Federal Agencies Increase Focus On Pricing Enforcement

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Last month, the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) jointly hosted a public meeting of the interagency "Strike Force on Unfair and Illegal Business Practices."
United States Consumer Protection

Last month, the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) jointly hosted a public meeting of the interagency “Strike Force on Unfair and Illegal Business Practices.” The meeting was a continuation of an effort, initially announced by President Biden in March, to “strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices,” according to a press release.

The August 1 meeting brought together a number of different agencies to discuss their actions to lower prices for Americans, including the FTC and the DOJ, the Consumer Financial Protection Bureau (CFPB), the U.S. Department of Transportation, the U.S. Department of Agriculture (USDA), the U.S. Department of Health and Human Services (HHS), the U.S. Securities and Exchange Commission (SEC), and the U.S. Federal Communications Commission (FCC).

The first public meeting of the Strike Force gave agency representatives the opportunity to shine a light on the efforts their agencies have undertaken to combat unfair and illegal business practices. FTC Chair Lina Khan highlighted the actions of her agency to uncover collusion attempts by oil executives and challenge big pharma, as well as their work on the Click to Cancel rule. Representatives from DOJ and the SEC noted their efforts to encourage competition and punish those who consistently use tactics to raise prices for consumers.

The Strike Force is one of several actions the FTC and DOJ have taken in recent months focused specifically on unfair or illegal pricing activities that could harm consumers and increase prices. These include the FTC's July service of eight subpoenas on “middlemen” engaged in the collection of consumer data to share with clients who wished to tailor pricing to individual customers; and) the agency's ongoing activities clarifying the rules on disclosing junk fees, and actions brought to enforce those rules. Because of these actions, as well as increased enforcement by state regulators, sellers should exercise extreme caution in pricing policy and practices.

In a July 23, 2024 press release, the FTC announced that it sent subpoenas to eight “middlemen” regarding the practice of “surveillance pricing” in the industry, i.e., the practice by middlemen of providing retail businesses with algorithms that use consumers' personal data to tailor product pricing to individuals. The FTC's subpoenas seek information about the pricing products the recipients offer, the data being collected and how such collection is disclosed, and how the data is used to target the consumers who receive offers.

The agency has expressed concern about potential unfairness or privacy violations taking place based on the way that consumers' personal data is being collected and used in order to personalize savings and pricing—particularly if such collection and use has not been properly disclosed, and particularly if a third party is involved—and about whether the pricing tools may be used for discriminatory pricing practices, such as unfair competition or “bait and switch” pricing.

The DOJ has also been investigating the potential use of personalized pricing, algorithms, and AI for anticompetitive conduct that could violate the antitrust laws, including price coordination and discrimination. For example, this spring, the DOJ and FTC jointly filed a statement of interest in pending litigation expressing their concern about merchants knowingly sharing their competitive information with, and then relying on pricing decisions from, an entity that competitors know analyzes information from multiple competitors.

Taking into account past and recent activities by federal regulators with respect to deceptive pricing generally and dynamic or personalized pricing specifically, sellers should act with caution in engaging in dynamic pricing and surveillance pricing practices, and/or working with third parties that do so. Specifically, sellers should proceed carefully in adopting strategies that provide different prices to different customers and collect and use consumer data to do so, particularly if such use and pricing has not been disclosed to and would not be expected by the consumer. The risk increases if a third party engages in collecting consumer data and/or providing the data or the algorithm, particularly if the third party's involvement is not disclosed and consented is not obtained from consumers.

Price regulation will continue to be a hot topic in the coming months—indeed Vice President Harris has announced that she will seek a federal price gouging law if elected president in November, and the DOJ has recently announced a lawsuit they have filed centered around unfair pricing tactics in the apartment industry. The FTC, the DOJ, and other members of the Strike Force, as well as the states and class action attorneys, will no doubt continue to focus their attention on deceptive and unfair pricing practices, including junk fees, dynamic and personalized pricing, antitrust, price gouging, reference pricing, and general consumer deception topics.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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