Seattle targets "AI-assisted price gouging" at grocery stores
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Seattle is set to become the first U.S. city to ban grocery stores from using personal data to charge customers different prices for the same items, according to Consumer Reports.
Why it matters: Supporters of the ban say companies are using algorithms to charge shoppers different prices, driving up costs for some without their knowledge.
- Opponents argue the new rules will keep retailers from offering individually tailored discounts.
Zoom in: Seattle's ordinance, which the City Council approved last week, bans "algorithmic-based price discrimination" by grocery store chains and grocery delivery services.
- The goal is to "prevent AI-assisted price gouging" and "ensure fair discounts for everyone," City Councilmember Alexis Mercedes Rinck said at a council meeting last week.
- The measure applies to online prices and personalized discounts used in stores. It also covers personalized pricing through electronic shelf labels or other in-store technology.
Seattle's policy follows similar state laws passed in New Jersey, Connecticut, Maryland and New York.
The big picture: According to the Federal Trade Commission, data like a person's browser history "can be frequently used to target individual consumers with different prices for the same goods and services."
- The FTC raised concerns about the practice in a proposed policy statement last month, saying it can constitute an unfair or deceptive act.
Separately, Consumer Reports and Groundwork Collaborative investigated what they called "AI-enabled experiments" with grocery prices on Instacart last year.
- They found prices varied as much as 23% between customers at the same store.
- At a Seattle Safeway, the same cart of groceries ranged from $114.34 to $123.93.
- Instacart said it has since stopped letting retailers run those kinds of pricing tests on its platform.
Consumer Reports also found Kroger builds detailed customer profiles and uses customer data to personalize discounts.
What's inside: Seattle's ordinance bans price variations like the tests that occurred on Instacart, which the company said were done at random.
- It also bans setting different prices based on data such as customers' behavior, location and demographic characteristics. That could include data acquired from third parties or collected using surveillance technology, such as software or cameras.
- The rules apply to grocery chains with at least 20 stores globally, as well as to grocery delivery and online ordering services.
Yes, but: The ordinance still allows some price differences, such as those based on delivery costs, as well as discounts for broad groups of customers (such as seniors or students).
- Loyalty programs can also offer discounts based on purchase history, but only to groups of customers — not individualized prices — and can't use that history to infer a customer's willingness to pay.
What they're saying: People "don't want their data fed into algorithms that decide how much they pay at the grocery store," Mayor Katie Wilson said in a news release.
- "Everyone deserves transparent pricing and equal treatment, not hidden systems that charge some shoppers more than others."
The other side: The Washington Retail Association says it agrees that personal shopping data shouldn't be used to raise prices but argues Seattle's policy will make it harder for stores to offer tailored discounts.
- Customers may be surprised "when their personalized discounts and loyalty programs disappear due to the new regulations," Jan Himebaugh, the organization's president and CEO, said in a written statement.
What's next: Wilson plans to sign the ordinance into law in early October, according to her office.
- The new rules would then take effect Sept. 1, 2027.