California Lawmakers Take on Predatory ‘Surveillance Pricing’

It’s no secret that our personal data is for sale: everything from our demographic profiles to where we swipe the screen as we shop online. Now, companies are weaponizing that information to surreptitiously charge some customers more than others.

The practice, known as surveillance pricing, has spread in recent years, according to consumer and privacy watchdogs, and it’s become increasingly difficult to escape, no matter how often we clear our cookies or tighten our privacy settings.

Creepy. Enraging. In many cases, legal. But some California lawmakers want to change that. At least four lawmakers have introduced bills during this legislative session to regulate surveillance pricing.

“You walk into a grocery store, you’re surveilled,” said Kristin Heidelbach, Legislative Director for United Food & Commercial Workers Western States Council, which is backing AB-446, which “would prohibit a person from setting a price offered to a consumer-based, in whole or in part, upon personally identifiable information, as defined, gathered through an electronic surveillance technology, as defined, including electronic shelving labels.” Heidelbach’s organization, according to its website, represents more than 200,000 food, pharmacists and cannabis workers across California, Nevada, Arizona and Utah.

“This is a consumer issue, but our grocery workers and our pharmacists are also consumers, and they feel that pinch as well, and so we look at it as a righteous fight to try to make it more affordable for people to live,” Heidelbach said. “Folks who are hit the hardest in bad economic times, people who are living paycheck to paycheck, are the ones who are squeezed the most.”

Surveillance pricing can show up in different ways, both online and in real life. Target settled a California lawsuit in 2022 for raising prices for customers who appeared to be close to making a purchase because they were in or near a store. The growing use of digital price tags by retailers like Target and Walmart allows them to automate price updates, in some cases based on information about individual customers.

In other words, let’s say a consumer is lingering in the dairy section on a shopping trip. The retailer may have information that hints at their level of commitment to the purchase. Maybe they’re a parent with small children. Maybe the dinner hour is approaching, and the store’s about to close. All these data points paint a picture of someone who is vulnerable to price gouging.

“They have all the tools they need to track you from the time you walk inside the grocery store,” explained Heidelbach. “Then [retailers] take those data points, and they will adjust the price…while you’re standing in a store. They can track on your phone how many times you’ve looked up something. You go to pick up a gallon of milk, and it’s one price, and then by the time you get up to the front, [the price] has already fluctuated.”

Federal anti-discrimination laws prohibit predatory pricing in particularly sensitive applications like employment, housing, and credit, but it still happens. Attorneys general nationwide have filed multiple lawsuits against corporate landlords for alleged collusion inflating rents.

California already has some protections in place in the form of The California Consumer Privacy Act, which limits the amount of information that businesses can collect and use to make decisions about consumers. “But, more can be done,” Maureen Mahoney, Deputy Director of Policy & Legislation for the California Privacy Protection Agency, wrote in an email to KQED.

“Consumers shouldn’t have to worry that where they live or how they browse a store will be used to determine how much they pay for important purchases,” wrote Mahoney in an email to KQED.

With an established history of leading in the consumer privacy space, California lawmakers are joining those in other states like Colorado, Georgia, and Illinois to pick up where federal regulators are expected to leave off.

In January of this year, the Federal Trade Commission announced the results of its survey of companies that publicly touted their use of AI and machine learning to engage in data-driven targeting, but after President Donald Trump took office, incoming chair Andrew Ferguson canceled the agency’s request for public comments to continue the inquiry.

It’s too early in California’s legislative session — Friday was the filing deadline for new bills in Sacramento — to determine which prospective measures will succeed in making it to Governor Gavin Newsom’s desk. It’s common practice for lawmakers to change a measure’s language substantially as it moves through committees with the help of other lawmakers, lobbyists, as well as privacy and consumer advocates.

State Sen. Aisha Wahab (D–Hayward) has introduced a couple of bills [SB-384 and SB-259] that would restrict companies from using algorithms for dynamic pricing. She said she expects pushback from a variety of industries, and not just in Silicon Valley, as dynamic pricing has become a big money maker.

“But I have always seen my job as a policymaker is to put safeguards there to protect the average person,” Wahab said.