Key Takeaways:
- Surveillance pricing differs from dynamic pricing because it uses personal data such as browsing history, location, and past purchases to set individual prices, rather than adjusting for overall demand.
- An FTC study found surveillance pricing can raise company profits by up to four percent, while a 2025 Consumer Reports analysis estimated the practice could cost shoppers as much as $1,200 a year.
- At least thirty states have considered algorithmic pricing legislation, and Maryland lawmakers approved the first state ban on surveillance pricing, covering grocery retailers, in April 2026.
AI is supposed to make our lives easier, enhance product discovery, and speed up the shopping experience. As it works toward these goals, it is also transforming how retailers adjust online pricing, tailoring costs to individual customers based on their browsing behavior, purchase history, and demographic data. While this practice can create competitive advantages for businesses, it has also raised important questions about fairness, transparency, and privacy.
What Is the Difference Between Dynamic Pricing and Surveillance Pricing?
Dynamic pricing adjusts prices based on demand, inventory, timing, or location, a practice airlines and hotels have used for decades. Surveillance pricing goes further by using data tied to an individual shopper, including browsing history, location, and demographic profile. One method focuses on market conditions. The other reflects assumptions about what a specific person will pay.
Why Digital Price Tags Are Making Shoppers Uneasy
According to a Gartner Consumer Community survey, 68% of respondents expressed discomfort with pricing that could vary by shopper or time of day. Lack of transparency is a key issue, with customers unsure whether they’re getting a fair deal compared to others. Privacy concerns also play a role, as these systems often rely on detailed behavioral data to determine prices.
An FTC 6(b) study launched in July 2024 determined that surveillance pricing can increase company profits by as much as four percent, offering retailers a measurable financial incentive to adopt this strategy. However, the practice comes at a notable cost to consumers. A 2025 Consumer Reports analysis estimated that personalized pricing based on behavioral data could lead shoppers to spend up to $1,200 more annually than they would under standard pricing practices. As digital price tags become more common, calls for clearer regulations and greater retail transparency are growing.
What Data Do Retailers Use to Set Individualized Prices?
That same FTC study found that pricing intermediaries examine location, purchase history, abandoned shopping carts, browsing behavior, and even mouse movements on a webpage. The agency’s research included a hypothetical in which car dealers could identify a “first-time car buyer” and target that shopper with specific financing rates, trade-in discounts or service offers. The breadth of data involved means retailers can build detailed behavioral profiles before a price ever appears onscreen.
The FTC has since said that failing to disclose how personal data shapes an individualized price could violate consumer protection law. That is not a ban on price changes. It is a transparency requirement when personal information determines what a shopper sees.
“When consumers see a listed price, they expect it to be same price that everyone else sees, not the retailer’s estimate of how much they are willing to pay based on their personal data,” said FTC Chairman Andrew Ferguson. “The FTC does not have the legal authority to ban personalized pricing in all circumstances, but businesses that fail to tell consumers how their personal data is being used to set a price may be in violation of the FTC Act and other laws we enforce.”
Why Is Maryland’s Surveillance Pricing Ban Significant?
In April 2026, Maryland lawmakers approved HB 895, the Protection From Predatory Pricing Act, which bars grocery stores and their third-party partners from using personal information or protected-class data to set individualized prices. Violations count as unfair or deceptive trade practices under the Maryland Consumer Protection Act, with civil fines starting at $10,000. The law applies specifically to the grocery sector and is described as the first of its kind in the United States.
New York also passed a law in November 2025 requiring retailers to disclose when they use AI or personal information to set prices. A bill to ban surveillance pricing outright was introduced there in January 2026 and remains in early stages. California Attorney General Rob Bonta launched a separate investigation into surveillance pricing that same month. Retailers, meanwhile, argue that tools like electronic shelf labels mainly save labor on manual price updates rather than target individual shoppers. At least thirty states have considered algorithmic pricing legislation so far, and it remains to be seen whether these laws will set a precedent that expands all the way to ecommerce stores.
The Bottom Line on AI Pricing and Consumer Trust
The debate over AI personalized pricing centers less on whether prices change and more on whether shoppers know why. As state laws tighten and federal scrutiny continues, retailers face a choice: compete on price alone or disclose the data behind each offer.
(Note: AI assisted in summarizing the key points for this story.)