Surveillance Pricing
In July 2024 the US Federal Trade Commission issued orders to 8 companies seeking information about their possible use of Surveillance Pricing. These orders were sent to Mastercard, Revionics, Bloomreach, Chase, Task, Pros, Accenture, and McKinsey & Co. They are not retailers or direct sellers but offer a service that others can take up. Revionics for example promises that it is ‘Empowering retailers to make pricing decisions with clarity and confidence’. It claims to be trusted by various USA retailers including discount store Family Dollar and sporting goods retailer Academy Sports + Outdoors.
There is no proof that anyone is using Surveillance Pricing algorithms but the concept is that a price is not fixed but set depending on the circumstances of the prospective buyer. This in-turn would be calculated based on information collected from previous account activity or harvested from the user’s computer or mobile device. The method is relatively easy to implement either though on-line shopping carts or through mobile apps where a unique price is displayed to the viewer. The advantage to the seller in either is that privacy settings can be exploited to harvest further personal information. This might be used to better target prices or even sold on to other organisations. Any user should consider the benefits to ‘signing up’ against anonymised shopping.
The concept of an individualised price is older than that of a ticket price. It dates back to bartering and haggling to agree what the customer is prepared to pay while still encouraging return sales. It is still prevalent in many fields such as sales of collectables or second hand cars. It is also common with service contracts and corporate negotiations. The current concern is that retailers could offer different prices for the same consumer goods at the same time to different customers; all based on information that they gather based on each potential buyer. The seller can benefit from receiving the maximum acceptable price from some buyers and attracting sales from others (albeit at a lower price point) who would not otherwise have bought. On the other hand as awareness of varying prices grows potential buyers will lose trust in the sellers or hold off purchases until they see a drop.
Surveillance pricing could be considered as a variant of electronic discount codes applied to shopping carts or in-store payment apps. These make goods cheaper to some users than others. Historically codes were not individualised and are often repeated on web forums or aggregation sites. Anyone using such sites needs to be aware of possible malware hosted on them and certainly should not enter any personal details to obtain codes. Retailers have identified risks from coupon abuse including buyers accessing coupons they should not qualify for and coupons being used for purchases other than the intended target of the coupon.
Dynamic pricing algorithms are already in place in a form that prices will automatically change based on external factors. These will include current stock levels, competitor’s prices, recent purchase history and other factors that could affect sales such as the weather or market trends. The algorithms will adapt based on how well they drive sales. Unlike personalised pricing all buyers would be seeing the same prices but those could vary even over a short period of time. With an increase in electronic price displays dynamic or surge pricing could become more prevalent in bricks and mortar establishments.
Although Surveillance Pricing is an evolution of these existing models the individualised aspect and intrusion on privacy is of concern. Australian law specifically allows dynamic pricing but bars setting higher prices for people due to gender, disability, race or age. Due to the complexity of any underlying algorithms discriminatory barriers could be being implemented indirectly as shopping habits themselves might be based on social factors. There could also be issues from a technology barrier. Having a high end device with the latest software might generate lower or higher prices. Not having access to such a device might not be seen as discriminatory but being physically unable to use such a device could be.
