[Plura-list] FTC vs surveillance pricing
Cory Doctorow
doctorow at craphound.com
Wed Jul 24 13:55:19 EDT 2024
Read today's issue online at: https://pluralistic.net/2024/07/24/gouging-the-all-seeing-eye/
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Today's links
* FTC vs surveillance pricing: A prelude to an ass-kicking.
* Hey look at this: Delights to delectate.
* This day in history: 2009, 2014, 2019, 2023
* Upcoming appearances: Where to find me.
* Recent appearances: Where I've been.
* Latest books: You keep readin' em, I'll keep writin' 'em.
* Upcoming books: Like I said, I'll keep writin' 'em.
* Colophon: All the rest.
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🌮 FTC vs surveillance pricing
In the mystical cosmology of economics, "prices" are of transcendental significance, the means by which the living market knows and adapts itself, giving rise to "efficient" production and consumption.
At its most basic level, the metaphysics of pricing goes like this: if there is less of something for sale than people want to buy, the seller will raise the price until enough buyers drop out and demand equals supply. If the disappointed would-be buyers are sufficiently vocal about their plight, other sellers will enter the market (bankrolled by investors who sense an opportunity), causing supplies to increase and prices to fall until the system is in "equilibrium" - producing things as cheaply as possible in precisely the right quantities to meet demand. In the parlance of neoclassical economists, prices aren't "set": they are *discovered*.
In antitrust law, there are many sins, but they often boil down to "price setting." That is, if a company has enough "market power" that they can dictate prices to their customers, they are committing a crime and should be punished. This is such a bedrock of neoclassical economics that it's a tautology "market power" exists where companies can "set prices"; and to "set prices," you need "market power."
Prices are the blood cells of the market, shuttling nutrients (in the form of "information") around the sprawling colony organism composed of all the buyers, sellers, producers, consumers, intermediaries and other actors. Together, the components of this colony organism all act on the information contained in the "price signals" to pursue their own self-interest. Each self-interested action puts more information into the system, triggering more action. Together, price signals and the actions they evince eventually "discover" the price, an abstraction that is yanked out of the immaterial plane of pure ideas and into our grubby, physical world, causing mines to re-open, shipping containers and pipelines to spark to life, factories to retool, trucks to fan out across the nation, retailers to place ads and hoist *SALE* banners over their premises, and consumers to race to those displays and open their wallets.
When prices are "distorted," all of this comes to naught. During the notorious "socialist calculation debate" of 1920s Austria, right-wing archdukes of religious market fundamentalism, like Von Hayek and Von Mises, trounced their leftist opponents, arguing that the market was the *only* computational system capable of calculating how much of each thing should be made, where it should be sent, and how much it should be sold for.
Attempts to "plan" the economy - say, by subsidizing industries or limiting prices - may be well-intentioned, but they broke the market's computations and produced haywire swings of both over- and underproduction. Later, the USSR's planned economy *did* encounter these swings. These were sometimes very grave (famines that killed millions) and sometimes silly (periods when the only goods available in regional shops were forks, say, creating local bubbles in folk art made from forks).
Unplanned markets do this too. Most notoriously, capitalism has produced a vast oversupply of carbon-intensive goods and processes, and a huge undersupply of low-carbon alternatives, bringing the human civilization to the brink of collapse. Not only have capitalism's price signals failed to address this existential crisis to humans, it has also sown the seeds of its own ruin - the market computer's not going to be getting any "price signals" from people as they drown in floods or roast to death on sidewalks that deliver delivery second-degree burns to anyone who touches them:
https://www.fastcompany.com/91151209/extreme-heat-southwest-phoenix-surface-burns-scorching-pavement-sidewalks-pets
For market true believers, these failures are just evidence that regulation is distorting markets, and that the answer is *more* unregulated markets to infuse the computer with more price signals. When it comes to carbon, the problem is that producers are "producing negative externalities" (that is, polluting and sticking us with the bill). If we can just get them to "internalize" those costs, they will become "economically rational" and switch to low-carbon alternatives.
