The arrival of artificial intelligence accelerates the practice of businesses using the personal information of consumers to advance a sale. But a new practice is emerging, called surveillance pricing, in which sellers set different prices for different consumers shopping for the same product at the same time. Driven by consumer indignation, some governments are moving to ban the practice.
Market Forces and Restrictions
Imposing restrictions on market forces can distort those forces. Instead of banning surveillance pricing, governments should ensure that consumers know who is using it and who isn't, so that they can then make an informed choice.
It is difficult to know how widespread surveillance pricing has become in Canada, but in the United States, the Federal Trade Commission found in January 2025 that “retailers frequently use people’s personal information to set targeted, tailored prices for goods and services – from a person’s location and demographics, down to their mouse movements on a webpage.”
Legislative Responses
The Maryland government has banned surveillance pricing in grocery stores, and two dozen states are considering legislation. Manitoba’s NDP government brought in Bill 49 to limit surveillance pricing, and federal NDP Leader Avi Lewis is calling for a national ban on the practice.
There has long been widespread social acceptance of some forms of differentiated pricing, such as reduced prices for seniors and children. Passengers on an airplane or occupants of a hotel understand that some may have paid more for their seat or room than others, depending on when they booked. Anyone cancelling a subscription to a newspaper, say, may discover that the seller is offering a steep discount from the posted price in order to secure a renewal. But these practices apply equally to all consumers at a given time. Surveillance pricing charges different prices for consumers seeking the same product at the same time, based on their perceived ability to pay.
Critics cite examples of an airline that might charge a customer more because it knows they must attend a funeral, based on previous web searches, or a drug chain might hike the price of a thermometer when it knows a mother has a sick child.
Nonetheless, Ontario Premier Doug Ford wants nothing to do with restrictions on surveillance pricing. “There’s no better way of letting people get lower costs on no matter if it’s cars or homes or groceries, than competition,” he told reporters.
The Case for Competition
Mr. Ford is right. Provincial governments should be reluctant to intrude as the private market evolves under the influence of AI. Some even argue that surveillance pricing promotes social equity – that those who can afford to pay more, should pay more. As Aradhna Krishna, a professor of marketing at University of Michigan put it, when a company charges an affluent consumer more for a laptop than it charges a struggling university student, “it’s effectively running a means-tested subsidy program – funded by consumers.”
Nonetheless, there are good reasons to be wary of surveillance pricing. For one thing, it advantages large corporations with sophisticated software over smaller businesses. And the practice erodes public confidence. The free play of market forces should also be the fair play. The best way to preserve public trust in private markets is by ensuring transparency. Sellers engaged in surveillance pricing should be required to declare they do so every time someone visits their site or store. The consumer can then decide whether to continue.
It is worth noting that whenever a company has been accused of surveillance pricing, it has denied the practice or stopped using it. And governments everywhere should be employing best efforts to restrict corporations from sharing personal data.
National Standards Needed
Governments should seek to establish common national standards for any restrictions on surveillance pricing. Ottawa and the provinces are struggling to reduce non-tariff barriers and simplify regulations. A province-by-province patchwork of restrictions on surveillance pricing would move us in the opposite direction.
Caveat emptor, the saying goes. Buyer beware. But the buyer at least has the right to know what they should beware of.
