way for more controversial personalized pricing practices.
Several major retailers have already begun integrating technology that could enable such pricing strategies. Wendy’s faced significant backlash after announcing plans for dynamic pricing and AI-enabled menu changes in 2025, though the company later clarified it would only offer discounts, not price increases. Kroger partnered with Microsoft in 2019 to implement digital price tags in approximately 100 stores, while Walmart plans to roll out digital shelf tags in 2,300 stores by 2026. Both companies have stated they won’t use the technology for surge pricing, but concerns persist about future applications.
Key Quotes
Some of these AI tools are turbocharging that fraud because they allow some of these scams to be disseminated much more quickly, much more cheaply, and on a much broader scale
FTC Chair Lina Khan explained how AI is amplifying traditional fraud schemes at the 2024 Fast Company Innovation Festival, highlighting the technology’s role in accelerating consumer harm beyond just pricing concerns.
Given just how much intimate and personal information that digital companies are collecting on us, there’s increasingly the possibility of each of us being charged a different price based on what firms know about us
Khan articulated the core concern about AI-enabled price discrimination, emphasizing how the vast amounts of personal data collected by companies could be weaponized to extract maximum payment from individual consumers based on their specific circumstances and vulnerabilities.
Because we, I don’t think, want to wake up one day where this is just now the new normal. We want to be able to figure out: is this really an economy and society that we want to be living in, or do we want some guardrails there
The FTC chair explained the rationale behind the agency’s market inquiry into surveillance pricing, framing it as a proactive effort to prevent exploitative practices from becoming entrenched before consumers and regulators can respond effectively.
I think the fact that we’ve been living with dynamic pricing in some areas, like ride-sharing for some time, now has kind of destabilized for people the idea that we should all be charged one price at a particular moment
Khan suggested that consumer acceptance of dynamic pricing in services like Uber and Lyft may have inadvertently paved the way for more problematic personalized pricing schemes, as variable pricing becomes normalized in the marketplace.
Our Take
Khan’s warning represents a crucial regulatory intervention at a pivotal moment in AI’s commercial deployment. The FTC chair is essentially drawing a line between acceptable market practices and potentially exploitative uses of AI that could fundamentally alter the consumer-business relationship. What makes this particularly significant is the proactive nature of the inquiry—rather than waiting for widespread harm, the FTC is investigating before surveillance pricing becomes entrenched.
The distinction Khan draws between dynamic pricing and price discrimination is critical but may prove difficult to enforce in practice. As AI systems become more sophisticated, the line between responding to market conditions and exploiting individual vulnerabilities will blur. The challenge for regulators will be establishing clear standards that allow beneficial innovation while preventing discriminatory practices. This case could set important precedents for how AI applications in commerce are regulated, potentially influencing everything from healthcare pricing to housing markets. The outcome will likely shape the broader debate about AI ethics and consumer protection for years to come.
Why This Matters
This warning from the FTC chair represents a critical moment in the intersection of AI technology, consumer protection, and market regulation. As artificial intelligence becomes increasingly sophisticated at analyzing consumer data and predicting behavior, the potential for exploitative pricing practices grows exponentially. The ability to charge different prices based on personal circumstances could fundamentally reshape the retail landscape and erode the principle of fair pricing.
The implications extend beyond individual transactions. If AI-driven price discrimination becomes normalized, it could exacerbate economic inequality by systematically charging vulnerable populations more for essential goods and services. People with dietary restrictions, urgent travel needs, or other circumstances beyond their control could face higher costs simply because algorithms identify them as willing or forced to pay more.
For businesses, this regulatory scrutiny signals that AI implementation must consider ethical boundaries and consumer protection laws. The FTC’s proactive investigation suggests that companies deploying surveillance pricing technology will face increased oversight and potential enforcement actions. This could influence how retailers approach AI integration and data collection practices, potentially slowing adoption of certain technologies or requiring more transparent pricing policies. The outcome of the FTC’s inquiry could establish important precedents for AI regulation in commerce.
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Source: https://www.businessinsider.com/ftc-chair-lina-khan-warns-ai-pricing-discrimination-risks-2024-9