They’re watching you, and raising your prices – surveillance pricing, explained

By now, you probably know that companies have amassed a treasure trove of data on you. You may have noticed the way this is then used to advertise products to you. Maybe you even like that.

But did you know that some companies are also using your personal data to change what you’re charged for everyday goods?

This is referred to as surveillance pricing, and it’s becoming increasingly common on and offline. That’s why we’re breaking down surveillance pricing, the way it works, how it’s impacting everyday people, and what we can do about it.

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What is surveillance pricing?

Before defining surveillance pricing, a little history on pricing itself: For most of human history, price tags didn’t exist—you had to haggle. While some enjoy haggling, this enabled sellers to offer different prices to people based on race, gender, etc., a practice known as price discrimination.

The Quakers saw this as immoral and, thus, created the price tag. One price for everyone, no matter what.

Fast forward to today, and technology has enabled companies to use price tags that change quickly. Sometimes that change is due to external factors, such as when rideshares become more expensive after a big event. Rideshare platforms charge more because the demand for cars is high, as crowds of people are all vying to get home at the same time. This is referred to as dynamic pricing.

However, it’s become increasingly common for companies to change prices based on data that they have on you, such as your age, location, or how many times you’ve refreshed a page, presumably desperate to purchase something. This is surveillance pricing. 

There’s not even haggling, no ability for you to self-advocate. There’s just the highest price an algorithm has determined you’re willing to pay for anything and everything, including your everyday necessities.

How do they acquire this data?

The most common way companies collect data is through digital surveillance, using cookies, device fingerprinting, and social media listening software to track people’s online activity. You may have even inadvertently enabled companies to do this by signing lengthy user agreements that grant them permission to collect and sell information.

But it doesn’t stop at your phone. Devices from your earbuds to your fridge can be used to collect data on you. They’re even tracking you out and about through movement surveillance, via cameras, heat sensors, disturbances in radio frequency, and pings to cell phone towers and WiFi routers, and then using this information to charge you more.

For instance, in 2022, the County of San Diego settled a $5 million lawsuit against Target for false advertising and unfair competition arising from surveillance pricing. Prosecutors found prices posted for various items on Target.com or in the Target app that changed when a customer entered the store perimeter, without clearly and conspicuously disclosing the change.

Biometric surveillance technologies—which surveil people’s physical, biological, and/or behavioral characteristics—get even more personal. Facial recognition tech, which has been used to “recognize” returning customers, despite researchers identifying the tech’s gender and racial biases. Emotion recognition technology takes a step further, claiming to not only detect people but also discern the outer trappings of their inner world. Look too longingly at a bag of chips? They may just go up in price.

These data points don’t often stay siloed within a single company thanks to the data broker industry, which makes money by harvesting, storing, and selling our data. Tech giants like Google and TikTok are among the largest players in the data broker industry, capturing and selling user data. That’s why, if you’re not paying for the product, you’re probably the product.

What happens next? How do surveillance pricing algorithms work?

Pricing algorithms determine how much you’re willing to pay based on this data and a set of rules programmed into the algorithm by a human. 

First, all of your data is collated into consumer profiles, including details such as age and gender, as well as location, thumb and palm prints, shopping habits, walking patterns, and more. Often, collated data is also used to create inferred data points, such as sexuality, education, and income level, which then become part of the consumer profile.

Then, using consumer profiles and real-time data, algorithms can set prices based on the rules they were programmed with. The rules can be as simple as “if frowns, deduct price by 30 cents from digital price tag” to complicated math problems that weigh different demographic and behavioral factors and spit out a price.

Prices can also be set based on categories that a company may want to target with higher prices or coupons. These categories can be as basic as people in Seattle over the age of 60, but they can also get very specific—“single moms under the age of 30” or “unemployed men who play Fortnite and shop at the Gap.”

In fact, a recent Consumer Reports investigation revealed that Kroger grocery stores collect extensive customer data and use it to make detailed inferences—including a customer’s income level. Upon further investigation, Consumer Reports not only discovered that Kroger’s “income predictor” can be inaccurate but also that a shopper deemed to have less education or with a lower income, for example, could end up getting fewer of Kroger’s best discounts.

Because the ultimate category you’re sorted into is based on how willing you are to pay a higher price, how desperate you are. 

How is surveillance pricing impacting people?

This means the house always wins on surveillance pricing. They determine the rules of the pricing game and have all of the data, while consumers are left in the dark. Generally, this means higher prices across the board. But oftentimes, these costs are obscured.

False discounts

In this world, even a coupon or a “discount” can be weaponized to hide predatory pricing practices. Everyone loves a discount, but sometimes a discount isn’t really a discount, like when companies bump up prices right before Cyber Monday and Black Friday, so the deals look better than they actually are.

Now make that year-round and individualized, so then there’s no transparency. That’s what surveillance pricing enables companies to do: inflate prices for everyone and then hand out personalized “discounts” that really bring the price of a good or service down closer to its market value—a factor that you also don’t know. 

It’s important to note that traditional discounts based on clearly identifiable group characteristics (seniors, students, military, etc.) are okay and protected by law. They’re transparent; you know what discounts are available to whom. 

Pricing discrimination

With surveillance pricing, there’s a lack of transparency, which leaves room for potential discrimination. If these businesses are determining what people pay based on a treasure trove of personal information, that means they can determine prices based on protected classes like race, gender, sexuality, and more.

Algorithmic pricing discrimination could also exacerbate existing pricing inequities, such as the Pink Tax—the difference in the prices of products that are marketed to both men and women. Already, a US study found that women pay 13% more for personal care products—such as soaps, razors, and deodorants—than men. 

Government agencies such as the Federal Trade Commission (FTC) and attorneys’ general offices have investigated surveillance pricing and potential price discrimination. But due to a lack of corporate transparency, it’s difficult to know whether surveillance pricing is, in fact, leading to illegal price discrimination. 

Data security

There’s also no point at which these consumer data profiles become complete. The allure of surveillance pricing is the ability to predict an individual consumer’s likelihood of purchasing products at specific price points—more data enables that. So surveillance pricing incentivizes increasingly intrusive data collection. 

This data isn’t limited to commercial use, either. Data brokers sell to whoever can pay: personal data collected for commercial purposes can end up in the hands of third parties, like law enforcement, and be used for unrelated purposes. 

Small businesses

Ultimately, this rewards companies that win by violating our privacy rights, creating a race to the bottom. Companies that don’t want to participate lose a competitive edge, and smaller competitors without large amounts of intimate customer data put themselves at a disadvantage. 

Over time, they get taken out of the race altogether. The companies left standing earned their victory by exploiting our data, our basic needs, and our hard-earned dollars. If we want to prevent this, we need to set a floor on how companies conduct business.

What can be done to address these issues?

That’s why TechEquity Action is championing the Surveillance Pricing Protection Act (AB 2564) in California. Authored by Assemblymember Christopher Ward, AB 2564 will prohibit the practice of surveillance pricing by making it unlawful for retailers to use personal identifiable information when charging different prices for the same product, whether online or during in-store checkout.

While the reality of data collection and surveillance pricing can feel really overwhelming, you can take personal measures to decrease the amount you’re surveilled so that companies can’t get their hands on your data and your wallet.

Many states in the US also have privacy laws you can take advantage of. In California, the major privacy legislation is known as the California Consumer Privacy Act (CCPA). Under the CCPA, you have rights, such as the right to delete data from brokerage sites. You even have data rights as a worker.

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Have you been the victim of surveillance pricing? You can also contribute to this effort by sharing your story. By sharing your experience, you can help lawmakers understand why they should support these bills to protect everyday people.