A new law expected to take effect next year prohibits New Jersey grocery stores from setting prices based on a given shopper’s personal information.
The Fair Price Protection Act aims to prohibit price monitoring that discriminates against individual customers using personal information such as their purchasing history or online activity.
“New Jersey families are already feeling the pressure of higher costs,” Gov. Mikie Sherrill said in a statement. “The last thing they need is companies secretly using their personal data to charge them more than anyone else for the exact same product.”
Penalties for retailers could include fines of up to $10,000 for a first offense, $20,000 for subsequent violations and the possibility of cease and desist orders and the assessment of punitive damages.
The law also includes a provision that suspends new electronic labels for a year while the state studies their effect on monitoring prices.
Two other states, Maryland and Connecticut, have recently passed laws intended to protect consumer privacy, particularly regarding food prices. Other states, including New York and California, are considering similar new laws. Last year, New York state established rules requiring companies to disclose to customers when they set prices based on algorithms.
What constitutes monitoring pricing
Some state laws have focused on algorithmic pricing, which could include companies using AI to coordinate price setting, which is the subject of a lawsuit in California over gas prices. This is more like what people call price gouging, in which a company like Uber can raise its prices when the roads are busy and demand for its services is high.
However, price monitoring generally means that a retailer has personal information about its customers, for example through a loyalty or discount program, which it uses to set different prices for different shoppers.
According to the Electronic Privacy Information Center, personal data and market data are used by retailers to determine the highest price a customer is willing to pay, resulting in higher prices.
“This undermines consumers’ expectations of fairness and may constitute a violation of the National Consumer Protection Act,” EPIC said on its website. “Price differences can also discriminate on the basis of protected characteristics, such as race and gender. »
The Federal Trade Commission has investigated these types of practices. In a price monitoring report last year, the FTC found that companies could choose which customers have access to discounts in order to entice infrequent shoppers to make purchases.
Separately, Consumer Reports found that AI price experimentation can lead to hundreds or even thousands of dollars higher grocery bills for customers using services like Instacart.
In a statement on the New Jersey law, EPIC applauded the action but noted that more needs to be done, including “expanding the scope of the law beyond the grocery store context, narrowing the law’s exemption for loyalty programs, and clarifying certain key definitions.” »
