A new law that goes into effect next year prohibits grocery stores in New Jersey from setting prices based on any personal consumer data.
The Fair Price Protection Act aims to outlaw price surveillance that discriminates against individual customers by using personal information such as their purchase history or online activity.
“New Jersey families are already feeling the pressure of higher costs,” said Gov. Mikie Sherrill in a statement. “The last thing they need is companies secretly using their data to charge them more than anyone else for the same product.”
Penalties for retailers can include fines of up to $10,000 for the first offense, $20,000 for subsequent violations and the power to cease and desist orders and the assessment of punitive damages.
The law also includes a provision that freezes electronic shelf labels for a year while the state studies their effect on price surveillance.
Two other states, Maryland and Connecticut, have recently enacted laws aimed at protecting consumer privacy, especially when it comes to grocery prices. Other states including New York and California are considering similar new laws. Last year, New York state enacted laws requiring businesses to disclose to customers when they set prices based on algorithms.
What is included in the price of surveillance
Other state laws focus on algorithmic pricing, which could include companies that use AI to coordinate price fixing, which is the subject of a lawsuit in California over gas prices. That’s very close to what people know as surge pricing, where a company like Uber might raise prices when the roads are busy and demand is high for its services.
Price surveillance, however, usually means that the seller has personal information from his customers, such as through a loyalty or discount system, which he uses to set different prices for different buyers.
According to the Electronic Privacy Information Center, personal data and market data are used by marketers to determine the highest price a customer is willing to pay, resulting in higher prices.
“This undermines consumers’ expectations of fairness and would amount to a violation of federal consumer protection law,” EPIC said on its website. “Price differences may also discriminate on the basis of protected characteristics, such as race and gender.”
The Federal Trade Commission has been investigating these types of practices. In a price watchdog report last year, the FTC found that companies may pick and choose which customers have access to discounts to encourage infrequent shoppers to shop.
Separately, Consumer Reports found that AI price checks can lead to hundreds or thousands of dollars in higher grocery bills for customers using services like Instacart.
In a statement about the New Jersey law, EPIC applauded the action but pointed to more that needs to be done, including “expanding the scope of the law beyond the grocery store context, narrowing the law’s exemption to loyalty programs, and clarifying other important definitions.”
