As algorithmic data analysis grows more sophisticated and companies collect increasing amounts of data on their customers, watchdog groups and lawmakers are raising alarms. Marketers are increasingly able to issue individual target prices that can vary based on personal data, a practice called “surveillance pricing.”
Consumer advocates warn that retailers armed with algorithmic technology and insights about your buying habits, history and behavior can render price tags meaningless. AI-assisted systems are getting better at determining what you would personally pay for an item at a given time.
Especially as more people use e-commerce platforms or apps to order groceries and other everyday items, large retailers are no longer constrained by paper price stickers, meaning they can change prices almost instantly. “The question is are we doing it opportunistically or are we doing it right,” said food industry analyst Phil Lempert.
The prices are strong, from airlines to Amazon
Major e-commerce platforms like Amazon have been involved in continuous, real-time price changes for years, and companies are using anonymous and aggregated data to build sophisticated customer profiles.
For example, airlines use these programs to extract significant profits from customers such as last-minute business travelers. In the case of airfares, travelers learn to book in advance or pay; On the other hand, shoppers who wait until the last minute to book can sometimes find great deals if the hotel, airline or event is overpriced.
“By allowing flexible pricing, it improves economic efficiency,” it noted Z. John Zhang, professor of marketing at the Wharton Business School at the University of Pennsylvania. Zhang says companies need to do a better job of stressing that changing prices can sometimes work for consumers.
“I think there are a lot of misconceptions that when you do dynamic pricing you just want to squeeze customers,” he notes. “They are ignoring the fact that prices may actually go down.”
But the prospect of using personal data — which could include the use of facial recognition technology — to set different prices has raised eyebrows, especially when it comes to grocery prices that have risen due to inflation.
The Watchdog group’s investigation raises red flags
Grocery prices are up 3.2% from last year, and some items have seen sharp jumps, such as a nearly 40% increase in tomato prices and a 15% jump in beef prices compared to last year. Shoppers must consider the value of everything that goes into their shopping bag – or, with increasing number of purchases – their online cart.
That becomes difficult to do when consumers do not know how much they will pay. While the consumer advocacy nonprofit Consumer Reports led the investigation, it found that several supermarket chains on the grocery delivery platform Instacart charged people different prices for the same groceries, even when they shopped at the same store at the same time.
Consumer Reports said retailers including Albertsons, Costco, Kroger, Safeway, Sprouts Farmers Market and Target were conducting algorithmic price tests, without consumers’ knowledge. Prices for the same product vary by as much as 23 percent, which Consumer Reports estimates can increase annual grocery costs for a family of four by as much as $1,200.
A few weeks after the news broke, Instacart announced it would no longer use these pricing methods, but the backlash continued.
A group of Democratic senators from New Mexico and Oregon introduced a bill in February that would prevent consumers from using technology to set individual prices; it will require stores to disclose if they use facial recognition technology and prohibit supermarkets from using digital price tags. Accompanying legislation has been introduced in the House of Representatives, but its path forward in the Republican-led Congress is uncertain.
State lawmakers are waiting for Washington, DC, to act. To date, more than 50 bills in 26 states have been introduced that seek to restrict, restrict or prevent these practices and the technologies that enable them, especially when it comes to essential items such as food.
While loyalty programs have long offered special pricing and targeted discounts for members, Lempert says, “This takes it to another level. I think it’s starting to scare people a lot.”
Countries are proposing a ban on price surveillance
In April, Maryland Governor Wes Moore signed the first of these state laws into law, and more are expected in the future. Maryland’s law, which will take effect on Oct. 1, 2026, prohibits algorithmic price setting.
Many of these bills build on existing consumer protection laws, particularly those related to privacy and data collection. Some focus on informing consumers when their personal information is used by pricing algorithms, while others aim to control or limit the use of this technology altogether.
The legal guide to some of the new bills is New York’s Algorithmic Pricing Disclosure Act, which requires companies to notify customers when their personal information is included in a price-setting algorithm. It defines personal information as “any data that identifies or can be reasonably linked, directly or indirectly, to a particular consumer or device.”
Many of the new bills limit or ban personal, algorithmically calculated prices entirely, and some prohibit the use of facial recognition technology used for pricing.
Like Maryland’s new law, much of this pending legislation is directed directly at grocery surveillance costs. People understandably resent the idea of opportunistic prices for things people can’t live without, Lempert said.
“I can choose to get into an Uber or take a plane, but I have no choice when it comes to my food,” he said. “I think that’s why they see so much love from consumers.”
The United Food and Commercial Workers union announced in April that lawmakers in Arizona, Nebraska, Oklahoma, Tennessee and Washington have adopted legislative language proposed by the supermarket union to stop “AI-driven technological intervention in grocery stores” by banning electronic shelving labels and the use of “unique symbols” to set prices.
Walmart, the nation’s largest grocer, currently has digital pricing in about 2,300 of its stores. In March, the big-box behemoth announced plans to roll out digital price tags in all of its US stores by the end of this year. The company said it will not use the technology to implement dynamic pricing or collect customer data.
While savvy shoppers have learned how to find deals on things with variable prices like airline tickets, expecting people to jump on breakfast cereal or burger patties creates resentment, Lempert said.
“It makes it very difficult for us,” he said. “This takes it to another level. I think it’s starting to scare people a lot.”
