SAM DINGMAN: Last month, Sen. Ruben Gallego introduced the One Fair Price Act, a bill which his office says "would prevent companies from setting individualized prices based on consumers personal data and allow small businesses to better compete with large companies on the quality of their product, not the use of exploitive pricing practices." When Gallego visited the studio recently, I asked him for an example of the type of exploitation he thinks this legislation is necessary to address.
RUBEN GALLEGO: For example, you know, with the advent of basically being able to buy your tickets online, social media, and now with AI being very ever present, you can basically go online to be talking about the fact you just had a newborn or, you know, a grandson was born, and then you start looking for airline tickets.
That airline ticket will be able to figure out that you are very excited about going to, for example, Chicago to see your grandson. ... And instead of pricing it based on the supply and demand of seats, the price it on the fact that they know that you are very excited to go. And they'll figure out: What is your price point? So you're they're going to keep rising the price until they figure out like how much they can maximize profits out of you. That is not capitalism, that is being predatory.
DINGMAN: So let me make sure people really understand this. Because I appreciate that example you gave and I think this can sound a little conceptual to some people. I can go on Instagram and I can say, I have a new grandson in Chicago. ... Can't wait to see him. ... Thinking that I'm just talking to my Instagram followers about this.
I'm actually talking to say, Delta Airlines, unwittingly. Who, the next time I go to the Delta Airlines website and try to buy a ticket to Chicago, they will somehow know that I am particularly excited to get to Chicago, and they might tick my price up a little bit for the privilege of getting me there.
GALLEGO: Exactly. Now, when you brought up Delta, Delta actually did say this at one of their corporate shareholder meetings. And the CEO said that they're going to particularly institute this type of pricing, if I remember correctly, to find the particular pain point that someone's willing to pay.
DINGMAN: They use that language, pain point.
GALLEGO: They use that language, yes. Now they have since retracted. But you know, when you're saying this to as a CEO, when you're saying to your corporate shareholders, you know, you're basically saying that this is the way we're going to maximize profits. As you know, the CEOs have to maximize profits, but this is where the government has to step in, because we want to make sure that the consumer has just as much of a chance at getting the best price as the company's.
DINGMAN: Elsewhere in the conversation, Sen. Gallego referenced a recent investigation by Consumer Reports, which looked at the way this type of pricing has been used by grocery apps. They wrote up their findings for an article published in late December, and the piece sent shockwaves through the grocery industry.
Consumer Reports investigators focused primarily on the app Instacart, and revealed that the company was using algorithmic pricing to experiment with the cost of common items.
After my conversation with Sen. Gallego, I spoke with the lead reporter on the investigation, Derek Kravitz.
DEREK KRAVITZ: The capabilities are seemingly endless. We actually looked at their patents, Instacart and the small AI company they acquired, Eversight. And the patents made clear that they can sort of hoover up all of this personal data about you and create this crazy-good personal dossier. We've actually receive some of those from consumers where you live, your phone number, your email address, but also how much money you make, how many people are in your household, whether you're married.
DINGMAN: And so from a practical standpoint, what this means is that an app like Instacart, which, for people who don't know, is a virtual grocery shopping app. I might be shopping for bagels — and I don't know why I picked bagels, but I love bagels. So I might put some bagels into my shopping cart on Instacart and somebody in the apartment next to mine might be adding the same bag of bagels from the same store to their shopping cart. And we might be looking at different prices.
KRAVITZ: Yes. And generally speaking, you know, all the prices through Instacart and many other e-commerce platforms are constantly being toggled and tweaked and changed in order to find your perfect willingness to pay the the highest price that you are willing to spend on an individual product based on all of this data, all of these factors.
DINGMAN: And so tell us, based on what you found, about the range of price differences that users might be seeing in markets where this kind of experimentation is happening.
KRAVITZ: Yeah. So to understand how people are grouped and sorted into different price groups by Instacart, we had more than 400 volunteers across the country join us on live online shopping sessions from different areas of the country. And we had them put in the same 18- or 20-odd grocery items in their baskets and had them screenshot and check prices.
What we found was that at the highest level, some products like Skippy peanut butter or various types of cereal or eggs, the price variance could be as high as 23%. Not all products were algorithmically changed. But we saw that for the products, the three-quarter of products, 75% of products that were changed in our testing, the average change was about 13%. And then that resulted in a total basket change of about 7%. And 7% over the course of a year for a family of four can add up to $1,200.
DINGMAN: Right, of course. And we're talking about groceries here, right. So this is the kind of shopping trip that — this isn't like a one-off purchase. These are ostensibly the kinds of shopping trips that families make on a weekly basis.
KRAVITZ: Exactly. It's not furniture, it's not a car. It's, you know, it's, it's things essentials. So Instacart did announce right before the holidays that they have stopped price experiments in response to this investigation. But the caveat or the loophole there is that they will continue price experiments with promotions and discounts.
DINGMAN: OK, so they're saying basically that they will continue to do the experiments, but only in ways that would theoretically benefit the consumer as opposed to costing them extra money.
KRAVITZ: Yes, that's right.
DINGMAN: And are you aware, Derek — I mean, we've been talking about Instacart specifically because that's the company that your investigation looked at. But there must be other companies that are experimenting with similar tech.
KRAVITZ: Yes. A ton of retailers have taken notice of the ability to algorithmically change prices and to do so with personal data and buyer behavior in hand. You know, not just in the grocery space, but, you know, any other retailer you can think of. Obviously, Amazon and Walmart sort of, you know, created this market in this, you know, data science, so to speak.
But others have caught on. You know, one grocery retailer, second- or third-largest by most metrics in the country, Kroger, has a data science unit within its company. With clean rooms and, you know, rooms where first-party data is collected and then joined or shared with other data that they buy from data brokers. Extremely sophisticated tech for a company that operates a chain of grocery stores.
DINGMAN: Well, I have been speaking with Derek Kravitz, who is an investigative journalist and published this investigation with his colleagues at Consumer Reports. Derek, thank you for this conversation.
KRAVITZ: Yeah, thank you.
-
A pair of education groups are proposing a ballot initiative to rein in Arizona's universal school voucher program — which has ballooned to a nearly billion-dollar-a-year expense since first approved in 2022. -
The city of Phoenix is trying to tackle its stray shopping cart problem with a new ordinance aimed at retailers. The Show wanted to know: What would the Cart Narc have to say about this? -
Thursday's verdict, reached in Arizona, “validates the thousands of survivors who have come forward at great personal risk to demand accountability against Uber,” said Sarah London, one of the lawyers representing the plaintiff — who said the company has put the "focus on profit over passenger safety.” -
Phoenix has a reputation, fair or not, of a boom town where old buildings often get demolished. Hit songs were recorded in midtown decades ago. In the 1960s, that success led to construction of what was once the top studio between Dallas and LA. -
The 60-day action plan aims to get the two countries to develop new trade policies for critical minerals, as the United States seeks to reduce its reliance on China.
