Hate Buying Concert Tickets? Wait ‘Til Your Milk Is Dynamically Priced

Maryland has become the first state to prohibit supermarkets and grocery stores from employing dynamic pricing for food. This legislation, effective since October 1, prevents retailers from using customers' personal data to determine if you should pay more for groceries. Maryland's legislators moved swiftly to address this issue before it became a common practice.

The necessity of such legislation is both commendable and disturbing, as it suggests we have reached a point where lawmakers must explicitly state that algorithms should not manipulate pricing based on individual consumers.

Dynamic pricing is not a novel concept—it has been utilized for centuries to adjust the cost of goods based on supply and demand. However, in the digital era, it has evolved into something far more invasive. Airlines pioneered this approach in the 1980s using booking data to forecast demand and set seat prices. Over time, other industries adopted similar tactics for more routine purchases.

Ticketmaster introduced technology allowing ticket prices to fluctuate with demand in 2011, and Uber launched surge pricing to charge more for taxis during peak times. The ability to access consumer data and process algorithms quickly has made the ancient practice of charging the market's maximum feasible price faster, more personalized, and more exploitative.

The infrastructure to make such practices possible in supermarkets is already in place. Walmart reports that approximately 2,300 U.S. stores utilize electronic shelf labels, with chain-wide deployment anticipated within a year. Price adjustments that once took employees days can now be made in seconds. Similar technology is employed by companies like Kroger and Whole Foods.

Walmart maintains that its electronic labels do not collect customer data or automatically adjust prices. However, such assurances are difficult to trust given the widespread use of this technology.

Consumer suspicion is understandable. A study by Groundwork Collaborative monitored 437 shoppers purchasing groceries via Instacart. The research revealed that 74% of grocery items had different prices for different users, even when shopping at the same store concurrently. Some price differences reached up to 23%. The retailer discontinued the practice after facing a Federal Trade Commission investigation.

The FTC reported last year that this type of "surveillance pricing" is not an isolated incident, describing how companies and pricing intermediaries exploit consumers' precise location, browsing history, abandoned carts, and even mouse movements to tailor prices or offers.

This scenario illustrates the dangerous consequences of combining dynamic pricing with data collection and optimization. Companies amass more data and refine their algorithms to extract additional profits, imposing new barriers before consumers. We have already experienced similar exploitation in other areas, such as buying movies, video games, and streaming services.

Today, tiered pricing is standard, with additional costs for levels, skins, boosters, and passes. Subscription services increase prices monthly, while ads are often required to access content. Companies know that eventually, someone will exploit their technological advantages for profit.

Can we trust that supermarket price stickers are not subject to the same corporate incentives to maximize profit margins? Maryland's lawmakers have taken a crucial step by ensuring that algorithms cannot exploit consumers' desperation for milk by charging higher prices.