Online businesses may exploit user data to impose higher prices, leaving customers at a disadvantage. How can consumers combat this practice?
In a recent interview, Sam Levine, a senior fellow at the University of California, Berkeley School of Law and a former director of the Federal Trade Commission's Bureau of Consumer Protection, discussed the implications of personalized pricing, also known as surveillance pricing. This practice, which involves companies setting individualized prices based on consumer data such as location, demographics, and internet search history, has become a growing concern for both consumers and policymakers.
The FTC has found that personalized pricing consultants are working with over 250 companies across various industries, including grocery, hardware, apparel, and more. These consultants claim they can help companies earn billions of dollars in additional revenue by predicting the most each consumer is willing to pay. However, the use of personal data for individualized prices has raised concerns about privacy, affordability, and fairness.
Sam Levine argues that all states should pass surveillance pricing bans, especially if Congress does not act, to protect both privacy and affordability. He believes we do not need to live in a world where each person has a unique price, and that we can do better.
One example of the controversy surrounding personalized pricing can be seen in the case of Target, which was sued by enforcers in California for raising prices on consumers in their app when they were in the parking lot. This allegedly prevented consumers from knowing they could get lower prices online when near a store.
Delta Air Lines has been in the news for using AI to set ticket prices, but the company has stated it does not engage in surveillance pricing. However, some lawmakers have expressed concerns about the practice and have considered banning it.
Current regulations on personalized or surveillance pricing are emerging primarily at the state level in the United States. New York was an early mover, enacting the Algorithmic Pricing Disclosure Act on May 9, 2025. This law requires businesses using algorithmic pricing based on personal data to clearly and conspicuously disclose the use of such pricing next to the price shown to the consumer. Retailers must review and document the consumer data inputs into their pricing algorithms, audit their data collection practices, and provide a label informing consumers when prices are set algorithmically based on their personal data.
Beyond New York, multiple U.S. states are considering or have proposed legislation targeting algorithmic or surveillance pricing. Common regulatory themes include prohibitions on using personal data for individualized prices and requirements for consumer disclosure when such pricing is used. However, the regulatory landscape is contentious, with industry groups defending the use of AI and personal data for personalized pricing, while critics argue that laws like New York’s may cause consumer confusion or distrust.
In summary, personalized pricing is a practice that requires a response from policymakers to protect consumers. With growing legislative activity, businesses using these techniques should prepare for transparency obligations and evolving state laws.
References:
- New York Algorithmic Pricing Disclosure Act
- State Legislative Proposals on Algorithmic Pricing, 2025
- Industry Response to Algorithmic Pricing Regulations
- Criticism of Algorithmic Pricing Regulations
- Businesses in multiple industries, such as grocery, hardware, apparel, and others, have come under scrutiny for their use of personalized pricing consultants, raising concerns about privacy, affordability, and fairness in technology-driven finance and business practices.
- In response to growing concerns, some states have proposed or enacted legislation, like New York's Algorithmic Pricing Disclosure Act, requiring transparency and disclosure of personal data use in algorithmic pricing, aiming to protect consumer rights and build trust in the digital marketplace.
