Keeping an Eye on Surveillance Pricing and Wage Legislation

Should people with iPhones pay more than Android users for food delivery? Should delivery drivers earn different amounts for the same job, based on personal information the app has about them? Do we want nurses who staff shifts at hospitals bidding against each other for work, competing over who will accept the least amount of money? Should people who live in certain zip codes be charged more for online test prep? What about single parents?

Corporations are increasingly using detailed information about their customers and workers to target them with individualized higher prices and lower wages. (They may not be advertising it much, but boy, are they bragging about it to their shareholders.) These tactics, often referred to as algorithmic price discrimination or “surveillance pricing,” have in recent years been supercharged by advances in machine learning and AI. 

We’re used to grocery stores offering coupons and restaurants marketing early-bird specials. But this new breed of individualized surveillance pricing, based on vast troves of personal data people might not even realize are being collected, risks being a lot less fair and transparent.

None of these changes are inevitable. There’s a long history of the government regulating prices and wages to protect consumers and workers. Last year, the Federal Trade Commission launched an investigation of surveillance pricing. The agency found that companies were using consumer data—ranging “from a person’s location and demographics, down to their mouse movements on a webpage”—to set prices. Yet almost immediately after coming into office, Trump FTC Chair Andrew Ferguson shelved the inquiry. 

Lawmakers at the state and federal level are now beginning to introduce legislation to limit or prohibit surveillance-based pricing and wage-setting or otherwise regulate in this area.

Last year, the Federal Trade Commission launched an investigation of surveillance pricing. The agency found that companies were using consumer data—ranging “from a person’s location and demographics, down to their mouse movements on a webpage”—to set prices. Yet almost immediately after coming into office, Trump FTC Chair Andrew Ferguson shelved the inquiry. 

At the federal level, Rep. Greg Casar, joined by Rep. Rashida Tlaib, introduced legislation last week to ban pricing and wage-setting based on “surveillance data,” defined in the bill as “personal information, genetic information, behavior, or biometrics.” Senators Ruben Gallego, Mark Warner, and Richard Blumenthal also sent a letter to Delta Airlines with a series of pointed questions about Delta’s announced move toward individualized pricing using AI.

State laws have traditionally gone above and beyond federal regulation on prices and wages, including measures like minimum wage laws. And states are indeed stepping up with legislation in this area. A bill on surveillance pricing that was introduced in California last February is awaiting consideration by the state senate in August. The law would prohibit pricing “based on personally identifiable information collected through electronic surveillance technology.” As amended, the bill contains several exceptions, including for insurance products, discounts with publicly disclosed eligibility criteria, and price differences based solely on the cost of providing the good or service. 

It’s encouraging that states are starting to think through how to address this issue. In February, Colorado lawmakers introduced a bill to ban discrimination against consumers or workers through the use of automated decision systems. Similar legislation has been introduced in Georgia, Illinois, and Minnesota. The State of New York passed legislation to require disclosure of pricing based on consumer data specific to a particular individual, and the Ohio legislature is considering similar measures.

Technology is rapidly reshaping how corporations treat consumers and workers. This emerging wave of legislation marks the first—but surely not the last—effort to put guardrails and limitations on surveillance pricing and wage-setting. Ultimately, it will be up to our democracy—not just corporations—to decide how we expect companies to treat people with these new tools.