AI-Powered Surveillance Pricing Facing Bans in 26 States

A number of states have moved to ban so-called “surveillance pricing” amid pushback from consumers and advocacy groups.

That’s according to a report Thursday (May 14) by Money, which notes this pricing practice comes as algorithmic technology grows in sophistication, letting retailers more easily leverage personal data to set individualized prices.

Critics say that because AI-assisted programs can determine exactly how much a shopper is willing to pay at any given time, it could potentially make traditional price tags meaningless.

The report also cites a Consumer Reports investigation from last year involving a price testing experiment by Instacart and a number of grocery chains.

The study looked at shoppers in four cities who saw vastly different prices on the same grocers from the same stores.

“Some shoppers found grocery prices that were up to 23% higher than prices available to other shoppers for the exact same items, in the exact same store, at the exact same time,” the study’s authors wrote.

Instacart has said that reporting on the issue included misconceptions and misinformation about its pricing, but acknowledged it fell short of customer expectations and would end the tests.

“At a time when families are working exceptionally hard to stretch every grocery dollar, those tests raised concerns, leaving some people questioning the prices they see on Instacart,” the company wrote in a blog post late last year.

The practice drew the attention of both state and federal regulators, while the overall practice of algorithmic price-setting is facing bans in several states.

According to Money, more than 50 bills have been introduced in 26 states aiming to restrict or ban the technology, especially when dealing with essentials like food. Industry experts say that while “dynamic pricing” is common among airlines and ride-sharing services, applying it to groceries goes too far.

“I have a choice about getting into an Uber … but I don’t have a choice when it comes to my food,” food industry analyst Phil Lempert told Money.

Walmart, meanwhile, is bringing digital price tags to all its U.S. stores, though the company maintains it will not use the technology for dynamic pricing or to collect shopper data.

Z. John Zhang, a professor of marketing at the University of Pennsylvania’s Wharton Business School, told Money that companies need to do a better job of stressing that dynamic pricing can sometimes work in consumers’ favor.

“I think there are a lot of misconceptions out there that when you’re doing dynamic pricing you just want to squeeze customers,” he said. “They totally ignore the fact that prices may actually go down.”