California lawmakers seek to stop surveillance pricing

SACRAMENTO, Calif. (CN) — A new version of redlining has arrived.

Redlining — denying financial services to minority neighborhoods — has existed for decades. It’s now got a new face in the form of predatory pricing, a system some retailers use that charges people more based on their personal information.

“Many of you remember redlining,” said California Assemblymember Liz Ortega, a San Leandro Democrat, as she discussed the legislation she co-wrote.

Assembly Bill 446 would prohibit basing a product’s price off someone’s personal information, like products and services they’ve previously bought or geolocation, that’s revealed through electronic surveillance technology. Violators could face civil penalties.

Ortega at a Thursday press conference gave the example of a new parent searching for diapers online. They find the cheapest price and drive to the store, only to find the item now costs $10 more.

In that example, an algorithm gave information to the seller about the parent’s immediate need for diapers and led to the price increase.

The practice isn’t only theoretical, said Assemblymember Chris Ward, the bill’s main author. It’s already happening.

The Democrat pointed to a $5 million settlement in 2022 against Target in his home of San Diego County. Prosecutors discovered some prices on the store’s website and app changed, with no clear disclosure of that switch, once someone entered a store’s perimeter. In one case, the price of a television jumped by $100 when the purchaser entered the store.

“Companies are using what they know about you … to decide how much to charge you,” Ward said.

He listed more real world examples in his bill. A travel website charged Macintosh computer users more to stay at a hotel than their non-Mac counterparts. One retailer charged more for a stapler, if it knew the buyer had fewer options for their staple needs.

According to Ward, the Federal Trade Commission has looked into this price gouging.

“But sadly, I don’t have the confidence that this will continue under the new administration,” he added, referring to President Donald Trump.

The legislation is sponsored by Consumer Watchdog and the United Food and Commercial Workers.

Kim Stone, speaking on behalf of Consumer Watchdog, said people have the right to pay the posted price of an item, whether in a store or online.

“Companies are using our data against us,” she said.

In some cases, it’s known what factor a retailer uses to impose higher prices. However, in the example of a ride-hailing service, it’s unknown. Stone theorized one example could have been based on an individual’s remaining cellphone battery power.

Amber Parrish, executive director of the United Food and Commercial Workers Western States Council, said her members face customer backlash over predatory pricing. Retailers are working overtime to learn all they can about consumers. They already have the tools to change prices in real time. Without legislation like Assembly Bill 446, Parrish said prices will keep rising.

“It is online, it is happening in person in stores,” Ward said.

It’s also led other California lawmakers to introduce similar legislation.

State Senator Aisha Wahab, a Silicon Valley Democrat, introduced Senate Bill 259. Not fully fleshed out yet, the bill calls for banning algorithmic pricing that would target a group of consumers based on their personal data.

Wahab also introduced Senate Bill 384. That bill would prohibit businesses from using a price-fixing algorithm when setting prices for goods or services.

State Senator Melissa Hurtado, a Bakersfield Democrat, wrote Senate Bill 295. It would, among other requirements, impose a duty to people making over $5 million in annual revenue, and who use a pricing algorithm, to inform customers of its use before a purchase is made.