Custom-fit clothing can be a luxury. Custom-fit prices, quietly adjusted for each shopper based on personal data, are something else entirely — and regulators are starting to push back.

Retailers have long used data to figure out what customers like. Now, with the help of AI, some companies are going a step further — using personal information to decide how much individual shoppers should pay. Two people buying the same item online, at the same store, at the same time may see different prices, not because of demand or supply, but because a computer system thinks one of them will pay more.

That practice is known as “surveillance pricing,” and it has quickly become one of the most controversial uses of AI in retail. Supporters say it helps businesses offer targeted discounts and run promotions more efficiently. Critics argue it does the opposite, quietly charging loyal or higher-income customers more — without telling them.

Those concerns are now driving new laws. In New York, a statute that took effect in late 2025 does not ban surveillance pricing outright. Instead, it requires companies to disclose when algorithmic systems using personal data are involved in setting prices. If a price is determined by such a system, retailers must clearly state at checkout: “This price was set by an algorithm using your personal data.” The disclosure must appear next to the price, in plain language and readable type.

The law focuses on individualized pricing — situations in which automated systems use data tied to a specific person or device to adjust prices. It does not apply to common forms of ‘dynamic pricing,’ such as prices that change because of high demand, low inventory or time of day. It also includes exemptions for banks and insurance companies, which are already regulated under other laws. Enforcement falls to the state attorney general, who can order companies to stop violations and seek civil penalties of up to $1,000 per instance.

New York is not alone. Similar proposals are being debated in other states, and at the federal level lawmakers are urging regulators to take a closer look at algorithm-based pricing, particularly in the grocery sector.

In California, state legislators are considering AB-446 (The Surveillance Pricing Protection Act), a bill that would prohibit a grocery establishment for engaging in surveillance pricing; “The bill would define surveillance pricing to mean offering or setting a customized price increase for a good or service for a specific consumer or group of consumers, based, in whole or in part, on personally identifiable information collected through electronic surveillance technology, as specified.” The bill, which has been amended four times since it was introduced on February 6, 2025, was withdrawn in September 2025 by Assemblymember Christopher Ward, the bill’s author, and is expected to be refiled in the next legislative session. 

“Californians should not have to worry that the personal information companies collect about them, such as their browsing history, location, or personal characteristics will be used to charge them a different price than their neighbor,” said Grace Gedye, policy analyst for AI issues at Consumer Reports. “While we are disappointed that the Surveillance Pricing Protection Act did not pass this year, we applaud the leadership of Assemblymember Christopher Ward for tackling the issue of surveillance pricing. We look forward to working with Assemblymember Ward and the California Legislature during the next legislative session to push back against these unfair practices.”

In December 2025, a group of Democratic U.S. senators called on the Federal Trade Commission to investigate Instacart after a Consumer Reports study claimed that shoppers were often shown sharply different prices for the same groceries from the same stores at the same time. Researchers found that prices for everyday items such as cereal, apples, peanut butter and sliced turkey sometimes varied by more than 20% between consumers, with nearly three-quarters of products studied showing price differences.

The senators warned that if the findings are accurate, such practices could raise grocery bills overall, make it harder for shoppers to compare prices and weaken competition. They also raised antitrust concerns, noting that if multiple companies rely on the same algorithmic pricing systems — especially those driven by large pools of consumer data — it could blur the line between competitors.

In a  blog dated December 18, 2025, Instacart flatly denied that it engages in surveillance pricing. “Some of the most misleading stories over the last week have claimed that Instacart uses information about your income, ZIP code, or shopping history to charge you more for items like milk, eggs, and cereal. We don’t do that. Period.”

Consumer Reports stands by its investigation, and in an update on December 22, 2025, it stated, “Prompted by this investigation, Instacart has stopped offering technology that allowed grocery retailers to charge shoppers different prices for the same groceries at the same time.”

Critics say surveillance pricing flips the traditional logic of competition on its head. Instead of lowering prices to attract customers, companies can use data to charge each shopper the maximum amount they are willing to pay.

Surveys show trust drops sharply when people learn their personal data is being used behind the scenes to influence prices. As AI-driven shopping tools spread, retailers may face a backlash similar to the one that followed revelations about widespread online tracking through browser cookies.

New York’s law reflects a growing belief among regulators that transparency matters. If companies are going to use personal data to help set prices, consumers deserve to know it. 

Concerns about surveillance pricing extend beyond retail. The American Civil Liberties Union has warned that the shift toward digital driver’s licenses could make it harder for consumers to avoid individualized pricing, particularly in sectors such as airline travel.

“That will make it far harder to escape surveillance pricing,” said Jay Stanley, senior policy analyst for the ACLU’s Speech, Privacy and Technology Project. “It will make it easier for companies to collect data about us, merge it with other data, and analyze it, all with high confidence that it pertains to the same person — and then recognize us when we show up to make a purchase, run the data through an algorithm, and execute their price-maximizing strategy against us.

“Digital IDs and surveillance pricing would also be mutually reinforcing. Not only would digital IDs prevent people from escaping surveillance pricing, but surveillance pricing would simultaneously incentivize companies to require the presentation of digital IDs by people who want to shop. The ACLU is fighting to raise the alarm about this incipient identity infrastructure and trying to persuade state legislatures to pass protections to stop this world from coming about. But so far, it still looks like there’s a good chance we’ll end up with the worst-case scenario.”