FTC Investigates Airlines for Personalized Pricing Practices

The Federal Trade Commission (FTC) is looking into how airlines and other companies use personal data to set prices. This study, called the Personalized Fares inquiry, is examining whether companies are charging consumers different prices based on their individual information. The FTC has ordered major airlines like Delta, United, and JetBlue, along with other companies, to hand over records. This is to understand if personal data influences the prices people pay for flights, rides, and goods.

FTC’s Personalized Fares Study

The FTC’s study aims to uncover how companies use consumer and worker data in their pricing strategies. It’s important to note that these requests for information do not mean any company has broken the law. The agency is using its authority under Section 6(b) of the FTC Act to gather this data for its research. Airlines and other companies have 45 days from receiving the order to provide the requested records.

The FTC is particularly interested in how companies determine what consumers pay. FTC Chairman Andrew N. Ferguson stated, “Consumers deserve to know whether companies use their web surfing habits or other personal data to estimate the highest price they can charge each consumer.” This highlights the agency’s focus on transparency and fairness in pricing.

Airlines Ordered to Provide Data

Delta Air Lines, United Airlines, and JetBlue are among the nine companies that received orders from the FTC. The other companies include ride-sharing services like Lyft and Uber, and delivery services like DoorDash and Instacart, as well as retailers Target and Walmart. The FTC wants to understand how personal data affects prices for rides, food delivery, and other goods and services.

If a company does not comply with the FTC’s request, the agency can ask a federal court to force them to provide the information. However, the FTC’s role in this study is separate from enforcement actions against airlines. The Department of Transportation is the agency responsible for handling any enforcement actions against air carriers.

What Information the FTC is Requesting

For the airlines, the FTC is asking for details about the information used in their pricing systems and how widely these systems are being used. They also want to know which parts of a fare might be affected by these methods and whether customers are sorted as individuals or into larger groups. The records requested include:

• Data Inputs and Methods: Information on the data used in pricing, the methods employed, any third-party suppliers involved, and how extensively these methods have been put into practice.
• Pricing Experiments: Details about any tests where different prices or promotions were offered to various customer groups, including the impact on prices, sales, revenue, and profits.
• Discounts and Promotions: How discounts and promotions are decided, and whether pricing methods have changed the affordability or accessibility of flights.
• Customer Disclosures: The exact wording and placement of any disclosures made to customers regarding pricing.

The FTC’s requests also cover participation in loyalty programs and offers linked to airline-specific programs like Delta SkyMiles, United MileagePlus, and JetBlue TrueBlue. Paid upgrades and targeted fare sales are also included. Most of the requested information dates back to January 2023, with requests for pricing research and experiments going back to January 2021.

Airline Responses to the FTC Inquiry

Delta has stated that it does not use, test, or plan to use a fare product that offers individualized prices based on personal data. According to Delta, its AI tool uses demand and market information at the route level, not passenger personal information. They described a trial with a tool called Fetcherr as being for forecasting demand and recommending fare adjustments, and that it does not use personal data in ticket pricing.

JetBlue has also stated that personal information and web-browsing history do not determine individual fares. The airline attributes fares to demand and seat availability, and claims customers see the same prices on its website and mobile app. United referred questions to Airlines for America, a trade group that welcomed the FTC study and stated its member carriers do not engage in personalized pricing.

Dynamic Pricing vs. Personalized Pricing

It is important to distinguish between dynamic pricing and personalized pricing. Dynamic pricing adjusts fares based on market conditions, such as how many seats are available and the overall demand for a flight. Personalized pricing, on the other hand, uses specific information about an individual shopper to influence the price they are offered. This difference is key to the FTC’s investigation into what data is used in fare-setting methods and how it affects what customers ultimately pay.

Delta’s trial with Fetcherr is an example of a tool for forecasting demand and recommending fare changes. Delta maintains that this tool does not use personal information for ticket pricing. The FTC’s requests are designed to gather information about systems and experiments across all nine companies involved in the study. JetBlue is also facing a separate class-action lawsuit that makes similar allegations about using trackers to set prices dynamically, which JetBlue denies.

The FTC is also working on a policy that would require businesses to clearly state if they use personalized pricing and what types of data are involved. This policy is currently open for public comments. The airlines and other companies must meet their deadlines to respond to the FTC’s orders within 45 days. Travelers can follow the developments as companies respond and the FTC releases its study findings.

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