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The Federal Trade Commission has urged companies to be transparent about their pricing, but that may not be enough.
The debate over whether companies can set prices based on information they have about individual customers continues to grow. So-called surveillance pricing is in the news again on reports that Walmart patented technology for dynamic AI pricing about six months after filing for patents related to digital shelf labels.
Walmart, faced with a backlash, has been trying to assure the public that different customers will see the same digital shelf label prices and that its backend AI systems won’t engage in discriminatory pricing. “Your income, shopping history, urgency or what we think you could pay won’t change the price,” Walmart’s CEO John Furner wrote in a Sept. 25 letter to customers. “And whether you’re buying groceries or electronics on a hot afternoon or in a sudden rush for an item, it’s never a reason to charge you more.”
Reached for comment, a representative for Walmart pointed CNET to the web page and letter to customers regarding pricing.
But the backlash may continue if customers aren’t convinced. One consumer advocate, Jeff Rossen, went as far as to suggest in a recent video that Walmart customers should leave their phones in the car when they shop in order to avoid being datamined.
Separately, but in a similar vein, McDonald’s has been the target of media coverage over its shift to AI systems that could mean different prices for different burgers at different restaurants for different customers. The company has bristled at some of that coverage, calling it “speculative and misinformed,” but it hasn’t stopped reporters from asking why burger prices can vary from neighborhood to neighborhood as part of the company’s technology makeover.
A representative McDonald’s did not immediately respond to a request for comment.
Two of the largest American brands are now caught in the publicity crossfire over a topic that is drawing attention from lawmakers, the Federal Trade Commission and consumer advocacy groups: how companies are using AI to set prices and whether those practices may harm certain shoppers or even break the law.
Surveillance pricing, which is often conflated with the terms “dynamic pricing” or “algorithmic pricing,” is a broad term that includes something that’s been happening for decades: prices set automatically based on supply and demand (say, gasoline prices). For years, shoppers also heard about “surge pricing,” such as the cost of an Uber ride increasingly dramatically during spikes in activity or around big events.
But as AI has gone mainstream and more companies have access to an array of information collected about their customers — whether it’s through apps, loyalty programs or just website tracking — it’s increasingly likely that those companies can set different prices for different shoppers based on that information.
It may not always be personal: In June, a lawsuit was filed in California claiming gas stations were inflating the price of fuel illegally due to AI software used by thousands of gas stations. But lawmakers in states are concerned about more personalized dynamic pricing. This summer, New Jersey passed a law set to go into effect in 2027 banning the use of personal data to set prices; the law primarily targets grocery stores.
Last year, shoppers in New York began seeing warnings on product pages due to new laws mandating that customers let people know when shopping prices were set using personal data in an algorithm.
According to the Electronic Privacy Information Center, for instance, personal data and market data are being used by retailers to determine the highest price a customer is willing to pay, leading to higher prices.
In a report released in August, the Consumer Federation of America called out retailers, hotel booking sites and airlines for engaging in practices like raising prices based on things like how much AI determined they’d be willing to pay, their income or their proximity to a store.
The Federal Trade Commission said in August that it’s looking for public comment on policy around surveillance pricing, but it has implied that it may not be able to do much to stop companies by enforcing rules; its approach appears to be geared toward helping consumers be more aware of potential surveillance pricing and requesting that those engaging in this kind of pricing be transparent about it.
That’s not enough, according to consumer advocates like the CFA, which responded to the FTC’s proposal with a letter demanding it do more than promote transparency.
“Not even the most detailed disclosure of what information they’re using to hike your prices will change the fact that those prices are still going up,” said Emily Peterson-Cassin, director of competition and market fairness at the CFA, told CNET in an email. The CFA argues in its letter that surveillance prices can be based on proxies for protected characteristics like race or age and are likely to disproportionately hurt low-income and working families who can’t easily comparison shop.
“To put it bluntly, the more vulnerable you are, the harder you stand to get hit,” Peterson-Cassin said. “If companies know you must have, for example, baby formula, they are more likely to charge you a higher price for it. “