You go right into a retailer to purchase a two-litre bottle of milk at your native grocery store and pay $3. However the particular person earlier than you within the queue paid $3.50. And the particular person after you paid $2. What if these costs have been based mostly in your private knowledge or circumstances, and even the battery energy in your telephone?
This will sound like science fiction, but it surely’s not as far-fetched as you may assume.
In July, US group Delta Air Traces revealed that roughly 3 p.c of its home fare pricing is set utilizing synthetic intelligence (AI) – though it has not elaborated on how this occurs. The corporate mentioned it goals to extend this determine to twenty p.c by the top of this 12 months.
The information raised considerations amongst shoppers that Delta could be utilizing clients’ knowledge to find out what to cost them. So, US Senators Mark Warner, Ruben Gallego and Richard Blumenthal despatched a letter to Delta Air Traces requesting additional details about its reported plans to implement AI-driven “dynamic pricing”.
“Delta’s present and deliberate individualised pricing practices not solely current knowledge privateness considerations however may even seemingly imply fare worth will increase as much as every particular person client’s private ‘ache level’ at a time when American households are already scuffling with rising prices,” the letter acknowledged.
Though Delta didn’t deny utilizing AI to set costs, it replied, telling the senators that it doesn’t use it for “discriminatory or predatory pricing practices”.
In keeping with former Federal Commerce Fee Chair Lina Khan, nonetheless, some firms are in a position to make use of your private knowledge to foretell what they know as your “ache level” – the utmost quantity you’re keen to spend for a particular good or service.
In January, the US’s Federal Commerce Fee (FTC), which regulates truthful competitors, reported on a surveillance pricing study it carried out in July 2024.
It discovered that firms can gather knowledge instantly by way of account registrations, electronic mail sign-ups and on-line purchases as a way to do that. Moreover, net pixels put in by intermediaries monitor digital indicators together with your IP tackle, machine sort, browser data, language preferences and “granular” web site interactions corresponding to mouse actions, scrolling patterns and video viewing behaviour.
This is named “surveillance pricing”.
What’s surveillance pricing?
Surveillance pricing is the apply of monitoring client knowledge to set individualised costs as a way to maximise earnings for the retailer.
Put merely, gaining access to your private data allows retailers to cost you probably the most they assume you can be keen to pay.
In a 2024 research paper, Oren Bar-Gill, authorized scholar and economist at New York College, describes surveillance pricing as follows: “Fuelled by huge knowledge, algorithmic worth discrimination allows sellers to parse the inhabitants of potential clients into finer and finer subcategories – every matched with a special worth.
“In some instances, sellers are even capable of set personalised pricing, marching down the demand curve and setting a special worth for every client.”
In an interview with economist Robert Reich in July this 12 months, Khan mentioned: “Proof reveals that ride-sharing apps are charging totally different costs for the very same rides at the very same time. It’s not totally clear, however researchers ran checks and located that riders with decrease battery life on their telephone have been charged extra.”
Delta Airways reportedly desires to make use of AI to set individualized ticket costs for passengers.
It is the newest firm to embrace a shady tactic referred to as “surveillance pricing” that weaponizes your private knowledge.
Watch Lina Khan clarify the way it works. pic.twitter.com/pnRJTyLZq6
— Robert Reich (@RBReich) July 16, 2025
Uber denies it’s intentionally concentrating on any of its app customers with increased costs. Nevertheless, its former head of financial analysis, Keith Chen, did reveal in an NPR interview in 2016 that the corporate had found that customers with low battery life have been extra more likely to settle for surge pricing.
“Uber has discovered that these with a low battery have a tendency to simply accept the surge worth regardless, as a result of they want a journey residence that minute, as an alternative of ready an additional 15 for the surge to presumably go down.
“We completely don’t use that to sort of push you a better surge worth, but it surely’s an attention-grabbing sort of psychological truth of human behaviour.”
Then, in 2023, an investigation by Belgian newspaper La Derniere Heure additionally discovered that costs for a similar journey on the Uber app might be totally different for various customers. Specifically, its take a look at discovered that the identical journey from the newspaper’s workplace in Brussels would value extra ordered from a telephone with 12 p.c battery – 17.56 euros ($20.51) than from one with 84 p.c – 16.60 euros ($19.39).
