A federal antitrust lawsuit filed against McDonald's this week alleges the company uses an AI-powered “pricing engine” to set menu prices across U.S. locations, overcharging customers for Big Macs and fries. McDonald's denies using AI to determine what individual customers are willing to pay. Instead, it says it gives franchisees “tools, resources, research and recommendations to help them make informed decisions.” The allegation raises a sharp question: who sets the price, and what can shoppers learn about the calculation?
Who Gets to Set the Price
Food businesses are bringing AI and other technology into their operations. Earlier this year, Kroger said it uses an AI platform called FlashFood to mark down perishables nearing the end of their shelf life and promote them through an app. Electronic shelf labels display prices on digital screens. They’re gaining ground at Kroger, Amazon Fresh, Walmart and Whole Foods, and at U.K. supermarkets Tesco, Morrisons and Asda.
Global financial platform Revolut recently trialed facial-recognition checkout in select coffee shops, letting customers pay with a glance. Amazon Fresh, Whole Foods, Tesco, Morrisons, Asda and Revolut didn’t immediately respond to CNBC’s requests for comment on AI use. The source doesn’t show that every tool sets individualized prices; it does show retailers and payment companies bringing more digital systems into shopping.
Experts warn that wider AI use could help drive more dynamic pricing: frequent, rapid, real-time changes that affect shoppers. “Dynamic pricing means changing prices in response to changing market conditions, such as demand, timing, capacity or competitors' prices,” said Miroslava Marinova, a senior lecturer of commercial law at the University of East London. “It is not new. Airlines, hotels, and ride-hailing services have used it for years.”
A Price Built Around the Shopper
In April, Bank of England economists Clare Lombardelli and Rupal Patel said more sophisticated technology is making prices change more often and become more individualized. Firms could charge “as close to the maximum price a consumer is willing to pay for a good or service,” they said, describing the practice as “perfect price discrimination.”
Marinova and the economists said electronic shelf labels and facial-recognition checkout are changing how much information companies can collect, including transaction histories, browsing behavior, location and purchasing patterns. On Wednesday, U.K. supermarket chain Sainsbury's released SmartLists, an AI feature that helps customers create shopping lists and find products by uploading pictures of what they need or typing meal ideas.
“The traditional distinction between dynamic and personalised pricing is becoming less clear in practice,” Marinova said. “Dynamic pricing responds primarily to market conditions, whereas personalised pricing uses information about the consumer to estimate willingness to pay.” Retailers are combining market-level information with more detailed consumer data, she added, and “the boundary between dynamic and personalised pricing becomes thinner.”
Rules, and Their Limits
Walmart and Kroger have said in recent years that they don’t use dynamic or surge pricing to set individualized prices for customers, and that they use tools to streamline operations. Several states are moving to limit data-driven pricing. New York requires most businesses that use customers' personal data to set prices to clearly disclose that use. Maryland has restricted food retailers and delivery services from using personalized, data-driven pricing to charge higher prices for certain food. New Jersey and Connecticut have enacted measures targeting “surveillance pricing.”
Marinova said dynamic and personalized pricing isn’t automatically harmful to shoppers; it can discount items for some consumers and make some products and services more accessible. But individualized prices can leave consumers unsure whether a price reflects general market conditions or their own behavior. “That makes it much harder to compare prices and to know whether another consumer is being offered a different price for the same product,” she said. If consumers can’t understand a price, compare it with offers to others, or effectively switch suppliers, she said, “the normal disciplining effect of consumer choice becomes weaker.”
Lombardelli and Patel said personalized pricing “splinters the consumer experience,” leaving households with increasingly different inflation rates. When the same item carries different prices, they said, inflation becomes more personalized, and aggregate measures may no longer reflect households' experience. The price tag still appears on the screen. What it represents may differ for every shopper.