As more retailers adopt AI-based pricing systems, the Federal Trade Commission is cautioning that one method may prompt consumer protection concerns.
That method, often called "surveillance pricing," involves using personal information, including where someone is located, what they have browsed, or what they have bought before, to influence the price displayed to that shopper.
Here's what to know
According to the FTC, it is illegal for companies to use personal data in pricing decisions without making that practice clear to consumers, LEX 18 reported. The agency indicated its concern is less about ordinary price shifts tied to stock levels or market demand and more about undisclosed data-driven pricing.
"When consumers see a listed price, they expect it to be the same price that everyone else sees, not the retailer's estimate of how much they are willing to pay based on their personal data," FTC Chairman Andrew Ferguson said.
Ferguson said, according to LEX 18, that the FTC is not asserting its power to prohibit all personalized pricing.
"The FTC does not have the legal authority to ban personalized pricing in all circumstances, but businesses that fail to tell consumers how their personal data is being used to set a price may be in violation of the FTC Act and other laws we enforce," Ferguson said.
TCD Picks » Quince Spotlight
💡These best-sellers from Quince deliver affordable, sustainable luxury for all
When a retailer uses someone's online activity to predict how much that person will pay, failing to disclose the approach could raise legal issues.
More background
In practice, surveillance pricing may draw on data such as a shopper's location, browsing history, or purchase history, information many consumers generate in the course of online shopping.
Ferguson contrasted that approach with the kind of pricing changes shoppers might anticipate, as people generally understand that prices move with supply and demand.
If two shoppers are shown different prices for the same product based on their personal data, comparison shopping can be difficult, and consumers may pay more without realizing the price was tailored to them.
What's being done?
Lawmakers in at least 30 states have weighed legislation related to algorithmic or personalized pricing, LEX 18 reported, showing that the issue has spread beyond consumer advocates and technology critics.
Retailers, for their part, say the presence of digital price tags does not by itself prove a customer is receiving a personalized price. That means the debate may turn largely on transparency and whether companies clearly disclose when personal data affects what someone is asked to pay.
Where can I learn more?
These stories show how pricing transparency fights are playing out.
• In Pennsylvania, lawmakers are pushing a ban on surveillance pricing so every shopper sees the same price.
• North Carolina's attorney general urged the FTC to confront hidden food delivery fees and marked-up menus.
• Across online retail, shoppers often encounter add-to-cart price restrictions that obscure what products cost.
• At Home Depot, a customer said a sneaky Black Friday tactic made in-store discounts misleading.
• At one thrift store, shoppers spotted brazen pricing tactics.
Get TCD's free newsletters for easy tips, smart advice, and a chance to earn $5,000 toward home upgrades. To see more stories like this one, change your Google preferences here.