That's the theory behind the creation and sale of carbon credits. Rather than ordering companies to stop risking civilizational collapse and mass extinction, we can *incentivize* them to do so by creating markets that reward clean tech and punish dirty practices. The buying and selling of carbon credits is supposed to create price signals reflecting the existential risk to the human race and the only habitable planet known to our species, which the market will then "bring into equilibrium."
Unfortunately, reality has a distinct and unfair leftist bias. Carbon credits are a market for lemons. The carbon credits you buy to "offset" your car or flight are apt to come from a forest that has already burned down, or that had already been put in a perpetual trust as a wildlife preserve and could never be logged:
https://pluralistic.net/2022/03/18/greshams-carbon-law/#papal-indulgences
Carbon credits produce the most perverse outcomes imaginable. For example, much of Tesla's profitability has been derived from the sale of carbon credits to the manufacturers of the dirtiest, most polluting SUVs on Earth; without those Tesla credits, those SUVs would have been too expensive to sell, and would not have existed:
https://pluralistic.net/2021/11/24/no-puedo-pagar-no-pagara/#Rat
What's more, carbon credits aren't part of an "all of the above" strategy that incorporates direct action to prevent our species downfall. These market solutions are incompatible with muscular direct action, and if we do credits, we can't do other stuff that would actually work:
https://pluralistic.net/2023/10/31/carbon-upsets/#big-tradeoff
Even though price signals have repeatedly proven themselves to be an insufficient mechanism for producing "efficient" or even "survivable," they remain the uppermost spiritual value in the capitalist pantheon. Even through the last 40 years of unrelenting assaults on antitrust and competition law, the one form of corporate power that has remained both formally and practically prohibited is "pricing power."
That's why the DoJ was able to block tech companies and major movie studios from secretly colluding to suppress their employees' wages, and why those employees were able to get huge sums out of their employers:
https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation
It's also why the Big Six (now Big Five) publishers and Apple got into so much trouble for colluding to set a floor on the price of ebooks:
https://en.wikipedia.org/wiki/United_States_v._Apple_(2012)
When it comes to monopoly, even the most Bork-pilled, Manne-poisoned federal judges and agencies have taken a hard line on price-fixing, because "distortions" of prices make the market computer crash.
But despite this horror of price distortions, America's monopolists have found so many ways to manipulate prices. Last month, *The American Prospect* devoted an entire issue to the many ways that monopolies and cartels have rigged the prices we pay, pushing them higher and higher, even as our wages stagnated and credit became more expensive:
https://prospect.org/pricing
For example, there's the plague of junk fees (AKA "drip pricing," or, if you're competing to be first up against the wall come the revolution, "ancillary revenue"), everything from baggage fees from airlines to resort fees at hotels to the fee your landlord charges if you pay your rent by check, or by card, *or* in cash:
https://pluralistic.net/2024/06/07/drip-drip-drip/#drip-off
There's the fake transparency gambit, so beloved of America's hospitals:
https://pluralistic.net/2024/06/13/a-punch-in-the-guts/#hayek-pilled
The "greedflation" that saw grocery prices skyrocketing, which billionaire grocery plutes blamed on covid stimulus checks, even as they boasted to their shareholders about their pricing power:
https://prospect.org/economy/2024-06-12-war-in-the-aisles/
There's the the tens of billions the banks rake in with usurious interest rates, far in excess of the hikes to the central banks' prime rates (which are, in turn, justified in light of the supposed excesses of covid relief checks):
https://prospect.org/economy/2024-06-11-what-we-owe/
There are the scams that companies like Amazon pull with their user interfaces, tricking you into signing up for subscriptions or upsells, which they grandiosely term "dark patterns," but which are really just open fraud:
https://prospect.org/economy/2024-06-10-one-click-economy/
There are "surge fees," which are supposed to tempt more producers (e.g. Uber drivers) into the market when demand is high, but which are really just an excuse to gouge you - like when Wendy's threatens to surge-price its hamburgers:
https://prospect.org/economy/2024-06-07-urge-to-surge/
And then there's *surveillance pricing*, the most insidious and profitable way to jack up prices. At its core, surveillance pricing uses nonconsensually harvested private information to inform an algorithm that reprices the things you buy - from lattes to rent - in real-time:
https://pluralistic.net/2024/06/05/your-price-named/#privacy-first-again
Companies like Plexure - partially owned by McDonald's - boasts that it can use surveillance data to figure out what your payday is and then hike the price of the breakfast sandwich or after-work soda you buy every day.
