Federal and state governments are increasing scrutiny of “surveillance pricing” and AI- enabled pricing practices, particularly when pricing relies on consumer data. There is growing concern over this corporate greed stemming from these invasive, covert tactics and the exploitation of everyday citizens shopping for fair prices.
House Bill 1942, or the Surveillance Pricing Act, prohibits the use of a consumer’s personal data gathered by electronic surveillance technology to set a customized price. The proposed ban prevents companies from using your data – race, weight, location, or browsing patterns – to unfairly inflate prices.
State Rep. Jim Prokopiak, whose 140th House District covers all of Falls and parts of Middletown Townships, said he decided to co-sponsor the proposed legislation “because working families don’t need to be taken advantage of by greedy corporations.”
“Every consumer should pay the same price in the same store for the same item,” said Prokopiak. “Changing prices minute by minute or hour by hour for necessary items only takes advantage of people and can’t be allowed to happen.”
Surveillance pricing is when stores use technology to adjust prices in real-time based on local supply and demand factors. This practice is routinely used by hotels and airlines to adjust prices based on customer demand. Changes in technology have allowed other businesses, including big-box retailers and grocery stores, to start doing this.
“We don’t believe that especially in these times of rising costs, that consumers in the same store at the same time should be getting different pricing; there has to be certainty that if you go to the same store, you should get the same price,” said Prokopiak. “This bill is an attempt to ensure that all consumers are treated equally.”
Prokopiak said he does a majority of the food shopping for his family, so he hasn’t seen this – yet. “Generally speaking, at retailers and certainly grocery stores I go to the price is listed,” he said. “It’s more making sure that stays the case because in this day of rapidly emerging technology and AI, the last thing we need to do is turn these things over to them. That’s what this bill attempts to address.”
State Rep Danilo Burgos introduced this bill in the state House and his colleague Mary Isaacson also worked on it. Now they’re waiting for hearings and votes for it.
Prokopiak said this is more proactive rather than reactive.
“Grocery prices and inflation are going up and the American working families – certainly families in Bucks County – are getting squeezed,” he added. “We have to ensure that we take actions to prevent that as much as possible.”
It’s Adam Smith’s “invisible hand” being turned against consumers, picking their pocket.
George Slover, Senior Counsel for Competition Policy at the Center for Democracy and Technology (CDT), said HB 1942 would prohibit sellers from engaging in surveillance pricing.
“Surveillance pricing, or what I refer to as ‘bespoke pricing,’ aims to target consumers individually, to induce them to pay the highest price they are willing to pay, based on the seller’s assessment using personal data collected about them,” said Slover. “Vast amounts of this data are now obtainable, touching on all aspects of an individual consumer’s life, including intimate details. And not only the factual details, but also assumptions based on those details made using artificial intelligence.”
Consumers will no longer get the benefit of a uniform public list price set based on what the majority of consumers regard as affordable and fair.
“This is different than a seller offering discounts openly and uniformly to all who qualify, such as seniors, veterans, students, club members, etc.,” said Slover. “It is also different than a seller changing the public uniform list price based on supply and demand conditions, or on changes in actual delivery costs.”
(More information in the testimony Slover gave for CDT in March at a joint Pennsylvania House-Senate policy committee hearing is available here.)
CDT has been focused on the prospects for bespoke pricing to become widespread in the marketplace, especially in the online marketplace, but also potentially in stores, impacting consumers in your county and across the country.
“The technology is readily available and is becoming easier to use and more powerful with the advance of artificial intelligence,” said Slover. “The temptation to use it will be hard to resist.”
Slover said it is a rank abandonment of the transparent, uniform “list price” approach that has served consumers well for 150 years, since the arrival of mass marketing, and that has justified free enterprise as best benefitting consumers and the economy. And it is a betrayal of the touted promise that the Internet would be a boon for shoppers.
“It exploits a stark information advantage that sellers using online technology can wield over consumers,” said Slover. “It risks reducing what economists refer to as ‘consumer surplus’ – the benefit received by consumers who would have been willing to pay more than the list price, but don’t have to, because they aren’t being algorithmically tagged and profiled – to zero.”
It’s Adam Smith’s “invisible hand” being turned against consumers, picking their pocket.
READ: Majority of Americans Support Ban on Surveillance Pricing and Electronic Shelf Labels
And Pennsylvania families have already been seeing that their dollar goes less far today. In fact, government statistics cite that credit usage is on the rise.
“People are turning to credit cards to provide for the things that they can’t do just out of their paychecks,” said Prokopiak. “However, there is a limit to that. We really have to do anything we can to ensure that we keep costs in as much as possible and provide everyone a fair shake at the same items at the same price.”
He noted that a gallon of milk may cost differently from store to store, but not in the same store. Prokopiak added that they’ve seen dynamic pricing happen in ticket sales and luxury items and they can’t have it go into items that people need on an everyday basis.
Prokopiak added that when they look at statistics, there are always greater instances of mental health crisis, domestic violence and crime in tough economic times.
“Ultimately, being not able to take care of your family is something that certainly puts a mental toll on people,” said Prokopiak. “We have a weak job market. We’ve got rising inflation; we’ve got low wage growth. Those things all place a burden on working class families.”
