New York State recently enacted a law addressing surveillance pricing – the practice of using customers’ personal data, such as browsing history, to determine different prices for each individual on the same product online.
The law requires retailers practicing surveillance pricing to add a “clear and conspicuous” disclaimer that states: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.”
There are several reasons why this is a necessary bill. First, nobody wants to pay extra for no reason. Second, on an economic level, surveillance pricing destroys the trust between businesses and consumers. Finally, allowing surveillance pricing to go unregulated allows use of artificial intelligence, which is already barely regulated, to run free, potentially ripping off more people.
Stephanie Martz, chief administrative officer of the National Retail Federation, said that she wished she “understood what harm exactly lawmakers think they are solving.”
To answer Martz’s question, the primary reason bills like this are necessary is that consumers will be forced to pay more. Ignoring the broader effects of letting AI go unregulated, nobody likes being ripped off.
According to a Capital One survey, an estimated 84.3% of Americans shop online. That’s 288 million Americans who are vulnerable to AI pricing.
Chad Yoes, co-founder of Waypoint Retail, told The New York Times that the pricing bill was “going to start breaking trust between retailers and consumers.”
He also believed that “the use of personalized pricing was far more widespread on social media apps than on retail sites.”
Even if this were true, it doesn’t change the fact that consumers are still paying more for things they shouldn’t.
His statement about the breaking of trust is also odd. The trust between a business and its consumers is broken due to consumers believing that the business is doing something wrong.
This implication suggests his quote is in reverse – surveillance pricing itself is what’s breaking the trust between retailers and consumers, not the disclosure of it. Consumers must be aware of the business’s practices. It’s better that this law forces this transparency, regardless of the results, rather than continuing to allow surveillance pricing to exist in secret.
Finally, and most importantly, allowing surveillance pricing to go unregulated has a shared impact across the rest of the AI sphere. Currently, there is no federal regulation on AI. While there are several regulations progressing on the state and city level, oversight by the federal government as a whole is lacking.
This means that the job falls onto the states to get regulation done. If lawmakers in other states do not follow New York, predatory practices like surveillance pricing could run rampant and exploit consumers.
This isn’t a problem solely applicable to retailers: setting the precedent that AI can go unregulated opens new avenues for its exploitation in settings outside the economic sphere.
At the end of the day, however, this bill is just a disclosure; it does nothing to stop the practice of surveillance pricing itself.
This bill sets the precedent that AI cannot go unregulated, and it makes it clear to retailers that the government does not condone exploitation of consumers using predatory AI practices. Even though it accomplishes little in a practical sense, this bill signals the state’s first steps at regulating AI use to protect consumers.
