Contrary to what’s taught in economic textbooks, companies’ price setting is not always a true reflection of costs but rather an assessment of market conditions and how much they can get away with. The combination of market power and technology-driven software tools has made it ever more possible to test the boundaries of pricing schemes.

Companies have been experimenting with new tactics to tailor prices to consumers on a granular level or fluctuate them rapidly in response to demand (think Uber’s “surge pricing,” or Ticketmaster’s alleged Oasis ticket price-gouging). The end goal is the same: boost profit margins.

The most recent case study came during the pandemic, when the cost of consumer goods — from groceries to cosmetics to medicine — jumped dramatically, an inflation crisis that commentators blamed alternately on government spending and high wages.

Yet from the beginning, data showed that the true culprit was rising corporate profits. Executives were telling their investors that they were hiking prices beyond the costs incurred from supply chain disruptions, all while lavishing shareholders with payouts. And prices remained high well after those temporary disruptions subsided.

It was during this time that the pricing optimization industry began to deploy the full arsenal of tools it had been developing. In the 1980s, airlines pioneered so-called dynamic pricing — rates that adjust according to customer demand — and the practice later fueled Amazon’s rise as an online retail giant.

Over the last few years, a host of companies have begun advertising their “AI-driven” pricing tools to a broader swath of industries. These algorithms allow companies to target and isolate individual consumers, offering different prices for the same product to maximize margins. This brings us to today, a world in which Wendy’s is exploring surge pricing for chicken sandwiches.

Last summer, amid enduring high inflation rates, Joe Biden’s FTC chair, Lina Khan, opened an investigation into these practices. In July 2024, the agency initiated a preliminary market study into what it described as an emerging trend of algorithmic and data-driven “surveillance pricing” that may be harming consumers and competition, ordering a host of pricing companies to hand over documents.

The eight companies that FTC investigators demanded turn over documents included powerful firms like Mastercard, McKinsey & Company, Accenture, JPMorgan Chase, and a subsidiary of Goldman Sachs. It also included smaller, more targeted pricing consultants like PROS Holdings, Bloomreach, and Task Software.

Weeks before the inquiry was terminated, Goldman Sachs and the Electronic Payments Coalition, a lobbying group that includes Mastercard, each contributed $1 million to Trump’s inauguration fund.

One area FTC regulators investigated was how companies were using algorithmic data collection to target and isolate individual consumers, offering different prices for the same product to wring as much profit as possible from each purchase.

The tools outlined in the FTC’s subsequent report now read like a prophecy for how companies are beginning to reconfigure their prices for the impending doom of tariff disruptions.

“[The pricing industry] saw that there was no penalty for this type of gouging during the post-pandemic inflation period,” said Lindsay Owens, an economist and the executive director of the Groundwork Collaborative, an economic policy think tank. “Of course, they are going to execute their successful playbook once again.”

The FTC’s decision to end its inquiry into pricing advisers like PROS, who usually operate in the shadows without much scrutiny, “only emboldens their position,” Owens said.

Much like during the pandemic inflation, Trump’s mounting trade wars with China and other countries provide fertile ground for firms to find new ways to pass the higher costs on to consumers. Despite the temporary pause on Trump’s Liberation Day “reciprocal tariffs,” a 10 percent across-the-board duty on most imports remains in place, as well as 125 percent tariff rates on goods from China.

Already, businesses have been quick to raise prices and point the finger at tariffs. “You may just have to rip the Band-Aid — jack up prices and see what happens,” one consultant advised his e-commerce clientele on a recent webinar entitled “How to Raise Your Prices in Response to Tariffs.” He added: “You’re going to be surprised by how much room you have.”

For months, publicly traded companies have indicated to investors that they were preemptively pricing in higher costs due to tariffs before even knowing the exact impacts on their supply chain. When asked about Trump’s campaign-trail tariff proposals on a September 2024 earnings call, the car parts retailer AutoZone told investors that “if we get tariffs . . . we’ll generally raise prices ahead of — [when] we know what the tariffs will be.”

The CEO of Columbia Sportswear offered a similar assessment late last year on tariffs: “We’re buying stuff today for delivery next fall. So we’re just going to deal with it [tariffs] and we’ll just raise the prices.”

