As algorithmic data analysis grows more sophisticated and companies amass an increasing amount of data on their customers, watchdog groups and lawmakers are raising alarms. Retailers are increasingly able to crank out ultra-targeted, individualized pricing that can vary based on personal data, a practice that’s been dubbed “surveillance pricing.”

Consumer advocates warn that retailers armed with algorithmic technology and insights into your individual shopping habits, history and behaviors could make price tags meaningless. AI-assisted programs are getting better at determining exactly how much you would personally pay for an item at a particular time.

Especially as more people use e-commerce platforms or apps to order groceries and other everyday items, big retailers aren’t constrained by paper price stickers anymore, which means they can change prices almost instantaneously. “The question is whether we do it opportunistically or whether we’re fair about it,” says food industry analyst Phil Lempert.

Dynamic pricing, from airfares to Amazon

Big e-commerce platforms such as Amazon have engaged in continual, real-time pricing changes for years, and companies use anonymized and aggregated data to build increasingly complex customer profiles.

For example, airlines use these systems to extract the maximum profit from customers like last-minute business travelers. In the case of airfares, travelers learned to book early or pay up; on the flip side, consumers waiting until the last minute to book can sometimes score great deals if a hotel, airline or event overestimates demand.

“By allowing dynamic pricing, it really improves the economic efficiency,” remarks Z. John Zhang, a professor of marketing at the University of Pennsylvania’s Wharton Business School. Zhang says companies need to do a better job of emphasizing that dynamic pricing can sometimes work in shoppers’ favor.

“I think there are a lot of misconceptions out there that when you’re doing dynamic pricing you just want to squeeze customers,” he notes. “They totally ignore the fact that prices may actually go down.”

But the prospect of using people’s personal data — potentially including the use of facial recognition technology — to set individualized prices has raised hackles, especially when it comes to grocery prices already driven higher by inflation.

Watchdog group investigation raises red flags

Grocery prices are up by 3.2% from a year ago, and some items have seen much sharper jumps, like a whopping spike of roughly 40% in the price of tomatoes and a nearly 15% jump in the price of beef compared to a year ago. Shoppers have to consider the price of everything that goes in their shopping bag — or, for a growing number of purchases — their online cart.

That gets harder to do when shoppers don’t know how much they’re going to pay. When consumer-advocacy nonprofit Consumer Reports spearheaded an investigation, it found that several major supermarket chains on grocery-delivery platform Instacart charged people different prices for the same groceries, even when they were shopping the same store at the same time.

Consumer Reports said retailers including Albertsons, Costco, Kroger, Safeway, Sprouts Farmers Market and Target were conducting algorithmic pricing experiments, unbeknownst to shoppers. Prices for the same product varied by as much as 23%, which Consumer Reports estimated could drive up annual grocery costs for a family of four by as much as $1,200.

A few weeks after the news broke, Instacart announced it would no longer utilize these pricing practices, but the backlash was on.

A pair of Democratic senators from New Mexico and Oregon introduced a bill in February that would ban grocers from using technology to set individualized prices; it would require stores to disclose if they use facial-recognition technology and prohibit big supermarkets from using digital price tags. Companion legislation has been introduced in the House of Representatives, but its path forward in a Republican-led Congress is uncertain.

State lawmakers aren’t waiting for Washington, D.C., to act. To date, more than 50 bills in 26 states have been introduced that seek to limit, restrict or ban these practices and the technology that enables it, especially when it comes to essentials like food.

While loyalty programs have long offered special prices and targeted discounts for members, Lempert says, “This brings it to another level. I just think that it’s getting very scary for people.”

States propose surveillance pricing bans

In April, Maryland Gov. Wes Moore signed the first one of these state bills into law, and more are expected in the future. Maryland’s law, which goes into effect Oct. 1, 2026, prohibits algorithmic price-setting.

Many of these bills build on existing laws around consumer protections, particularly pertaining to privacy and data collection. Some are focused on informing consumers when their personal information is used by pricing algorithms, while others aim to regulate or restrict the use of this technology entirely.

A legislative guide for several of the new bills is New York’s Algorithmic Pricing Disclosure Act, which requires companies to notify customers when their personal information is fed into a price-setting algorithm. It defines personal information as “any data that identifies or could reasonably be linked, directly or indirectly, with a specific consumer or device.”

Many of the new bills limit or ban personalized, algorithm-calculated pricing entirely, and some also ban the use of facial recognition technology being used for pricing.

Like Maryland’s new law, much of this pending legislation is targeted specifically at surveillance pricing for groceries. People understandably resent the idea of opportunistic pricing on items people can’t go without, Lempert says.

“I have a choice about getting into an Uber or getting on a plane, but I don’t have a choice when it comes to my food,” he says. “I think that’s why were seeing such passion from consumers.”

The United Food and Commercial Workers union announced in April that lawmakers in Arizona, Nebraska, Oklahoma, Tennessee and Washington had adopted the supermarket union’s proposed legislative language to stop “the encroachment of AI-driven technology in grocery stores” by banning electronic shelving labels and the use of “unique characteristics” to set prices.

Walmart, the nation’s largest grocery retailer, currently has digital price tags in roughly 2,300 of its stores. In March, the big-box behemoth announced plans to roll out digital price tags in all its U.S. stores by the end of this year. The company said it won’t use the technology to implement dynamic pricing or collect customer data.

While savvy consumers have learned how to score deals on dynamically-priced items like airline tickets, expecting people to jump through hoops for breakfast cereal or burger meat generates resentment, Lempert says.

“It makes it more onerous for us,” he says. “This brings it to another level. I just think that it’s getting very scary for people.”