Two Democrats in Congress, Greg Casal (D-TX) and Rashida Tribe (D-MI), have introduced laws in the U.S. House of Representatives, banning the use of AI surveillance to set prices and wages.
During Delta's second quarter revenue call last week, Delta President Glenn Hauenstein said the airline has already rolled out AI-controlled dynamic pricing for 3% of its customers, and is aiming to use the system to set a 20% fare by the end of the year. Software Biz Fetcherr offers price codes to Delta and others in the industry, including Virgin Atlantic and Westjet.
“We're in a fierce testing phase. We like what we're seeing,” he told analysts. “We love it so much and we keep rolling it out, but we take the time to hurry it out and make sure the deployment is successful, rather than risking that there is an unnecessary answer there.”
The delta movement is nothing new. Many companies adjust prices according to the situation – for example, business plans for ride apps are built around the idea that peak demand leads to peak prices. Supply and demand are fundamental parts of today's economic thinking. Software that minifies huge amounts of data simply makes the process more efficient and instantaneous.
Nevertheless, the use of AI sparked protests and politicians were interested. The new law, the AI Price Gouging and Wage Amendment Act, wants to prohibit the use of advanced AI systems and analyze personal data in price and wage settings.
“Major companies shouldn't be allowed to jack your prices or use data that spies on you to lower wages,” Casar said. “Whether you know it or not, you may already be shattered by businesses using your personal data to charge you more with your personal data. This issue will only get worse and Congress should act before this becomes a completely blown away crisis.”
Representatives hope that the FTC, the Equal Employment Opportunity Committee and individual states will enforce the rules of the bill. This law allows private citizens to use such practices to take action against businesses.
In January, the FTC issued a staff report showing that so-called “surveillance pricing” was already occurring in some sectors and could be expanding. The agency found that companies adjust prices based on factors such as browser type, device used, location, shopping history, and estimated personal characteristics, including wealth.
“The FTC deserves to know how it is used to set prices that Americans pay, so we need to continue to look into supervisory pricing practices and know if companies charge different prices for different goods or services.”
The FTC provided a hypothetical example where consumers profiled as new parents could display a higher priced baby thermometer because they are unlikely to already own it. The agency found that at least 250 companies are working with pricing intermediaries using such techniques, and that these companies often rely on data from brokers and other third-party sources.
“Companies armed with extraordinary access to personal information use opaque algorithms to set prices based on the individual perceived needs, which often means that the cost of important products is high.”
“Since the explosion of online shopping in a pandemic era, explosion with new technology designed to squeeze the last penny from consumers, grocery prices have risen by 26%. Congressmen need to take part in this effort to restore fair, transparent, and predictable pricing.”
The FTC continued to investigate the issue by voting 3-2 votes, with both Republican commissioners voting against it. Commissioner Andrew Ferguson, the newly appointed director of the regulator, was extremely stiff. [PDF] His counterargument says that more research on this issue is needed. Meanwhile, Republicans hold the House and Senate, suggesting that the law has little chance of passing. ®
