What is surveillance pricing and how is California trying to stop it?
Are you paying more than your neighbor for that backpack online? Consumer advocates say you can, all because of surveillance pricing.
As a mom to three kids, I shop a lot, and it's usually done online. I didn't really know how surveillance pricing works until I believed that I had become the target of what consumer advocates say is a deceptive practice that could soon become illegal in California.
"Surveillance pricing is when you are charged based on your personal data and your personal whereabouts," Consumer Watchdog President Jamie Court said. "Information that is known about you based on electronic surveillance by a company."
Court added that companies will use data such as where you live, how often you shop online and how much you spend.
"Then, they charge you a price based on that data, and their algorithm determines how ready you are to buy a product," Court said. "And if you're more ready, they'll charge you a higher price, and if you're less ready, they'll charge you a lower price."
It's something I believe I experienced while I was shopping for a swim backpack for my daughter online. I had been googling the item she wanted for days from my cellphone. One evening, I happened to be on my laptop, when I found the cheapest price yet on Amazon.
Since I have the app on my phone, I tried to switch devices to make the purchase, but when I did, the price suddenly jumped up by $7. I thought it must have been a mistake, so I emailed the link to myself and viewed it on my laptop. There were still two different prices on two different devices at the same exact time.
Court said the companies knew that I shop more on my cellphone than my laptop.
"Absolutely. If they see you put something in your cart and come back, the price will go up," he said.
When I reached out to Amazon to confirm if the company uses surveillance pricing, a spokesperson said they could replicate my claim.
"We investigated and were not able to replicate the reporter's claim," a spokesperson said. "Our prices change as we match competitors' low prices, offer deals to save customers money, or as independent sellers choose to update their own prices."
Just last week, a bill targeting surveillance pricing moved forward in the California State Assembly.
"Essentially, it bans surveillance pricing and says that there will be a remedy that can either be used by a private person or a public attorney to be able to go after and stop somebody that is guilty of surveillance, pricing as we're defining it," said Assemblyman Chris Ward, who authored the bill.
Ward said he's unsure how widespread the practice is.
"We know that it happens," he said. "In fact, every time someone tries to test it like maybe an incident of you being treated differently than other consumers out there, it's possibly traced back to your IP address.
Last December, Consumer Watchdog released a report on surveillance pricing and provided examples of how it works.
We know Orbitz charged people who were Mac users more because they know they could pay more," Court said. "We know Booking.com charged people in places that weren't as affluent less for their airfare because they knew they weren't willing to pay."
Ward cites research by corporate analysis company McKinsey, which found that retailers can increase their revenue by 2% to 7% based on how they set their prices. Last year, the FTC issued orders to eight companies seeking information on how they set their prices and whether they use consumer data to set them. McKinsey was one of those companies.
"As technology is evolving so fast around us, we need to make sure that our state code keeps up with the definitions that define what is a part of our everyday experience right now," Ward said. "To make sure that people are better protected and can have a fair price."
Court said that there are some ways to evade surveillance pricing, but they aren't foolproof. Using a private web browser, clearing the cookies in your search history and checking the price on multiple devices could help. It's even better if you have a friend or relative in a different ZIP code. However, consumer advocates said the only way to control it is through a ban.
"Your data should not be used against you," Court said.
Though the FTC took up the issue last year, it appears the current administration has abandoned the investigation at the federal level.
Orbitz was purchased by Expedia after allegations of surveillance pricing.
"Regarding CA state bill AB 446, we are working with aligned business interests and policymakers to maintain consumer protections while also ensuring Californians have access to discounts and promotions," Expedia said in a statement. "While this conversation is ongoing, we're grateful to see erroneous references to online travel agencies will be removed from the draft legislation."