Like every bad pricing practice, surveillance pricing has its origins in the aviation industry, which invested early on and heavily in spying on fliers to figure out how much they could each afford for their plane tickets and jacking up prices accordingly. Architects of these systems then went on to found companies like Realpage, a data-brokerage that helps landlords illegally collude to rig rent prices.
Algorithmic middlemen like Realpage and ATPCO - which coordinates price-fixing among the airlines - are what Dan Davies calls "accountability sinks." A cartel sends all its data to a separate third party, which then compares those prices and tells everyone how much to jack them up in order to screw us all:
https://profilebooks.com/work/the-unaccountability-machine/
These price-fixing middlemen are everywhere, and they predate the boom in commercial surveillance. For example, Agri-Stats has been helping meatpackers rig the price of meat for 40 years:
https://pluralistic.net/2023/10/04/dont-let-your-meat-loaf/#meaty-beaty-big-and-bouncy
But when you add commercial surveillance to algorithmic pricing, you get a hybrid more terrifying than any cocaine-sharks (or, indeed, meth-gators):
https://www.nbcnews.com/news/us-news/tennessee-police-warn-locals-not-flush-drugs-fear-meth-gators-n1030291
Apologists for these meth-gators insist that surveillance pricing's true purpose is to let companies offer *discounts*. A streaming service can't afford to offer $0.99 subscriptions to the poor because then all the rich people would stop paying $19.99. But with surveillance advertising, every customer gets a different price, titrated to their capacity to pay, and everyone wins.
But that's not how it cashes out in the real world. In the real world, rich people who get ripped off have the wherewithal to shop around, complain effectively to a state AG, or punish companies by taking their business elsewhere. Meanwhile, poor people aren't just cash-poor, they're also time-poor and political influence-poor.
When the dollar store duopoly forces all the mom-and-pop grocers in your town out of business with predatory pricing, and creating food deserts that only they serve, no one cares, because state AGs and politicians don't care about people who shop at dollar stores. Then, the dollar stores can collude with manufacturers to get shrunken "cheater sized" products that sell for a dollar, but cost double or triple the grocery store price by weight or quantity:
https://pluralistic.net/2023/03/27/walmarts-jackals/#cheater-sizes
Yes, fliers who seem to be flying on business (last-minute purchasers who don't have a Saturday stay) get charged more than people whose purchase makes them seem to be someone flying away for a vacation. But that's only because aviation prices haven't yet fully transitioned to surveillance pricing. If an airline can correctly calculate that you are taking a trip because you're a grad student who *must* attend a conference in order to secure a job, and if they know *precisely* how much room you have left on your credit card, they can charge you everything you can afford, to the cent.
Your ability to resist pricing power isn't merely a function of a company's market power - it's also a function of your *political* power. Poor people may have less to steal, but no one cares when they get robbed:
https://pluralistic.net/2024/07/19/martha-wright-reed/#capitalists-hate-capitalism
So surveillance pricing, supercharged by algorithms, represent a serious threat to "prices," which is the one thing that the econo-religious fundamentalists of the capitalist class value above all else. That makes surveillance pricing low-hanging fruit for regulatory enforcement: a bipartisan crime that has few champions on either side of the aisle.
