Darren Woods (2:36)

In economics, there is a concept called price discrimination. It kind of sounds bad, but, you know, economists use it in a more neutral way to describe a situation where different people are charged different prices for the same product. Like a movie theater might sell cheaper tickets to students or seniors, but when.

Adrian Ma (2:54)

It comes to shopping online, you don't know if the price that you see is the same as what others see. And this creates the potential for what Some call personalized pricing, and others call surveillance pricing.

Sam Levine (3:07)

So surveillance pricing is when companies collect data from consumers, like their location data, their demographics, their Internet search history to set individualized prices. And the goal is to charge each person most that they're willing to pay.

Adrian Ma (3:21)

Sam Levine is a former director for the Federal Trade Commission's Bureau of Consumer Protection. And he says companies collect data on consumers in a few basic ways. They can track you through web browsers or cookies or through apps that you use. They can also buy that data from a third party data broker. And once they have it, they can use it to target you with, say, personalized ads.

Darren Woods (3:45)

Yeah, you probably know the drill. You Google for one pair of shoes, and then suddenly those pairs of shoes are kind of following you all around the Internet.

Adrian Ma (3:53)

So creepy.

Sam Levine (3:54)

So the same technology that's powering advertising can power pricing as well. So instead of just showing you an ad for shoes, if a company knows that you're really looking for shoes and maybe you're in a hurry to get them, they can raise prices on those shoes because they know you're really looking for it.

Darren Woods (4:11)

We should say this is not illegal, but. But in theory, it's the kind of consumer harm Sam was looking for when the FTC started investigating this type of pricing last year. As part of these efforts, the agency demanded data from eight companies that allegedly offer surveillance pricing products and services. End quote. The companies included names like MasterCard, JP Morgan Chase, and McKinsey.

Adrian Ma (4:35)

I hear the theoretical argument behind it, but how, how big is the scope of this problem really?

Sam Levine (4:42)

I think the scope is big and getting bigger. The FTC study we did and that we released some of the results from in January showed that just among the eight pricing consultants we looked at, they were working with more than 250 companies in industries ranging from grocery to hardware to apparel, and more.

Darren Woods (5:02)

Sam says companies have the technology and the motive to engage in surveillance pricing, and he thinks it should be banned.

Adrian Ma (5:09)

Here's the thing. It's really hard to say just how prevalent this practice is. Through a website called Consumer Watchdog, we did find a few documented examples that suggest there is a there there. For instance, in 2012, the Wall Street Journal found companies like Staples and Office Depot were showing different customers, different prices for the same product. And they did that based on things like their location and browsing history.

Darren Woods (5:35)

In 2015, the investigative news outlet ProPublica found the Princeton Review showed people different prices for online tutoring based on their zip code. And the result was that people living in areas with a bigger Asian population might have paid hundreds of dollars more for the same service.

Adrian Ma (5:52)

But these smoking guns are hard to find, in part because what companies do with our data is sort of a black box. And Even though the FTC's investigation promised to shed more light on the practice, the that investigation seems to be on pause. After President Trump took office and installed new leaders at the agency, we repeatedly reached out to the FTC for an interview for this piece, and each time a spokesperson for the agency said it has no comment. So what does Sam Levine think about all this?

Sam Levine (6:20)

I really think the FTC's seeming inaction and lack of attention to this issue is quite worrying. And I think it's why states really need to step up.

Darren Woods (6:30)

And some states are. New York recently passed a bill requiring businesses to disclose when they're offering customers personalised algorithmic pricing.

Adrian Ma (6:39)

In their words.

Darren Woods (6:40)

Lawmakers in Georgia, Colorado, California and Ohio have also proposed regulating or banning the practice.

Adrian Ma (6:47)

Still, some experts, like Jean Pierre Dube, are skeptical of this rush to regulate.

Jean Pierre Dube (6:53)

The concept of a company using data that I wasn't aware they had to determine a marketing offer for me. I don't think that's all that new.

Darren Woods (7:00)

Jean Pierre is a professor of marketing at the University of Chicago who studied personalized pricing, calling things surveillance.

Jean Pierre Dube (7:08)

Pricing is just a way of branding it in a very negative light so that people would have a hard time wanting to defend it, because how could surveillance ever be good in a free country like America?

Darren Woods (7:18)

Good point. It does not sound good.

Adrian Ma (7:21)

Jean Pierre prefers a more neutral term like personalized or differential pricing, and he says it's not unusual for businesses to consider a customer's attributes and tailor prices accordingly. For example, think of a car dealer who sees a customer walk into the showroom with a fancy suit and a gold watch on. They might decide to charge them a little more because, you know, it seems like they can afford it.

Darren Woods (7:44)

Yeah, classic haggling. But he says personalized pricing doesn't always mean higher prices.

Jean Pierre Dube (7:50)

If I have the data that allows me to know what people's willingness to pay are, there's just as much interest in me lowering my prices to some people to serve customers that would otherwise not have purchased. So as long as I can charge you more than my cost of supplying to you, this is additional profits I collect. So some people will pay more, some people will pay less.

Adrian Ma (8:10)

To illustrate, Jean Pierre told us about an experiment he and a colleague ran with ZipRecruiter, a company that makes money selling job matching services to employers. And what they found was when ZipRecruiter tailored their pricing to different customers based on data they provided. More than 60% of them were offered a lower price than they would have gotten if the company had just charged everyone the same flat fee.

Jean Pierre Dube (8:32)

Most of these people being charged less were the smallest businesses. And so if you think small businesses deserve special advantages over large companies, then you would argue this seems a lot more equitable and fair.

Darren Woods (8:44)

Now it's important to note in this experiment, customers provided their data voluntarily, and that's different from the secretive, involuntary data collection critics of surveillance or personalised pricing talk about. And on this particular point, Jean Pierre says he gets it.

Jean Pierre Dube (9:01)

I think we have to be very careful about saying that charging differentially is unfair, but I would definitely agree with you that it feels like consumers are losing the agency over their personal information.

Darren Woods (9:14)

On that note, if you're concerned about all of this, there are a few things that experts suggest you can do to lessen your exposure, like regularly clearing your web browsers.

Adrian Ma (9:24)

Cash seems pretty easy.

Darren Woods (9:26)

You could use a private browser or a vpn.

Adrian Ma (9:29)

Inconvenient but doable.

Darren Woods (9:31)

Or go to a physical store and buy things in cash.

Adrian Ma (9:35)

That's going too far.

Darren Woods (9:36)

This is Adrian's populist revolt. This episode was produced by Angel Carreras and engineered by James Willits. It was fact checked by Sarah Juarez. Cake and Canon edits the show and the indicator is a production of npr.

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