Congress introduces bill to ban AI surveillance pricing • The Register

Two Democratic members of Congress, Greg Casar (D-TX) and Rashida Tlaib (D-MI,) have introduced legislation in the US House of Representatives to ban the use of AI surveillance to set prices and wages.

During Delta’s Q2 earnings call last week, Delta’s president Glen Hauenstein said that the airline has already rolled out AI-controlled dynamic pricing for 3 percent of its customers and is aiming to have 20 percent of fares set using the system by the end of the year. Software biz Fetcherr supplies the pricing code to Delta and others in the industry, including Virgin Atlantic and WestJet.

“We’re in a heavy testing phase. We like what we see,” he told analysts. “We like it a lot, and we’re continuing to roll it out, but we’re going to take our time and make sure that the rollout is successful as opposed to trying to rush it and risk that there are unwanted answers in there.”

Delta’s move is nothing new. Many companies adjust prices depending on circumstances – the business plan for ride-hailing apps, for instance, is built around the idea that peak demand leads to peak prices. Supply and demand is a fundamental part of current economic thinking. Software that munges massive amounts of data just makes that process more efficient and instantaneous.

Nevertheless, the use of AI sparked an outcry, and politicians took interest. The new legislation, the Stop AI Price Gouging and Wage Fixing Act, wants to ban the use of advanced AI systems to analyse personal data in setting prices and wages.

“Giant corporations should not be allowed to jack up your prices or lower your wages using data they got spying on you,” said Casar. “Whether you know it or not, you may already be getting ripped off by corporations using your personal data to charge you more. This problem is only going to get worse, and Congress should act before this becomes a full blown crisis.”

The representatives want the FTC, the Equal Employment Opportunity Commission, and individual states to enforce the rules of the bill. The legislation would also allow private citizens to take action against companies using such practices.

In January, the FTC issued a staff report indicating that so-called “surveillance pricing” is already occurring across some sectors, and may be expanding. The agency found that companies are adjusting prices based on factors such as browser type, device used, location, shopping history, and inferred personal characteristics, including wealth.

“The FTC should continue to investigate surveillance pricing practices because Americans deserve to know how their private data is being used to set the prices they pay and whether firms are charging different people different prices for the same good or service,” said the outgoing FTC Chair Lina Khan.

The FTC offered a hypothetical example in which a consumer profiled as a new parent could be shown higher-priced baby thermometers, since they were less likely to own one already. The agency found that at least 250 companies were working with pricing intermediaries using such techniques, and that these firms often rely on data from brokers and other third-party sources.

“Armed with extraordinary access to personal information, corporations are using opaque algorithms to set prices based on perceived individual need, which often means higher costs for essential goods,” said Lee Hepner, senior legal counsel at the American Economic Liberties Project, which supports the legislation.

“Grocery prices have risen 26 percent since the pandemic-era explosion of online shopping, dovetailing with new technology designed to squeeze every last penny from consumers. Federal lawmakers should join this effort to restore fair, transparent, and predictable pricing.”

The FTC voted 3-2 to continue studying the issue, with both Republican commissioners voting against. Commissioner Andrew Ferguson, the newly appointed head of the regulator, was quite firm [PDF] in his rebuttal, saying more study of the issue is needed. Meanwhile, Republicans hold the House and the Senate, suggesting the legislation has little chance of passage. ®