Senate Hearing and New Book Expose How Algorithms Set Personalized Prices for Shoppers
A new book and Senate testimony reveal that companies use surveillance pricing to charge different customers different prices based on personal data, prompting calls for regulation and a Shopper's Bill of Rights.
Consumers are increasingly paying prices that are set not by product quality or market value, but by algorithms analyzing their personal data. That is the central finding of a newly released book, Gouged: The End of a Fair Price — And What That Means For Your Wallet, by Lindsay Owens, president and CEO of the Washington think tank Groundwork Collaborative. The exposé details how surveillance-based price discrimination, AI shopping assistants, and algorithms lead to higher prices on everything from airline tickets to groceries.
The practice, known as surveillance pricing, involves corporations harvesting customer data to predict how much each individual is willing to pay. Owens, a former economic policy advisor to Sen. Elizabeth Warren, testified before the Senate Judiciary Subcommittee on Crime and Counterterrorism earlier this year. She explained that major companies like Walmart, Kroger, Instacart, and major airlines use tools to track purchases, location, and loyalty program activity to determine personalized prices. «Surveillance pricing isn't just unfair. It erodes transparency and predictability and makes it harder for families to budget, let alone comparison shop,» Owens said in her testimony. «As we do more of our shopping online and on our phones, we have no idea if we're being charged a different price than our neighbor.»
Owens was one of five witnesses at the hearing. Four of them were critical of the practice, but Z. John Zhang, a professor of marketing at the University of Pennsylvania's Wharton School, offered a dissenting view. «Firms don't always gain from personalized pricing,» Zhang told the subcommittee. «Research shows that it can intensify competition and reduce profits. The firms that are most likely to benefit from personalized pricing are those with higher quality products, stronger brands, and more loyal customers.»
In August, the Federal Trade Commission weighed in, warning that such tactics may violate the law. «When consumers walk into a retail store, for example, they reasonably expect the price on the shelf to be the same price offered to any other consumer shopping at the same store at the same time,» the FTC said. The agency added that the same expectation applies online, where shoppers reasonably expect the price they see to match what anyone else browsing the same listing would see, not a price set based on a retailer's analysis of their personal data.
Despite the controversy, change may require government intervention. Owens advocates for banning manipulative price-setting practices and has proposed a Shopper's Bill of Rights. The principles include «pricing products, not people»; the ability to «cancel with a click»; and no junk fees because «the price you see is the price you pay.» Around two dozen states have already introduced bills addressing surveillance pricing. Some aim to ban or regulate pricing based on personal data collection, while others would require merchants to disclose whether they set personalized prices.
Public sentiment appears to favor such measures. A newly released poll conducted by Blue Rose Research found that about two-thirds of 3,250 Americans surveyed supported the policies outlined in the Shopper's Bill of Rights. Owens believes consumers will need to fight for fair pricing. «Shoppers turned picket lines into policy before, and they can do it again,» she said.
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