Such messaging from corporate heads echoes the go-to advice from the consultant class. In one pricing webinar that the Lever attended, hosted by e-commerce pricing company Intelligems, consultants discussed how companies had successfully capitalized on consumers’ fears of imminent price increases, even before businesses felt the impacts.

“Go send an email to your list being like, ‘We are being impacted by tariffs. We will likely have to make changes soon. Prices will stay the same through the end of the week,’” said Intelligems CEO Drew Marconi on the call. “I spoke to a furniture brand yesterday who generated $70,000 in sales off of one of those emails.” (Still, he cautioned, “don’t go mislead your customers.”)

In a follow-up interview with the Lever, Marconi described the real harm that tariffs were inflicting on his clients, mostly e-commerce web stores hosted on platforms like Shopify. “All of these companies are going to be hard-hit in one way or another,” he said, given that their inventory typically originated outside of the US.

“I haven’t seen much cynical price-raising right now,” he said.

But Marconi also said that industry data he had crunched showed that direct-to-consumer brands had begun raising prices at an unusual rate beginning in January, long before the details of Trump’s tariff regime were unveiled. “And we’ve just seen higher and higher prices in that sample every week since,” he said.

Companies are already subtly coaxing consumers to adjust to the new economic reality by inundating them with corporate messaging. “You should put thought into creating a communication plan to accompany your tariff strategy,” admitted the retail price consultant Revionics in strategy guidance they shared with their clients in February. “Inflation fatigue is real among consumers.”

Revionics, owned by a subsidiary of investment banking giant Goldman Sachs, was among the consultancies that received orders as part of the FTC’s market study this past summer.

Dame, a company that sells women’s sex toys, has gotten some laudatory press for adding a “Trump tariff surcharge” to its online shopping carts, complete with an image of a Trump-style toupee. “We wanted to be transparent with you, rather than quietly inflating prices,” the company wrote. (Its sex toys, sourced from China, are not covered by Trump’s exemptions for certain electronics.)

Marconi, in the webinar, noted that Dame was perhaps playing to its “more liberal-leaning customer base” in spotlighting Trump as the bogeyman behind the surcharge. He advised companies serving a broader swath of consumers, “where opinions may be different,” to avoid such political stunts.

But there is another, more serious drawback to tacking on an explicit tariff fee to your products, as Zawada, the PROS consultant, was careful to highlight: If the tariffs are ultimately rolled back, you’ll have to roll back the surcharge, too.

“The downside is that it’s highly visible to the customer,” he explained. “So as soon as a tariff were to come away, then you have to take it away.” (Zawada, through a PROS spokesperson, declined to comment.)

However, according to the consulting industry, this problem is avoidable. A swath of consultants identified by the Lever are promoting a new set of more clandestine techniques they’ve developed during the past four years of inflation to extend high prices well beyond a supply-shock period.

One consultant, Datasembly, has recently shifted its focus to “tariff watch” to help clients assess whether or not “shoppers [will] absorb the cost” of higher shelf prices. In brochures, Datasembly promotes its services as a way to help companies use “effective price increase management” for “faster, lasting implementation of price increases.”

According to its own online materials, Datasembly has worked with consumer goods brands and retailers to pass on higher costs to shoppers for eggs, milk, and cereal. Specifically, it told one client competing against Walmart, the big box retailer known for its low prices, that they were actually keeping “prices too low for too long.” By surveilling Walmart’s fluctuating price points, Datasembly helped the client “adjust prices” accordingly.

The constant tariff reversals and product exemptions from the Trump administration have created what Owens at Groundwork Collaborative called a “best-case scenario for price gougers,” given widespread uncertainty and chaos.

“The expectations are setting in that there should be price increases, but [companies] may not actually be subject to large tariffs,” she explained. “The average consumer can’t necessarily always discern that.”

For instance, US-based companies with a domestic supply chain may hike prices in response to tariffs they’re largely immune to. Or convenience stores may stop doing “markdowns,” the common practice of reducing the sale price of nonperishable items that sit on the shelf for a long time. And as one consultant recently recommended, tariffs can give retailers an excuse to keep prices on these items high, even if they were purchased well before costs started going up.

