Digital surveillance is ubiquitous. Corporate snoops collect information about everything we do, everywhere we go, and everyone we communicate with. Then they compile it, store it, and use it against us.
Increasingly, companies exploit this information to set individualized prices based on personal characteristics and behavior. This “surveillance pricing” allows retailers to charge two people different prices for the exact same product, based on information that the law should protect, such as your internet browsing history, physical location, and credit history. Fortunately, the Federal Trade Commission (FTC) is stepping up with a new investigation of this dangerous practice.
What Is Surveillance Pricing?
Surveillance pricing analyzes massive troves of your personal information to predict the price you would be willing to pay for an item—and charge you accordingly. Retailers can charge a higher price when it thinks you can afford to spend more—on payday, for example. Or when you need something the most, such as in an emergency.
For example, in 2019, investigative journalists revealed that prices on the Target app increased depending on a user’s location. The app collected the user’s geolocation information. The company charged significantly higher prices when a user was in a Target parking lot than it did when a user was somewhere else. These price increases were reportedly based on the assumption that a user who has already traveled to the store is committed to buying the product, and is therefore willing to pay more, whereas other shoppers may need a greater incentive to travel to the store and purchase the product.
Similarly, Staples used users’ location information to charge higher online prices to customers with fewer options nearby. The website did this by offering lower prices to customers located within approximately 20 miles of a brick-and-mortar OfficeMax or Office Depot store.
Surveillance Pricing Hurts Us All
The American privacy deficit makes surveillance pricing possible. Unlike many other countries, the U.S. lacks a comprehensive privacy law. As a result, companies can often surveil us with impunity. Unregulated data brokerages buy and sell the enormous amounts of information generated every time you swipe a credit card, browse the internet, visit the doctor, drive your car, or simply move through the world while in possession of a mobile phone. And it is difficult to shield yourself from prying eyes.
Corporate surveillance yields comprehensive—but often inaccurate and unappealable—personal profiles. Surveillance pricing uses these profiles to set prices for everything from homes to groceries.
This is fundamentally unfair. You have a human right to privacy (even though U.S. lawmakers haven’t updated privacy laws in decades). You shouldn’t be spied on, period. And constant surveillance pricing compromises your ability to freely use the internet without fear of adverse economic consequences.
Worse, surveillance pricing will often have disparate impacts on people of color and those living in poverty, who have historically suffered greater price increases when companies adopted AI-powered pricing tools. For example, an algorithmic pricing model used by the Princeton Review—a test prep company—allegedly charged higher prices to Asian American customers than to customers of other racial backgrounds. Likewise, ridesharing apps—such as Uber and Lyft—have charged higher fares to residents of neighborhoods with more residents of color and residents living below the poverty line.
Further, surveillance pricing tools are notoriously opaque. Lack of transparency into pricing decisions makes it difficult for customers and regulators to assess harms and seek redress for these problems.
Surveillance pricing—a form of “price gouging,” according to U.S. Sen. Sherrod Brown—may also suppress market competition. It incentivizes the continuous, fine-grained extraction of your data, because it offers big companies a competitive advantage—and the ability to charge higher prices—by collecting more personal information than their competitors. This fosters a race to the bottom that rewards companies that win by violating our privacy rights. And it puts smaller competitors at a disadvantage when they don’t have reams of intimate data about their potential customers.
Consumers know that surveillance pricing is unfair, but our legal rights to resist it are exceedingly limited. Some websites simply ignore browsers’ requests not to be tracked. Others have even charged higher prices to consumers who use digital privacy tools to prevent tracking. For example, they increase regular prices, and then offer discounts only to customers who allow the companies to collect their data. This kind of pay-for-privacy scheme undermines your personal choices, and disproportionately harms people who can’t afford to pay for their basic rights.
Putting a Stop to Surveillance Pricing
This is a critical time to resist surveillance pricing: most vendors have not adopted it yet. Correcting course is still possible, and it’s vital for our right to privacy.
Good news: the FTC recently announced that it is investigating surveillance pricing practices. Specifically, the FTC ordered eight companies to provide information about surveillance pricing tools they make available to others. The FTC sent these orders to Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture, and McKinsey & Co.
These eight firms play a key role in the collection, analysis, and weaponization of your private information: they are the “middlemen” that provide surveillance pricing tools to other companies. In particular, the FTC instructed the companies to submit reports detailing technical specifics of tools, the types and sources of consumer information they use, which companies are currently using them, and how they impact consumer prices.
As FTC Chair Lina Khan explained:
Firms that harvest Americans’ personal data can put people’s privacy at risk. Now firms could be exploiting this vast trove of personal information to charge people higher prices…Americans deserve to know whether businesses are using detailed consumer data to deploy surveillance pricing.
These FTC investigations are an important step towards public understanding of opaque business pricing practices that may be harming consumers. Increased transparency into new pricing models will facilitate efforts to curb this unfair pricing practice and could be the prelude to a rulemaking or enforcement action to halt the practice altogether.
We can mitigate surveillance pricing’s myriad harms by preventing surveillance. How? By doing privacy first.
Comprehensive privacy legislation would prevent companies from accumulating massive amounts of our information in the first place. Companies cannot charge prices based on our personal information if they don’t have it.
Economic research shows that opt-in privacy regulations—such as the GDPR—mitigate the negative effects of surveillance pricing and make us all better off. When all businesses, big and small, must respect customers’ privacy, surveillance will no longer create a competitive advantage for the biggest online platforms.
That’s in addition to the myriad other benefits of strong privacy protections, which would help combat financial fraud, support local and national news outlets, protect reproductive rights, mitigate foreign government surveillance on apps like TikTok, and improve competition in the tech sector.
Most importantly, strong legal protections for your privacy would guard against the emergence of new, increasingly harmful ways of weaponizing your data against you. Without a strong, comprehensive federal privacy law, “surveillance pricing” may give way to a never-ending parade of ways to use the most intimate facts about your life against you.