When approached for remark, Uber denied this, stating: “Uber doesn’t have in mind the telephone’s battery stage to calculate the value of a visit. The dynamic pricing utilized to journeys booked through Uber is set by the prevailing demand for rides and the availability of drivers who can reply to it.”
How does surveillance pricing work, precisely?
Retailers can monitor your on-line behaviour by recording what you click on on, your searching time, location and machine alternative and mix all this along with your buy historical past to find out your “worth sensitivity”.
“Worth sensitivity” sometimes measures how a lot clients’ shopping for behaviours change in response to shifts in product costs.
To do all this, they use AI surveillance instruments to provide pricing suggestions. These subtle techniques function throughout a spectrum, from broad store-wide pricing methods to personalised, real-time worth changes tailor-made to particular person person behaviour patterns.
A variety of consumer-facing companies – each online-only and high-street retailers – together with grocery, attire, well being and sweetness, residence items, comfort, {hardware} and basic merchandise retailers, have been included within the January FTC surveillance pricing examine.
In keeping with the examine, these are a few of the methods retailers are utilizing surveillance pricing to numerous levels:
- Concentrating on ‘reluctant gamblers’: As an illustration, the examine discovered, “if a hypothetical buyer who visits a sports activities betting web site demonstrates hesitation by lingering on the homepage longer than anticipated or strikes their cursor in direction of the button to shut out their browser tab, the web site could set off a pop-up displaying well-liked sporting occasions to incentivise the customer to stay on the web site and place a wager.”
- Concentrating on inexperienced consumers: For instance, a automotive dealership may provide an in-store kiosk to assist clients discover totally different car fashions, options, and monetary choices for a automotive. This buyer can then probably be “segmented” as a “first-time automotive purchaser”, implying the patron could be “much less savvy in regards to the choices accessible and be promoted explicit financing charges, trade-in reductions, or upkeep merchandise”, the examine concluded.
- Concentrating on clients deciding on ‘quick supply’ choice: For instance, a father or mother deciding on the “quick supply” choice for a purchase order of child formulation might be a rushed father or mother who could also be much less “price-sensitive”.
- Excluding loyal clients from reductions: For instance, the examine mentioned, a pharmacy may select to exclude common clients from a particular promotion for over-the-counter drugs or weight-loss dietary supplements as a result of it believes these clients would purchase the merchandise anyway. “As an alternative, it could goal low cost codes to a gaggle of rare consumers for these merchandise who could also be ‘in danger’ of disengaging.”
- Analysing buyer behaviour: “Actions like putting an merchandise in a cart, however not buying, or sorting a feed of merchandise from ‘lowest’ to ‘highest’ worth, may hypothetically be used to deduce elements corresponding to a consumer’s emotional state, buy intent, or monetary sensitivity,” the examine concluded.
- Video engagement: On-line retailers can decide how seemingly somebody is to pay increased costs by way of measuring their engagement with data movies, the examine discovered. “A web based retailer for survivalist gear, for instance, may use the knowledge {that a} web site customer watched a minimum of 65 p.c of a video on its homepage as a sign that they could be receptive to textual content messages urging them to make a purchase order,” it mentioned.
- Utilizing private knowledge for focused commercials: For instance, a cosmetics firm may gather data on shoppers’ pores and skin sorts or pores and skin tone by way of a survey. “The corporate can then use that details about pores and skin tone to focus on shoppers with adverts or promotions,” the examine discovered.
- Location-based pricing: Retailers can tailor their web sites in order that guests see solely the particular costs featured within the retailer nearest to their location.
How is AI utilized in surveillance pricing?
Retailers are utilizing AI to assemble detailed details about shoppers, together with login knowledge, location, searching behaviour, “deserted cart gadgets”, and even mouse motion patterns, after which feeding this data into pricing algorithms.
AI assesses a person’s willingness to pay (WTP), then systematically checks numerous worth factors to establish the optimum worth which can generate probably the most income.
“Sellers are more and more utilising huge knowledge and complex algorithms to cost discriminate amongst clients,” says Bar-Gill. “Certainly, we’re approaching a world wherein every client can be charged a personalised worth for a personalised services or products … many retailers and journey websites set personalised costs that modify by a whole lot of {dollars} from one client to the following.”