Another hidden way companies may stick it to the consumer is by finding ways on the back end to secretly lower costs without passing that reduction on to final prices. Intelligems consultants suggested experimenting, for example, with the cost of shipping (“when we run shipping tests, 66 percent of the time you can get away with higher pricing,” Marconi told clients on the webinar) and slashing discounts.

One price consultant, Revionics, has developed an even more detailed playbook. In February, the company’s senior director of strategy and innovation, Matthew Pavich, laid out the firm’s assessment of the tariff environment based on insights it gathered during the post-pandemic inflationary period. According to the public blog post, Revionics has devised more elaborate strategies for clients who may want to avoid the more “blunt-edge approach” of simply passing price increases on to consumers across the board.

The main headwinds for unilateral price hikes on nonessential goods are consumer purchasing power and competitive pressures: Consumers may stop buying as much at some point, or they’ll switch to a rival offering cheaper prices. But Revionics and other consultants have fashioned tools for testing the limits of both, in the hopes of grabbing higher margins.

Revionics helps clients refine their price strategies by different product categories, store locations, and customer bases rather than just across-the-board price increases. They do so by leveraging massive hauls of aggregated market data and consumer trends, analyzed with “industry-leading” artificial intelligence tools.

One of Revionics’ selling points is evaluating market conditions for a client’s “pricing elasticity,” essentially how much leeway a firm has with its pricing. In that vein, Revionics sometimes recommends dropping prices for particularly competitive, price-sensitive “key value items” such as milk or toilet paper to boost sales, “while finding margin and profit elsewhere.”

One suggestion Revionics offered for chain retailers is to stagger their markups at different store locations based on localized factors such as the “customer sentiment” and “price image.” That could potentially involve factoring in the socioeconomic makeup of the area or the amount of nearby competition. If Trump’s tariffs lead to a 10 percent increase in overall costs, for example, Revionics could help retailers impose a 12 percent increase at one store but only a 6 percent price increase at another based on how willing their various consumer bases may be to stomach higher sticker prices.

Certain general practices outlined by consultants echo the FTC’s market study. The report, for example, details how companies use “price targeting tools” to “determine different product prices for each of its stores by using data gleaned about a nearby competitor’s pricing for comparable products.”

These agency studies are fact-finding endeavors that do not allege any legal wrongdoing. However, past FTC reports have often led to future enforcement actions, such as an ongoing federal lawsuit against pharmacy benefit managers that began with an FTC market study.

Pricing discrimination by retailers may be subject to the Robinson-Patman Act, an antitrust law that guards against unfairly charging different prices for the same goods without justifiable cost differences.

Whatever the method, all of these price hikes, if they exceed the costs of tariffs and persist beyond them, defy traditional economic logic. In competitive markets, companies should, in theory, be dissuaded from misleading “tariff fees” or protracted price hikes, as they would only be a gift to their business rivals, who could keep their own prices low to capture sales.

But for many companies, there is no such disincentive, thanks to the slow creep of monopoly power into every facet of American life.

Two-thirds of supermarkets, for instance, are controlled by just four companies, an oligopoly that enabled grocery retailers to keep prices high during the pandemic without fear that rivals would undercut them. And on every aisle of a grocery store or pharmacy, you can find more monopolies. Even niche markets — like french fries, microwave popcorn, or almond milk — are captured by just a few firms.

The same pricing software helping businesses hike prices is enabled by this ever-increasing market concentration, federal regulators charge. Some consultants recommend that companies keep tabs on rivals by using AI to sift through market data. “Which competitors have followed me the most on price in the past six months on this item?” is one query that Revionics recommends companies plug into their generative AI system of choice.

Marconi, the Intelligems consultant, told the Lever he does not recommend that customers use AI for that same reason. “If you have some black box setting prices for a huge chunk of the market, then at what point do you run the risk of collusion?” he said. “You want to make sure that you’re acting responsibly with price.”

Still, there are plenty of ways for companies to fleece consumers without resorting to ChatGPT, especially now that the FTC has signaled it could soon be turning a blind eye to the predatory pricing practices.

That means no matter what happens with Trump’s tariffs, pricing experts will keep finding new ways to help companies gouge consumers, even when some price hikes are warranted.

As one of PROS’s consultants told companies at the end of its emergency tariff pricing seminar, “This is an ongoing topic. This is not necessarily going away anytime soon.”