FTC warns retailers about AI-powered personalized pricing

Shutterstock A mother shops in a supermarket with her baby. You've likely heard of “surveillance pricing” by now. IN CASE YOU MISSED IT | Maryland becomes first state to pass bill banning ‘surveillance pricing’ The practice uses personal information, such as your location, browsing history or purchase history, to help determine the prices you see online.

The FTC has warned businesses that failing to disclose when personal data is used could violate consumer protection law. "The FTC does not have the legal authority to ban personalized pricing in all circumstances, but businesses that fail to tell consumers how their personal data is being used to set a price may be in violation of the FTC Act and other laws we enforce," said FTC Chairman Andrew Ferguson.

RELATED STORY | Same groceries, same store: So why did you pay more than your neighbor? Ferguson added that consumers expect prices to change based on supply and demand, not their browsing history. "When consumers see a listed price, they expect it to be the same price that everyone else sees, not the retailer's estimate of how much they are willing to pay based on their personal data," Ferguson said.

Retailers claim digital price tags alone do not mean you're paying a personalized price. As retailers increasingly turn to AI and digital pricing tools, lawmakers are taking notice. At least 30 states have considered legislation this year addressing practices such as algorithmic or personalized pricing.