Cannily, the FTC has just declared war on surveillance pricing, ordering eight key players in the industry (including capitalism's arch-villains, McKinsey and Jmorgan Chase) to turn over data that can be used to prosecute them for price-fixing within 45 days:
https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-issues-orders-eight-companies-seeking-information-surveillance-pricing
As *American Prospect* editor-in-chief David Dayen notes in his article on the order, the FTC is doing what he and his journalistic partners couldn't: forcing these companies to cough up internal data:
https://prospect.org/economy/2024-07-24-ftc-opens-surveillance-pricing-inquiry/
This is important, and not just because of the wriggly critters the FTC will reveal as they use their powers to turn over this rock. Administrative agencies can't just do whatever they want. Long before the agencies were neutered by the Supreme Court, they had strict rules requiring them to gather evidence, solicit comment and counter-comment, and so on, before enacting any rules:
https://pluralistic.net/2022/10/18/administrative-competence/#i-know-stuff
Doubtless, the Supreme Court's *Loper" decision (which overturned "Chevron deference" and cut off the agencies' power to take actions that they don't have detailed, specific authorization to take) will embolden the surveillance pricing industry to take the FTC to court on this. It's hard to say whether the courts will find in the FTC's favor. Section 6(b) of the FTC Act clearly lets the FTC compel these disclosures as part of an enforcement action, but they can't start an enforcement action until they have evidence, and through the whole history of the FTC, these kinds of orders have been a common prelude to enforcement.
One thing this has going for it is that it is bipartisan: all five FTC commissioners, including both Republicans (including the Republican who votes against *everything*) voted in favor of it. Price gouging is the kind of easy-to-grasp corporate crime that everyone hates, irrespective of political tendency.
In the *Prospect* piece on Ticketmaster's pricing scam, Dayen and Groundwork's Lindsay Owens called this the "Age of Recoupment":
https://pluralistic.net/2024/06/03/aoi-aoi-oh/#concentrated-gains-vast-diffused-losses
For 40 years, neoclassical economics' focus on "consumer welfare" meant that companies could cheat and squeeze their workers and suppliers as hard as they wanted, so long as prices didn't go up. But after 40 years, there's nothing more to squeeze out of workers or suppliers, so it's time for the cartels to recoup by turning on *us*, their customers.
They believe - perhaps correctly - that they have amassed so much market power through mergers and lobbying that they can cross the single bright line in neoliberal economics' theory of antitrust: price-gouging. No matter how sincere the economics profession's worship of prices might be, it still might not trump companies that are too big to fail and thus too big to jail.
The FTC just took an important step in defense of all of our economic wellbeing, and it's a step that even the most right-wing economist should applaud. They're calling the question: "Do you really think that price-distortion is a cardinal sin? If so, you *must* back our play."
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🌮 Hey look at this
* One in six Conservative voters likely to die before next election, analysis shows https://www.independent.co.uk/news/uk/politics/conserative-voters-age-next-general-election-b2583660.html (h/t Charlie Stross)
* What Would Kamala Harris Do About Corporate Power? https://www.thebignewsletter.com/p/what-would-kamala-harris-do-about
* Breaking Up the Giants of Harm https://static1.squarespace.com/static/65c9daef199ea70aa66592fe/t/669f0cc835d34a76dcb9328d/1721699547182/Breaking+Up+the+Giants+of+Harm%2C+Balanced+Economy+Project_July+2024.pdf
This day in history (permalink)
#15yrsago Ask Google to guarantee privacy for the future of reading https://web.archive.org/web/20100703132925/https://secure.eff.org/site/Advocacy?cmd=display&page=UserAction&id=433
#15yrsago Kadrey’s SANDMAN SLIM: a hard-boiled revenge novel from Hell https://memex.craphound.com/2009/07/24/kadreys-sandman-slim-a-hard-boiled-revenge-novel-from-hell/
