Khaberni - A new law in New York has sparked controversy after it required stores to disclose whether prices are determined by algorithms based on consumer personal data.
Although the law enforces transparency, it does not require companies to reveal what data is used or how it affects the final price.
The idea is clearly illustrated by a simple example: a carton of Good & Gather eggs at a "Target" store is priced at $1.99 for customers in an area near Rochester, while it rises to $2.29 in the upscale Tribeca neighborhood in Manhattan.
Although the difference seems minor, a new notice on the "Target" website hints at the reason: "This price was determined by an algorithm based on your personal data."
According to the law, the disclosure must be clear and conspicuous, but in reality, finding it is not an easy task, as it requires users to click on an “i” icon next to the price, then scroll down the pop-up window, according to a report published by the "Wired" website.
Judicial precedents indicate that relying on hidden links is not always an acceptable method to inform consumers.
Old practices in a new guise
"Target" relying on prices that differ according to location is not new.
In 2021, American media outlets revealed that website prices change according to the store linked to the user's account, while the company confirmed at the time that the prices reflect the nature of the local market.
In 2022, the company settled a lawsuit in California after accusations of using geolocation to automatically update prices on its app.
The variation in egg prices is not the only instance, as even toilet paper prices vary by region:
- $8.69 in the Flushing, Queens area.
- $8.99 for the same product in the Tribeca store.
A broader wave of algorithmic pricing in the United States
In 2012, a report by "The Wall Street Journal" revealed that "Staples" offered different prices based on geographic location.
In 2015, a "ProPublica" investigation showed that prices for Princeton Review educational services differ by hundreds or thousands of dollars depending on the customer's ZIP code.
As these practices escalate, the Federal Trade Commission (FTC) has begun studying what the agency calls "surveillance-based pricing," which includes using location data to determine prices.
Upcoming legislation
The New York law might just be the beginning, as other states like Pennsylvania have introduced similar bills, and a federal bill was proposed last July to address "algorithmic pricing" practices.
According to the "JD Supra" website, more than 50 bills have been introduced in the United States regarding dynamic and algorithmic pricing.
In another step towards integrating technology, "Target" recently announced the launch of its app through the ChatGPT platform from "OpenAI," to provide customers with personalized shopping recommendations based on artificial intelligence.
