Surveillance Pricing and Its Impact on Consumers

Have you ever noticed that flight prices increase after browsing for options online? Or after booking a flight, hotel and rental car prices mysteriously rise? This phenomenon is called ‘surveillance pricing.’ Companies analyze your search history and personal data to determine what you want or need and then adjust prices accordingly. They aim to find your ‘pain point’—the price level that might deter you but also ensures their profit.

This pricing strategy often frustrates consumers, yet it’s hard to avoid when travel plans are necessary. Clearing your browser history or starting fresh on a different site can help, but it’s time-consuming. Companies rely on this inconvenience, or ‘friction,’ betting you’re willing to pay more for less hassle.

Due to the growing prevalence and unpopularity of these practices, the Federal Trade Commission (FTC) recently proposed a policy change. This would require companies to disclose when they use personal data for personalized pricing and to share the type of information utilized. The public had until September 18 to comment on this proposed policy.

The practice of personalized pricing has faced criticism for being ‘predatory’ and ‘devious.’

Comments on this proposal overwhelmingly oppose surveillance pricing. Consumers share experiences like fluctuating prices for the same product, highlighting how these tactics exploit users’ lack of awareness about data usage and its implications.

Examples of Targeted Pricing

The staff of the FTC, after reviewing marketing disclosures, shared hypothetical scenarios that demonstrate the impact of this pricing strategy. New parents may see increased prices for baby products. Home-bound individuals could face steeper costs for food delivery. Rideshare services might charge more to those in emergency situations. Home security system prices might spike for recent crime victims.

Although the FTC cannot outright ban these practices, it can enforce transparency requirements, potentially leading to federal court actions or mandates for consumer refunds.

State-Level Actions

Some states are taking independent action. Maryland leads by prohibiting large grocery and delivery services from using personal data to determine prices, effective October 1. New Jersey’s similar law places restrictions on digital price tags, preventing personalized pricing based on phone data.

California too is addressing this issue through legislation. A bill, progressing through the California legislature, aims to curtail personalized pricing practices despite opposition from large retailers and data brokers.

Business advocates downplay concerns over surveillance pricing, positing they use consumer data to better target advertisements and offer discounts instead of maximizing profits.

These debates emphasize the constant evolution of digital commerce and privacy concerns, urging legislative and consumer awareness to keep pace with technological advancements.