AI Pricing Tools Spark Shopper Backlash in Retail

Shoppers nationwide are growing frustrated as restaurant chains and major retailers turn to high-tech tools to set prices. Digital shelf labels are spreading through stores, while businesses use artificial intelligence to help decide what to charge. On social media, that has fueled anxiety around terms such as “dynamic pricing” and “surveillance pricing.”

The central worry is straightforward: do two shoppers pay different prices for the same product? Consumers already accept changing fares for flights, hotel rooms and rideshare trips. But algorithms that draw on personal data and buying habits are another matter, and many people don’t like it. Katie Thomas, who leads an internal consumer behavior think tank at management consulting firm Kearney, put the stakes plainly: “There are major tensions happening right now between who's really going to have the power with some of these algorithms and usage of bots and AI: the companies or the shopper.”

The Companies' Case

Retailers say much of the anger stems from misunderstanding. In a blog post last month, Walmart CEO John Furner said digital tags save workers time and keep prices current. He said the labels aren’t used to raise prices based on weather, time of day or an individual shopper. “We price the product, not the person,” Furner wrote.

That message hasn’t fully landed. Companies have offered little detail about the customer data they collect or how they use it, leaving room for suspicion. Thomas said social media posts falsely claim that electronic shelf labels Walmart plans to install in all its U.S. stores scan shoppers’ faces or cellphones to set individual prices. The company’s own description of the technology doesn’t support the claim, but it keeps spreading.

Retailers’ defense starts with a practical point. Asa Farquhar of retail technology company Relex Solutions said retailers generally update electronic shelf prices on a regular schedule, often weekly, because shoppers value consistency. Researchers who tracked prices at an unnamed grocery chain found “virtually no surge pricing” after the labels arrived. “Changing prices throughout the day, the way airlines or rideshare apps do, is exceedingly rare in grocery and general merchandise today,” Farquhar said.

Lawmakers and Regulators Move In

State capitols and federal agencies have entered the debate. Legislators in at least 30 states have considered pricing bills this year, including proposals on algorithmic and personalized pricing, according to the National Conference of State Legislatures. The Federal Trade Commission has proposed an enforcement policy warning that failing to disclose the use of personal data to set individual prices could violate consumer protection law.

Maryland, New Jersey and Connecticut have already restricted the use of shoppers’ personal data to determine what they pay. The Maryland and New Jersey laws cover groceries, with exceptions for certain loyalty discounts and other promotional offers. Connecticut’s law applies to a broader range of retail purchases. Each state has drawn its own line, and the resulting patchwork raises questions about compliance costs for businesses operating across state borders.

The legal record offers a costly lesson. California prosecutors sued Target in 2022, alleging its app showed lower prices before shoppers entered stores and raised them once they were inside. Target agreed to a $5 million settlement and a ban on using geofencing technology to increase prices. The retailer said it used the feature to “provide guests with accurate pricing, which can vary across stores and channels,” and maintained it didn’t personalize prices based on guests’ data or behavior.

Not Every Price Gap Is Personal

A difference in price doesn’t prove that personal data played a part. Last year, an investigation by Consumer Reports, Groundwork Collaborative and More Perfect Union found that Instacart shoppers saw different prices for identical products at the same stores. Instacart later ended what it called tests that randomly assigned shoppers to groups, rather than setting prices based on personal information. To a suspicious customer, the episode shows how easily a randomized test can look like targeting.

The price data itself adds another wrinkle. Decodo, a web data company, tracked price changes in 2025 across electronics, clothing and home-improvement supplies. About half of the U.S. changes it recorded were decreases, according to Gabriele Vitke, a senior product marketing manager. That runs counter to the common assumption that dynamic pricing only drives costs up.

The Antitrust Question

The more serious legal fight is about coordination, not personalization. The National Retail Federation, which represents large and small stores, says algorithmic pricing is a new tool for an old practice: tracking and adjusting prices based on supply, demand, seasonality and competitors’ moves. Still, lawsuits have accused companies of using pricing software to weaken competition.

In a 2023 antitrust lawsuit against Amazon, the FTC challenged several practices, including an algorithmic tool codenamed Project Nessie. The agency alleged Amazon used it to identify products whose prices it could raise while competitors were likely to follow, generating more than $1 billion in excess profits. A trial is scheduled for next year. Amazon said the allegations “grossly mischaracterize” the tool, which it described as a way to prevent retail price-matching from creating unsustainably low prices. The company said it tested Project Nessie for a few years, found it didn’t work as intended and scrapped it before the federal lawsuit.

A separate consumer lawsuit against McDonald’s alleged its pricing system used nonpublic sales data from competing locations to coordinate prices. The Chicago-based burger company called the lawsuit “filled with inaccuracies” and said it makes the tool available to U.S. franchisees to help them set prices at their individual restaurants.

Why This Matters:

The fight over AI pricing is really about trust and who holds leverage in the marketplace. Retailers have a credible argument: digital labels and pricing software mostly repeat what stores have long done, adjusting prices for supply, demand and competitors. But that argument carries weight only when companies explain their data practices clearly. Opacity invites the rumors now circulating online. Consumers deserve to know what information companies collect and how it shapes what they pay.

State laws in Maryland, New Jersey and Connecticut, alongside the FTC’s proposed disclosure policy, point toward a patchwork that could raise compliance costs for businesses of every size. The Target settlement and pending Amazon trial show courts are willing to police pricing conduct after the fact. That may provide a better check than sweeping new rules written before the technology matures. Whether transparency and competition can discipline bad actors, or government will need to step in more heavily, will likely turn on what the Amazon case reveals about how these tools are actually used.