U.S. state pricing bills risk limiting consumer discounts

Traders Union
All News
Financial News
U.S. state pricing bills

Highlights

New York passes the One Fair Price Act restricting personalised pricing and awaits Governor Hochul's decision, while over 40 similar bills advance in at least 24 states in 2024.
Elimination of personalised pricing could push businesses toward single-price strategies, potentially reducing discount access for lower-income and price-sensitive consumers.
A University of Chicago Booth School study finds personalised pricing raises profits and benefits over 60 percent of customers, though total consumer surplus drops.

State bills reshape pricing rules

As reported by Financial Times, the latest wave of consumer pricing legislation is aimed at banning or restricting personalised pricing, the use of customer data to offer different prices to different people. Earlier this month, the New York State Legislature passed the One Fair Price Act, and the bill now awaits Governor Kathy Hochul’s decision.

Colorado takes a different path when Governor Jared Polis vetoes a similar bill, arguing that it “would punish differentially lower prices, not just higher prices.” Other states are also active on the issue. Connecticut passes its own law this year, Maryland enacts restrictions for grocery stores, and New Jersey passes one of the strictest versions, now awaiting Governor Mikie Sherrill’s approval. Lawmakers introduce more than 40 such bills in at least 24 states this year.

The policy push reflects concern that algorithms could identify the highest price each consumer is willing to pay. Yet the Federal Trade Commission says more work is needed to determine whether and when surveillance pricing results in higher prices for consumers, even as the infrastructure to support such pricing becomes more widely deployed.

Discount access and consumer impact

Critics of personalised pricing often focus on the risk that some consumers pay more, but differential pricing also allows some consumers to pay less. Student discounts, senior fares, matinee tickets and coupons all apply different prices for the same product, typically to reach people for whom the full price would be too expensive.

If personalised pricing is removed, businesses do not necessarily respond by lowering prices across the board. Instead, they are more likely to offer a single price, which can leave lower-income or more price-sensitive consumers worse off. The article argues that older forms of price discrimination, including coupon systems that required time and effort from shoppers, served a similar function by separating budget-conscious consumers from those willing to pay full price.

Research cited in the article also suggests selective discounts can benefit a large share of consumers. In a randomised experiment by economists at the University of Chicago Booth School of Business, personalised pricing raises profits, and while total consumer surplus declines, more than 60 percent of customers come out ahead. The article adds that transparency remains a challenge because consumers can see a coupon but cannot easily see how an algorithm sets a price, even though making all discounts fully open would eliminate their selective function.

In our earlier article on OpenAI’s proposed 5% stake for the U.S. government, we examined how major AI developers are increasingly engaging directly with policymakers as oversight frameworks take shape. We also noted that the idea raised broader questions about accountability and the balance between public oversight and private control in strategically important technology businesses.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.