MINNEAPOLIS – As more retailers introduce AI-powered technology into their stores, such as charging different customers different prices for the same product, union leaders and lawmakers are starting to push back.
Retail chains have long had different prices at different stores. But with the help of AI, companies are experimenting with more data-driven pricing, and technology is also being developed that can adjust prices based on factors like location and loyalty data as shoppers move through the aisles.
The practice, known as surveillance pricing, has led lawmakers in Minnesota and across the country to propose legislation aimed at curbing what they call “predatory pricing.”
The proposed bill also touches on electronic shelf labels (ESLs), which are digital price tags that update in real time rather than having employees replace paper tags.
Walmart has already begun installing ESLs in states including Minnesota. Retailers and others say they don’t use supervised pricing, but other forms of dynamic pricing are becoming more common.
Retailers say digital price tags can benefit both stores and shoppers. By automating time-consuming tasks like replacing paper tags, companies can free up employees to serve customers and keep shelves stocked more efficiently.
But leaders of United Food and Commercial Workers (UFCW) locals 663 and 1189, as well as DFL lawmakers, are skeptical.
“We want businesses to believe that ESL will only help their customers,” Diana Tastad-Dahmer, secretary and treasurer of UFCW 1189, said Wednesday at a news conference at the state Capitol. “With supervised pricing and ESL powered by AI, mass data collection, and automation, consumers won’t stand a chance, and they won’t be alone. Workers will suffer, too.”
The bill’s sponsors, Rep. Samantha Censor-Mura and Sen. Lindsey Port, said in a statement to the Minnesota Star Tribune that voters have expressed concerns about affordability and regulation of AI.
“All I hear is that they want us to focus on affordability and are concerned about large-scale technological surveillance of our purchases,” Sensa Mura said.
Union leaders say the shift could ultimately lead to staffing cuts and changes to the nature of jobs at grocery stores, while also opening the door to pricing models common in industries like airlines and ride-hailing services, where prices fluctuate based on demand.
Lena Wong, president of UFCW 663, said, “Prices are not improving. Shopping experience is not improving. Only revenue is improving.”
Electronic shelf labels are legal in all states in the United States. New York state requires companies to disclose when they use personal data to set prices, but does not prohibit monitored pricing.
Similar proposals have been introduced in several states, including New York, Washington and Arizona, as part of a broader national campaign launched by UFCW earlier this year.
Walmart said digital shelf labels will help customers.
“The price updates are people-driven and support Walmart’s Everyday Low Prices promise,” the Arkansas-based company said in a statement. “Prices are the same for all customers at every store and are consistent regardless of demand, time of day or shopper.”
Spokespeople for Lunds & Byerlys and Cub Target said their stores do not use technology or pricing techniques that would be covered by the law. Hy-Vee did not immediately respond to a request for comment.
Sensel Mulla said the bill is proactive and responsive to the changes lawmakers and unions are seeing in grocery stores across the state.
“Maybe true surveillance pricing hasn’t really taken off in a big way in Minnesota. Maybe electronic shelf labeling hasn’t taken off in Minnesota yet. So let’s do what we can while we still can to stop these companies from going after us,” she said at a news conference.
Jenny Winkels, Super One Foods price coordinator in Two Harbors, said customers are already concerned about affordability, and being able to change prices based on shoppers only exacerbates those concerns.
He added that by banning the use of ESL and monitored prices, customers can be assured that “the price of milk on Monday will remain the same the next morning.”
As AI and electronic shelf labels become more widespread, there are growing concerns about price hikes on grocery store shelves. However, recent academic research suggests that these concerns may be overstated.
The study, which analyzed hundreds of millions of transactions across more than 100 Walmart and Kroger stores, found there was “virtually no” evidence of real-time surge pricing before and after the introduction of digital labels.
The researchers conclude that the complexity of food pricing, which involves thousands of products, supplier contracts, and long-term planned promotions, makes it difficult to implement rapid price changes.
Instead, we’re seeing digital labels used more often to improve efficiency, reduce labor costs, and lower prices on expiring items.
Pat Garofalo, president of the Minnesota Grocers Association and a former Republican state lawmaker, wrote in an email comment that banning ESL is “the 21st century equivalent of candlestick manufacturers trying to ban light bulbs.”
He added that the technology reduces waste from paper tags and reduces pricing error rates.
Dynamic pricing, also known as surge pricing, adjusts prices based on a wide range of market factors such as demand, inventory, and competitor pricing. For example, stores in different suburbs or states may charge different prices, and online prices may vary as well.
Supervised pricing, on the other hand, uses personal data such as browsing history, location, device type, and behavior to set customized prices for individual consumers.
For example, when a shopper uses a retailer’s app to search for a product, it can tell them when they’re approaching a certain aisle. Akshay Rao, a marketing professor at the University of Minnesota’s Carlson School of Management, said electronic shelf labels could increase the price of Toll House cookies if the system determines that shoppers are less likely to compare options based on past buying habits.
“Surveillance pricing says, ‘I’m watching you, I know your past, and I’m setting prices based on my understanding of your willingness to pay,'” Rao said.
Dynamic pricing, the widespread practice of changing prices based on location, has come under scrutiny before in Minnesota. A 2019 KARE 11 investigation found that Target’s app was displaying higher prices when customers were in or near the store, prompting the retailer to update how it displayed prices.
More recently, a Consumer Reports investigation found that Instacart used AI tools that allowed retailers to change prices for each customer. The company later announced it would no longer offer technology that allows grocery stores to charge different prices to different shoppers for the same item at the same time.
Senate Majority Leader Erin Murphy said the ban on monitored pricing is about fairness.
“If my neighbor and I go to the same store on the same day and stand in the same aisle, the bananas should cost the same,” Murphy said. “What we are learning from the coverage of monitored pricing is that regardless of the price of bananas, we are not harming those who have money to spend on bananas, but rather those who cannot tolerate ever-changing prices.”
It’s hard to know how monitor pricing is being used in Minnesota, but experts say it’s only a matter of time before retailers start adopting similar pricing strategies.
“Now, we don’t actually know if[price changes]are every second, every minute, every hour, or whether they’re tracking cell phone data, but if a store makes sense, they’ll do it, and if they’re not doing it now, they’ll do it someday because they’ll make money,” Rao said.
