If consumers are wondering why they’re paying higher prices for certain items at major retailers and grocery stores, it might be due to “dynamic pricing,” a practice that uses artificial intelligence and other data to increase costs. Maryland legislators have passed a bill to become the first state to ban the practice.
“And I can’t wait to sign it,” Gov. Wes Moore said of the new legislation in an April 14 post shared on X, formerly Twitter.
Moore initially introduced the Protection from Predatory Pricing Act in January, according to a news release. The bill aims to prohibit “a food retailer and a third-party delivery service provider from engaging in the practice of dynamic pricing or using consumer personal data to set a price for consumer goods or services.” The Maryland General Assembly passed the legislation in early April.
“Marylanders deserve to know that the price they see on the shelf is the price they will pay at the register,” Moore said in the January news release. “Our Administration is laser-focused on protecting Marylanders from skyrocketing costs. At a time when Marylanders are already stretched by the rising cost of groceries, housing, and everyday necessities, we must ensure that new technologies are not used to drive up the bill for working families.”
Here’s everything consumers need to know about dynamic pricing, the major retailers and supermarket chains that adopted the practice and when the Protection from Predatory Pricing Act goes into effect.
What is dynamic pricing?
Dynamic pricing is a strategy that sets product or service prices based on evolving market trends, including supply and demand, competitor pricing and inventory levels, according to the Harvard Business School.
The practice results in several price changes to products throughout the day, depending on how many people are buying them or how much inventory remains. Dynamic pricing is similar to surge pricing in industries like airlines and ride-sharing, where prices can increase due to high demand, USA Today reported.
While online retailers use the method to edge out their competitors, brick-and-morter stores rely on electronic labels, which can quietly change product prices throughout the day.
What major retailers are using dynamic pricing?
Many grocery and retail giants have utilized electronic labels to promote dynamic pricing, often without consumers noticing the changes.
Walmart is one of the major retailers that has relied on these systems. In January, the Arkansas-based company obtained a U.S. patent for a “system and method for dynamically and automatically updating item prices,” to carry out markdowns in the e-commerce unit. In March, the company obtained another patent to predict demand and recommend prices for goods, according to the Financial Times.
A Walmart spokesperson said that both patents were “unrelated to dynamic pricing,” as the two systems were used for markdowns and by merchant teams to make decisions.
Other retailers, such as Whole Foods, Target and Kroger, also utilize dynamic pricing, per USA Today and Money Wise.
When does the Protection from Predatory Pricing Act go into effect?
While Moore hasn’t yet signed the legislation, the Protection from Predatory Pricing Act will go into effect on Oct. 1, according to the notice.
Several Maryland lawmakers have denounced dynamic pricing while stating that the new legislation will better serve consumers and their shopping needs.
“Dynamic pricing is predatory pricing and takes advantage of consumers at a time when many families are struggling to make ends meet,” House Speaker Joseline Peña-Melnyk said in the January news release. “The House is pleased the Governor is taking initiative to limit this practice in Maryland. Data used against consumers is a breach of public trust and we look forward to working together.”
Delegate Kriselda Valderrama shared the same sentiments: “We have no hesitation telling the marketplace that groceries are off-limits for these kinds of practices. Data used against Marylanders to create individualized grocery prices is a breach of public trust.”
