Surveillance Pricing: The Hidden Price Tag of Your Online Habits

Most people are familiar with the concept of cookies and how websites use them to store our browsing history. However, many of us may not be aware that companies can use this information to charge us a higher price for the same product, simply because they think we're likely to pay it.

This practice is known as "surveillance pricing," and it's become a growing concern in California. According to Assemblymember Chris Ward, who has introduced a bill to prohibit surveillance pricing in the state, companies are using our personal data from our cell phones, IP addresses, and other online activities to manipulate prices.

"What we have found is a growing body of evidence where companies are being encouraged to use surveillance pricing, using your own personal data from your cell phone, from the IP address attached to your home computer, to modulate the pricing on goods and services that you pay," said Ward. "And that runs completely afoul to what we believe should be a direct, very basic consumer interest that you should pay the same price for the same product, regardless of who you are."

Ward, a San Diego Democrat, has no problem with stores giving discounts to students, seniors, and veterans. However, he believes that surveillance pricing is unfair and needs to be prohibited.

"We need standard pricing because that's the way we've always fairly operated as a consumer society," said Ward. "Make sure that surveillance pricing is defined in the law, because it's not defined in California code now. It's a new thing we have to keep up with the times and make sure that it is prohibited."

Surveillance pricing has been the subject of an FTC investigation last year, and there are many documented cases of this practice.

One reported case showed hotel owners charging a customer from Kansas City $200 more per night than a customer from San Francisco Bay Area, simply because of their IP address. Another example allegedly constituted fraud, with Target accused of increasing the price on an item after using GPS to track the customer's smartphone.

"There is just so much information a company can have on you, whether they directly collected it or bought it, that they can basically hack your mind," said Justin Kloczko, tech and privacy advocate for Consumer Watchdog. "They are preying on your impulses and your desires."

Some business trade magazines have enthusiastically encouraged retailers to use personalized pricing, citing the benefits of using consumer data to offer more tailored prices.

"The vast pool of consumer data is a game-changer," wrote one article in a business magazine. "Retailers can use this data to create a truly personalized experience for their customers."

However, Chris Ward and others argue that surveillance pricing can prey on people in poorer neighborhoods, as companies may increase prices at stores located far from these areas.

"If they are farther away from some stores and it's a lot harder to get certain products, companies know this and they are increasing the prices for some products at those very stores because you don't have as many options," said Ward.

Ward's staff has informed that his bill, AB 446, will soon be heard by the California Assembly's privacy committee.