Most people know about how websites use cookies to store your browsing history. They know that merchants can recognize us online and have a good idea what kind of stuff we like.
But they may not know that companies with an online presence can charge you a higher price, for the same product, if they think you’re likely to pay it. The practice is called surveillance pricing.
“What we have found is a growing body of evidence where companies are being encouraged to use surveillance pricing, using your own personal data from your cell phone, from the IP address attached to your home computer, to modulate the pricing on goods and services that you pay,” said Chris Ward, assemblymember from the 78th district.
“And that runs completely afoul to what we believe should be a direct, very basic consumer interest that you should pay the same price for the same product, regardless of who you are.”
Ward, a San Diego Democrat, has introduced a bill to prohibit surveillance pricing in California. He said he’s got no problem with stores giving discounts to students, seniors and veterans. That kind of discriminatory pricing is very common and out in the open.
But he wants to stop the kind of pricing where companies use personal electronic information about buying habits that most people have no idea is going on.
“We need standard pricing because that’s the way we’ve always fairly operated as a consumer society and make sure that surveillance pricing is defined in the law, because it’s not defined in California code now. It’s a new thing we have to keep up with the times and make sure that it is prohibited,” Ward said.
Surveillance pricing was the subject of an FTC investigation last year and there are many documented cases. One reported case showed hotel owners charged a lot more to a customer with an IP address in the San Francisco Bay area than a customer from Kansas City; $200 a night more.
Another example of surveillance pricing allegedly constituted fraud.
Two years ago the San Diego District Attorney, and some other California DA’s, settled a fraud case against Target. The retailer was accused of advertising a price for an item on their website, but once GPS showed the customer’s smartphone was in close proximity to a store, the price on their smartphone increased to match the higher price the store was charging for the item.
“There is just so much information a company can have on you, whether they directly collected it or bought it, that they can basically hack your mind. I mean it sounds hyperbolic but they are preying on your impulses and your desires,” said Justin Kloczko, tech and privacy advocate for Consumer Watchdog.
Some articles in business trade magazines enthusiastically encourage retailers to make use of the “vast pool of consumer data” to begin using what they prefer to call “personalized pricing.”
KPBS contacted several groups seeking comment on surveillance pricing, including the California Retailers Association and the CTIA, which represents the wireless communications industry. They did not get back to us.
Chris Ward pointed out that price discrimination can prey on people in poorer neighborhoods.
“If they are farther away from some stores and it’s a lot harder to get certain products, companies know this and they are increasing the prices for some products at those very stores because you don’t have as many options,” Ward said.
Ward’s staff said his bill, AB 446, will soon be heard by the California Assembly’s privacy committee.
