Dynamic pricing, or surveillance pricing, refers to a business model in which retailers use AI algorithms to personalize product prices based on consumers’ purchase history, browsing behavior, demographic data, and even real-time location. Critics argue that this pricing model is essentially a form of covert price discrimination, where different consumers may pay vastly different prices for the same product at the same store and time.

Maryland’s new law explicitly prohibits grocery retailers from using such AI-driven pricing systems. Once enacted, supermarkets and convenience stores in the state will be required to adopt a uniform pricing system for all consumers, without differentiated pricing based on personal data.

The backdrop to this legislation is the rapid proliferation of AI pricing technology in the US retail industry in recent years. Industry reports indicate that more than one-third of large US retailers are already testing or using some form of dynamic pricing system. Some systems can automatically adjust prices within minutes based on factors such as weather conditions, inventory levels, and consumer behavior.

Consumer protection organizations have welcomed the law. They argue that AI pricing not only violates consumers’ right to know and fair trading rights, but may also have a disproportionate negative impact on low-income groups — as algorithms tend to charge higher prices to consumers who are less price-sensitive.

However, retail industry associations have raised questions about the law. They argue that dynamic pricing helps optimize inventory management, reduce waste, and ultimately provide lower base prices for consumers.

Analysts suggest that Maryland’s law could prompt other states to follow suit. California, New York, and Illinois already have similar legislative proposals under consideration. If more states pass similar laws, the AI pricing industry could face nationwide regulatory pressure.

Source: The New York Times - Maryland Is First to Ban A.I.-Driven Price Increases in Grocery Stores