California legislators ignore surveillance pricing gouging

Say you want a new pair of running shoes, but you just can’t make up your mind. So you spend a solid week checking them out online, coming back to one pair on a particular site again and again. When you’re finally ready to check out, you notice something upsetting — the price you saw on day one is now 20% higher.

What the heck? Welcome to the brave new world of surveillance pricing, where some companies are not just tracking your every move online but also purchasing deep-dive data into your life for a single purpose — to figure out the maximum you will pay for an item and jack up the price accordingly to squeeze every possible dollar out of every unwitting consumer.

It’s legal, and whether it’s good or bad “depends on which side of the transaction you’re on,” said Roger White, an economics professor at Whittier College.

For those of you who are really terrible at economics, we, the little people, are on the bad end of that deal. “It is using your own personal data and your characteristics, your demographics, information about you, to set a different price based on the perceived willingness to pay, and that is causing Californians a potential chance of being gouged,” said state Assemblymember Christopher M. Ward (D-San Diego).

Ward is trying to outlaw surveillance pricing in California with his AB 2564, which seems like a no-brainer if you actually care about affordability and your constituents. But he’s having a hard time getting his bill through the Legislature. In fact, he tried last year and failed. This year, the bill still has a chance, but the clock is ticking, the lobbyists representing big retailers and data brokers are spending, and our state elected officials seem lukewarm on the issue.

But if surveillance pricing seems corrupt or unethical, get ready. Because retailers are getting ready — for artificial intelligence. Right now, most surveillance pricing is relying on established data collection. That is about to get super-charged as AI goes further and further into sweeping up bits of information on every aspect of our lives, on and offline.

Did your car break down and you have to shop at home? Are you injured or have a medical condition that makes you desperate for comfy shoes? Did you just get a raise and maybe are in the mood to spend? The amount of data that can be definitively known about your life is huge. The amount that can be inferred is even bigger. Imagine if artificial intelligence in real time, using every bit of information it can find, is basically working to squeeze every dime out of you, every day on every purchase — groceries, clothes, plane tickets, maybe even medicines.

“AI gives them powerful tools to do that, and they can basically use information almost instantaneously to set prices,” said Darrell M. West, a senior fellow at the Brookings Institution, a nonprofit public policy think tank. Which makes regulating surveillance pricing now all the more important.

White, the Whittier professor, sees an even bigger threat looming with surveillance pricing. He points out that income inequality in the United States has been increasing since the 1970s, and it is mostly rich people who control and own large retail endeavors. If surveillance pricing is allowed to blossom unfettered, he’s concerned the rich will get richer by selling at higher prices, and everyone else will be paying so much to survive that the poor and middle class will suffer even further. “This could lead to an acceleration of income inequality,” White said. “This could be a way for, sort of, the rich to benefit more,” leaving “the middle class and the poor potentially being even worse off.”

Immediate gouging, and long-term erosion of the already tenuous ability of the middle class and poorer people to survive. You’d think our state Legislature would be all over fixing this. Other states have. In fact, about 20 states have some sort of law about “dynamic pricing,” a broader term for how retailers use data to set prices.

Just a few days ago, New Jersey Gov. Mikie Sherrill signed A4085 (the Fair Price Protection Act), which prohibits surveillance pricing for groceries. New Jersey, New York, Connecticut and Maryland also have laws on the issue, though some won’t take effect until next year. And this isn’t some sort of blue-state push. MAGA Republican Sen. Josh Hawley (R-Mo.) suggested last week that he might be considering federal legislation on the issue, the same week the democratic socialist mayor of Seattle proposed curbs on it. “There are both Republicans and Democrats who are worried about these issues because they’re getting complaints from their own constituents,” West said.

But in California, the winds are blowing in favour of the big guys. While Ward is working through one colleague at a time trying to pass the measure, the lobbying pressure against it has been significant. Retailers and others argue it could have unintended consequences, like preventing them from offering discounts to certain customers, or having loyalty programs.