Retailers are getting increasingly sophisticated at using personal consumer information, including online shopping habits and smartphone behavior, to estimate how much each individual shopper is willing to pay. Now, the Federal Trade Commission (FTC) is putting businesses on notice that this practice could run afoul of consumer protection laws.

The FTC issued a new enforcement policy statement on Wednesday, telling companies that if they use highly detailed personal data to generate individualized prices, they must disclose that fact. This new declaration marks the Trump administration's formal entry into the growing regulatory push aimed at reining in how retailers use pricing algorithms.

In its announcement, the FTC said businesses must provide a clear and conspicuous disclosure for any personalized pricing practice, along with details about the types of data used to determine the offer. The agency stated it does not have the authority to outright ban personalized pricing, but it will deploy enforcement resources against companies found to be falling short of disclosure standards.

Businesses have long charged different prices based on what different customer groups are willing to pay. College students and senior citizens, for instance, routinely get discounted rates on subscriptions and phone plans. Fine-tuning pricing down to the individual level has always been a marketing goal, but the practice has now become a highly charged political issue. Companies gather vast amounts of consumer data, including browsing history, geolocation, device type, purchasing patterns, and even how long a mouse cursor hovers over a product page. AI-powered automated pricing software can rapidly convert that data into a price tailored to each shopper.

During the Biden administration, the FTC conducted research on this topic. That research found that when merchants identify shoppers who are unfamiliar with the market, such as new parents or first-time car buyers, they may use personalized pricing to inflate the quoted price. The full report has not yet been released. Current FTC Chairman Andrew Ferguson, who was a minority commissioner at the time, criticized Democrats for rushing out preliminary research findings, though he has not taken a firm position on personalized pricing itself. He halted an effort by his predecessor, Lina Khan, to solicit public comment on the practice during her final week in office.

In the wake of that, Instacart was exposed for allowing retailers to test its software in four cities, where different users adding the exact same items to their carts would see different prices. Instacart responded that the experiment was meant to help retailers understand consumer preferences, but it ended the tests after a consumer backlash.

The FTC noted in Wednesday's announcement that food delivery platforms that quote higher prices to users based on their personal data are subject to disclosure requirements. Similarly, ride-hailing companies that charge more when they detect a passenger's phone lacks a competitor's app must also disclose the practice. Massachusetts Democratic Senator Elizabeth Warren and others have described dynamic pricing as a way to squeeze consumers. Some progressive voices argue that Wednesday's announcement does not go far enough to protect shoppers.

"The FTC's announcement today is two years late and nowhere near sufficient," said Nidhi Hegde, executive director of the American Economic Liberties Project, a progressive group focused on antitrust and consumer issues. Regulation of pricing algorithms is currently being driven mainly at the state level. New York passed a law last year requiring companies to disclose when they use personalized pricing, while Maryland enacted legislation banning algorithm-based individualized pricing for groceries. The FTC's latest statement acknowledges that it remains unclear how widespread the use of personalized pricing actually is. But the commission believes that when companies use personal data to make consumers pay more without disclosure, shoppers suffer substantial harm. The agency added that the more sophisticated the personalized pricing methods, the less likely consumers are to benefit from them.