Gov. Wes Moore Claims Maryland Banned Surveillance Pricing for Groceries. It Didn't.

The new law is riddled with loopholes, exemptions, and other problems.

Credit: iStock/Amy Sparwasser

By Pat Garofalo, Director of State and Local Policy and Lee Hepner, Senior Legal Counsel

Gov. Wes Moore recently appeared on the Bill Maher Show, where he proudly claimed, “We made Maryland the first state in the country that now bans price gouging and price manipulation, so when you go into a supermarket, they can’t use your data against you when you go to the checkout counter.”

He’s talking about Maryland’s so-called Protection Against Predatory Pricing Act, which purports to ban a practice known as surveillance pricing in the grocery industry. But in practice, it does no such thing. Governor Moore signed the bill this week, over the objections of consumer, labor and small business advocates, legal experts, academics, and policymakers who have spent years working to stem the tide of retail price discrimination. .

Surveillance pricing is the practice of corporations using personal information, including browser histories, social media activity, and location tracking, to set individualized prices based on a prediction of the highest price a consumer is willing to pay for something. Across industries, consumers wind up paying more for goods and services simply due to some data point the seller knows about them or their life circumstances.

Imagine two neighbors logging onto the same big box store delivery app at the same time to buy the same package of toilet paper. One has a history of buying whatever she needs quickly, because she has a toddler and no time to shop around. The other tends to abandon her cart when prices go up. The algorithm knows this. So it charges the first person more, not because the toilet paper costs more to deliver or because of supply and demand, but because the data says she’ll pay more. Or imagine a parent seeing higher prices for a thermometer because their data shows they likely have a sick child at home and need it immediately.

Findings from a Federal Trade Commission survey released last year found that clients of third-party surveillance pricing software include grocery stores, apparel retailers, health and beauty retailers, home goods and furnishing stores, hardware stores, travel firms, and department stores. FTC staff found that “consumer behaviors ranging from mouse movements on a webpage to the type of products that consumers leave unpurchased in an online shopping cart can be tracked and used by retailers to tailor consumer pricing.”

Contrary to Moore’s assertion, this is less about the checkout counter at an actual grocery store (though QR code price tags and required in-app purchasing are adapting to make in-person surveillance pricing more prevalent) and more about online commerce, where it’s possible to collect massive profiles of individuals, and prevent them from knowing that they’re being charged a different price than everyone else as they move across the web.

Maryland’s bill suffers from several problems that will render it ineffective – and it only applies to groceries and grocery-delivery, leaving a wide swathe of the economy untouched.

First, in a huge red flag, it allows surveillance pricing as long as a corporation claims a shopper “consented” to receiving the price, despite decades of research showing that consent policies don’t meaningfully prevent corporate abuse. Next, it exempts all “promotional offers,” undefined “temporary discounts,” and reduced prices even when – and this is the crucial point – a previous, higher price is not listed anywhere.

The great peril of surveillance pricing is it creates a world in which there’s never a baseline price from which a “sale” or “discount” is determined, because prices are constantly shifting and are tailored to each individual. Under the bill, sellers would be free to create fantasy-land higher prices no one pays, “discount” every price from those fake ones, and engage in as much surveillance pricing as they’d like.

But that’s not all. The bill exempts any loyalty program, even those built to scam customers into thinking they’re paying less when they’re not. It exempts all subscription-based pricing, a growing and increasingly scam-ridden part of the economy.

Finally, the bill would prevent individual consumers from suing when harmed by an exploitative price hike, though such suits are a fundamental tool for deterring illegal conduct. Not only does the bill block individual suits under the new law itself, it blows a hole in the state’s Consumer Protection Act, which might otherwise be brought to bear.

To be clear, well-crafted surveillance pricing bans exempt fair, transparent discounts and loyalty programs that actually provide a reduction from a previously listed price. They don’t ban coupons, matinee prices, or clearance sales, or generalized discounts for seniors, students, or veterans. In fact, they affirmatively protect discounts from becoming vehicles for discrimination, and ensure consumers know discounts are actually real.

There are plenty of bills in the more than 20 states where legislators introduced surveillance pricing restrictions this year that correctly balance eliminating unfair, invasive pricing tactics and preserving traditional discount mechanisms. Maryland’s simply isn’t one of them.

It’s clear the bill was influenced by industry insiders who were happy to see legislation pass that allowed them to continue business as usual, while enabling politicians to claim a win, and it’s being cheered by advocates representing the dominant tech firms.

That’s not to say that Maryland lawmakers can’t come back next year and close some of these loopholes - by making sure that loyalty programs don’t arbitrarily decrease the redemption value of reward points, or by making sure that discounts are tethered to a fixed price. Lawmakers might also put up guardrails so that major retailers like Walmart aren’t changing prices every 10 seconds.

But Marylanders shouldn’t be fooled by lawmakers more concerned with declaring victory than delivering real policy solutions. As lawmakers in other states - and federally - seek to reign in the very real problem of surveillance pricing, we should demand real solutions. Otherwise Maryland risks becoming the standard instead of a cautionary tale.