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 and overcharge customers for Big Macs and fries. McDonald's denied using AI to determine what individual customers are willing to pay. It said it gives franchisees “tools, resources, research and recommendations to help them make informed decisions.”
The case puts data-driven pricing under scrutiny as food businesses adopt more digital tools. The article reports no demographic effects from these systems; it describes possible effects on prices, personal data and consumers' ability to compare offers.
How pricing technology is spreading
Kroger said earlier this year that it uses an AI platform called FlashFood to mark down perishables nearing the end of their shelf life and market them to shoppers through an app. Electronic shelf labels, which show prices on digital screens, are becoming more popular at Kroger, Amazon Fresh, Walmart and Whole Foods. The article also names U.K. supermarkets Tesco, Morrisons and Asda as users.
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.
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. Examples range from discounting goods nearing the end of their shelf life to facial recognition at checkout and AI-assisted shopping lists.
More data, more individualized prices
Experts say wider AI use could contribute to more frequent and rapid price changes. “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. Airlines, hotels and ride-hailing services have used it for years, she said.
In April, Bank of England economists Clare Lombardelli and Rupal Patel said more sophisticated technology is making prices change more frequently and become more individualized. They said companies could charge “as close to the maximum price a consumer is willing to pay for a good or service,” which they defined 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. Marinova said the distinction between dynamic pricing based on market conditions and personalized pricing based on consumer information is becoming less clear as retailers combine both kinds of data.
Consumer protections and price comparisons
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. New York requires most businesses that use customers' personal data to set prices to disclose that use clearly. 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 individualized pricing can discount items for some consumers, but can also leave people unsure whether a price reflects market conditions or information about 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. She added that when consumers can't understand a price, compare it with offers to others or switch suppliers, “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. They warned continually changing prices can make it harder for statisticians to “measure and interpret” month-to-month inflation, because the consumer price index relies on a representative sample. “When prices differ for the same thing, inflation becomes even more personalised – and aggregate measures may no longer reflect households' experience,” they said.