#10yrsago Michigan sheriff issues inmates black-and-white striped uniforms https://www.washingtonpost.com/news/morning-mix/wp/2014/07/22/michigan-inmates-to-get-black-and-white-striped-uniforms-orange-is-now-too-cool-sheriff-says/
#10yrsago Back pain: Acetaminophen no better than placebos https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(14)60805-9/abstract
#10yrsago Report from America’s militarized, constitution-free border-zone https://www.salon.com/2014/07/20/bring_the_battlefield_to_the_border_how_americas_immigration_wars_were_poisoned_by_the_military_industrial_complex/
#10yrsago Family kicked off Denver Southwest flight because Dad tweeted about the rude gate-agent https://www.cbsnews.com/minnesota/news/family-asked-to-leave-sw-plane-after-tweet/
#10yrsago Pirate Bay traffic doubles over three years https://torrentfreak.com/pirate-bay-traffic-doubles-despite-isp-blockades-140717/
#10yrsago Comixology adds DRM-free option! Excelsior! https://memex.craphound.com/2014/07/24/comixology-adds-drm-free-option-excelsior/
#5yrsago Share prices slide as DOJ announces sweeping antitrust investigations of Big Tech https://www.cnbc.com/2019/07/23/doj-reportedly-to-open-broad-antitrust-review-of-big-tech-tech-stocks-dip.html
#5yrsago AP: the mob who attacked Hong Kong protesters were rural thugs hired by gangsters https://apnews.com/article/4867ea5aafbd45b78eb1747b8b84c04f
#5yrsago A generalized method for re-identifying people in “anonymized” data-sets https://www.nytimes.com/2019/07/23/health/data-privacy-protection.html
#5yrsago William Barr’s terrible, stupid idea to ban working crypto is slightly less terrible and stupid than earlier ideas https://memex.craphound.com/2019/07/24/william-barrs-terrible-stupid-idea-to-ban-working-crypto-is-slightly-less-terrible-and-stupid-than-earlier-ideas/
#5yrsago Because Internet: the new linguistics of informal English https://memex.craphound.com/2019/07/24/because-internet-the-new-linguistics-of-informal-english/
#1yrago Autoenshittification https://pluralistic.net/2023/07/24/rent-to-pwn/#kitt-is-a-demon
Upcoming appearances (permalink)
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Recent appearances (permalink)
* The Paradigm Shift
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Latest books (permalink)
* The Bezzle: a sequel to "Red Team Blues," about prison-tech and other grifts, Tor Books (US), Head of Zeus (UK), February 2024 (the-bezzle.org). Signed, personalized copies at Dark Delicacies (https://www.darkdel.com/store/p3062/Available_Feb_20th%3A_The_Bezzle_HB.html#/).
* "The Lost Cause:" a solarpunk novel of hope in the climate emergency, Tor Books (US), Head of Zeus (UK), November 2023 (http://lost-cause.org). Signed, personalized copies at Dark Delicacies (https://www.darkdel.com/store/p3007/Pre-Order_Signed_Copies%3A_The_Lost_Cause_HB.html#/)
* "The Internet Con": A nonfiction book about interoperability and Big Tech (Verso) September 2023 (http://seizethemeansofcomputation.org). Signed copies at Book Soup (https://www.booksoup.com/book/9781804291245).
* "Red Team Blues": "A grabby, compulsive thriller that will leave you knowing more about how the world works than you did before." Tor Books http://redteamblues.com. Signed copies at Dark Delicacies (US): and Forbidden Planet (UK): https://forbiddenplanet.com/385004-red-team-blues-signed-edition-hardcover/.
* "Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin", on how to unrig the markets for creative labor, Beacon Press/Scribe 2022 https://chokepointcapitalism.com
* "Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The *Washington Post* called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html
* "How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59?sk=f6cd10e54e20a07d4c6d0f3ac011af6b) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)
* "Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html
* "Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p2682/Corey_Doctorow%3A_Poesy_the_Monster_Slayer_HB.html#/.
Upcoming books (permalink)
* Picks and Shovels: a sequel to "Red Team Blues," about the heroic era of the PC, Tor Books, February 2025
* Unauthorized Bread: a middle-grades graphic novel adapted from my novella about refugees, toasters and DRM, FirstSecond, 2025
Colophon (permalink)
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* Spill, a Little Brother short story about pipeline protests. FORTHCOMING ON TOR.COM
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