‘Big Tech reinventing the rip-off’: You’re likely getting gouged by retailers’ pricing schemes. Protect yourself now

The problem is so pervasive that the U.S. Federal Trade Commission set in motion a personalized pricing enforcement policy last August that would mandate retailers and other businesses using consumer data to tell individuals three things:

• That the price is personalized.
• Here’s what drove the decision to personalize a price.
• What methods of tech detection were used to set the price.

“When consumers see a listed price, they expect it to be the same price that everyone else sees, not the retailer’s estimate of how much they are willing to pay based on their personal data,” FTC Chairman Andrew Ferguson said in a statement. “The FTC does not have the legal authority to ban personalized pricing in all circumstances, but businesses that fail to tell consumers how their personal data is being used to set a price may be in violation of the FTC Act and other laws we enforce.”

Here’s what’s happening on the personalized pricing front

How bad is the problem?

A recent Consumer Reports and Groundwork Collaborative study used 437 Instacart-using volunteers to buy the same box of Wheat Thins at the same Safeway, and found a 23% price discrepancy. What’s more, the study found that each shopper was exposed to algorithmic price experiments, and researchers estimated the gaps could cost a family about $1,200 a year.

Personalized pricing technology is highly sophisticated, and consumers usually don’t know they’re being tracked.

“The model doesn’t need your income; it infers it,” Rodion Sorokin, chief technology officer of The Capital Index, an Austin, Tx.-based deep-tech venture studio, told Moneywise.

Companies can now easily track your device, ZIP code, how fast you add to cart, and whether you abandoned the same item twice.

“Each is a weak signal, and modern machine learning is very good at stacking weak signals into a confident guess about how much a price will hurt you,” Sorokin noted.

The technology is built to ensure consumers can’t track the trackers.

“From one screen, you can’t,” Sorokin said. “That’s the point. The only reliable test is side by side: same item, same minute, two devices or two accounts, one logged in and one not. If the prices differ and shipping or stock doesn’t explain it, you’ve found personalization.”

Risk-wise, retailers or any business with a product or service to sell can monitor anything whose price already moves constantly, like airfare, hotels, rental cars, and event tickets.

“That’s because personalization hides inside normal volatility,” Sorokin added. “And repeat purchases like groceries are big: the $1,200 a year in the Instacart study came from cents per item.”

Here’s what you can do to fight back and protect your privacy

The FTC enforcement policy, if it goes through as currently constructed, will aid consumers, but shoppers can also take aggressive steps to keep their private purchasing behavior more private. These moves could turn the tables on nosy consumer trackers.

Know what shopping behavior is being monitored.

High-consideration categories, or categories that require multiple visits, are at the highest risk. That typically includes electronics, flights, hotels, rental cars, or financial products.