Walmart Inc. is planning to roll out digital price tags in all its U.S. stores by the end of the year, but some U.S. lawmakers and consumer groups fear the technology could serve as a gateway for predatory pricing strategies. In Canada, where many big grocers have already deployed these electronic shelf labels, citing improved efficiency and accuracy, there have been calls for a ban on so-called surveillance pricing — the practice of using personal data to set individualized prices.
What Is Surveillance Pricing?
Surveillance pricing, also known as algorithmic personalized pricing, is a method of setting prices where information about individual customers — from scraped social media activity to other identifying factors such as where they live or their spending habits — is used to generate prices. The concern is that this practice leads to different prices for different people, potentially exploiting their circumstances or need for a product.
Vass Bednar, managing director of the Canadian Shield Institute, a public policy think-tank, notes that surveillance pricing has been used in e-commerce settings in different forms for years, especially when shopping through an app or with a loyalty program. In such cases, companies obtain information about customers and make predictions about their willingness to pay. While difficult to determine in Canada, a U.S. Federal Trade Commission study indicates some retailers have used personal data such as a consumer’s location or browser history to set individualized prices.
Surveillance Pricing vs. Dynamic Pricing
Surveillance pricing is sometimes confused with dynamic pricing, which involves price updates that vary depending on factors such as higher demand or squeezed supply. Examples include more expensive ski lift passes, hotel rates, and airline fees during vacation periods, or sliding Uber ride and concert ticket prices depending on demand. In these cases, prices change under different circumstances, but all customers receive the same price at the same time.
It is the use of individualized data that turns dynamic pricing into surveillance pricing. In 2022, grocery delivery platform Instacart (operated by American tech company Maplebear Inc.) acquired AI-powered pricing and promotions platform Eversight, touting the platform’s “deep expertise in dynamic pricing strategies,” which would allow retailers and brands to test individualized and customized pricing and promotions.
Evidence of Differential Pricing
An investigation conducted by Groundwork Collaborative, Consumer Reports, and More Perfect Union last year found that nearly three-quarters of grocery items were offered to shoppers at different price points on Instacart. The report said the average difference between the lowest and highest price was 13 per cent, though some shoppers found grocery prices that were up to 23 per cent higher. In December, Instacart announced it was ending “all item price tests.” The company stated, “These tests were not dynamic pricing or surveillance pricing – and were never based on supply or demand, personal data, demographics, or individual shopping behavior.”
Why the Concern Now?
With electronic shelf labels becoming widespread in Canadian grocery stores, consumer advocates and some lawmakers are worried that the technology could enable surveillance pricing at the physical retail level. Unlike traditional paper price tags, digital labels can be updated remotely and potentially linked to customer databases. While grocers claim the labels are used solely for efficiency and accuracy, critics argue that the infrastructure could be exploited to charge different prices based on personal data.
As the debate continues, Canadians are urged to stay informed about how their data is used and to advocate for transparency in pricing practices.