He provides that intermediaries who specialize in figuring out shoppers’ willingness to pay (WTP) and promote this data to retailers have additionally begun to emerge.
Is that this even allowed?
Sure, however it’s more and more being referred to as into query.
This 12 months up to now, US state legislators have launched 51 payments throughout 24 states aimed toward regulating algorithmic pricing, a major rise from the ten payments handed in all of 2024.
Many of those legislative measures particularly goal rent-setting software program, which allows price-fixing in housing markets. Advocates are additionally pushing for limits on surveillance-driven pricing that tailors prices based mostly on private knowledge, location or searching behaviour.
Specifically:
- On Could 9, New York Governor Kathy Hochul signed A3008, banning undisclosed personalised algorithmic pricing.
- Two Ohio Senate payments, SB 79 and SB 328, require companies incomes greater than $5m to tell shoppers if a worth or time period comes from a pricing algorithm.
- California Meeting Invoice 446 sought to ban surveillance pricing with private knowledge. Nevertheless, it confronted sturdy opposition and was principally struck down, although debate continues on different payments.
Different nations are additionally introducing laws. As of April 2025, the Digital Markets, Competitors and Customers Act DMCCA lets the Competitors and Markets Authority (CMA), the UK’s fundamental competitors regulator, tremendous firms as much as 10 p.c of worldwide income for unfair or deceptive client practices, together with hidden or biased digital pricing.
Public participation and regulatory laws will proceed to play an necessary function in decreasing the chance of companies utilizing private knowledge for unfair pricing practices.
Is surveillance pricing new?
Probably not – it’s extra that the identify of this apply has modified over time. It has beforehand been generally known as “worth discrimination” or “dynamic pricing”.
In 2008, Norwich Union, the UK’s largest insurer, now referred to as Aviva, discontinued its “Pay As You Drive” automotive insurance coverage coverage attributable to buyer fears about surveillance and privateness.
The “Pay As You Drive” scheme used satellite tv for pc expertise and monitoring gadgets to watch drivers’ journey patterns, offering discounted premiums to clients who averted high-risk driving durations.
As we speak, many UK insurers present surveillance tools generally known as a “black field”, which new drivers plug into their automobiles. The higher you drive, the decrease your premiums.
Within the 2000s, Amazon experimented with dynamic pricing, providing various DVD costs utilizing buyer searching knowledge and web site cookies. After many buyer complaints, debates about equity and transparency in e-commerce started. Some critics argued Amazon’s apply resembled worth discrimination, elevating moral considerations.
Amazon mentioned the pricing experiment chosen random clients solely and denied deliberately concentrating on particular consumers.
Nevertheless, in a September 2000 assertion, Amazon issued an apology to clients concerning the price-testing programme and mentioned it had ceased the experiment.
“We’ve by no means examined and we by no means will take a look at costs based mostly on buyer demographics,” Amazon CEO Jeff Bezos mentioned in a press release. “What we did was a random worth take a look at, and even that was a mistake as a result of it created uncertainty for purchasers slightly than simplifying their lives.”
How can shoppers shield themselves from worth discrimination?
The FTC Surveillance Pricing report lists a number of methods wherein shoppers can shield their knowledge.
These embrace utilizing non-public browsers to do your on-line purchasing, opting out of client monitoring the place doable, clearing the cookies in your historical past or utilizing digital non-public networks (VPNs) to protect your knowledge from being collected.
It famous, nonetheless, “These steps might be tough to keep up and will not be totally efficient, since many firms use machine fingerprinting or different much less apparent monitoring strategies.”
System fingerprinting permits firms to trace individuals through the use of distinctive data from their gadgets, corresponding to their browser settings and what {hardware} and software program they use.
Customers may use “non-public mode” when searching to cover their exercise or simply share much less private knowledge. Nevertheless, superior monitoring applied sciences nonetheless make it tough to totally escape surveillance-driven pricing mechanisms.
In its July 2024 Surveillance Worth Gouging report, California nonprofit organisation Shopper Watchdog really useful that customers demand extra openness from retailers by insisting they disclose how they use private data to find out pricing, and use present privateness settings and knowledge opt-out choices.
