Amazon and Walmart’s dynamic pricing algorithms were compared to price gouging during a Senate Committee hearing on May 2nd, “Higher Prices: How Shrinkflation and Technology Can Impact Consumers’ Finances.” One week later, the chairperson of the committee Senator Brown sent a letter to the CEOs of the two retailers pressing them for answers on how they are using new technologies to set prices, requesting they respond by June 15th.
In his letter to Amazon CEO Andy Jassy (he wrote a similar letter to Walmart CEO Doug McMillon), Senator Brown wrote in part:
“With limited transparency around the factors pushing up prices, I am concerned that pricing algorithms enable corporations to charge higher prices in circumstances where consumers have the greatest need for something, and thus are unable to comparison shop because of both urgent need and frequent, opaque price changes. For instance, when a flu outbreak arises, local pharmacies may run out of supplies needed for families with the flu. Large tech platforms, with vast stores of data, can exploit this outbreak driving up prices for those suffering from the flu.
“What is “algorithmic pricing” to a retailer is price gouging to consumers. In addition to dynamic pricing, I am also concerned by how corporations may use customers’ web browsing data to engage in discriminatory pricing, in which different customers are charged different prices for the same goods or services. On top of generally higher prices, I am concerned that the use of pricing algorithms may lead to higher prices for individuals or families based on variables including a customer’s location or other sensitive personal data. Despite widespread adoption of pricing algorithms, consumers know little about how their personal data is being used to set prices and under what conditions prices may increase.”
Third-party sellers also use repricing services to “optimize” the prices of their products on marketplaces, though they may disagree about whether such practices raise or drive down their prices.
The Senate Committee on Banking, Housing, and Urban Affairs’ May 2nd hearing on higher prices included witnesses Bilal Baydoun, Director of Policy & Research at Groundwork Collaborative; Dr. Allison Schrager, Senior Fellow, Manhattan Institute; and Dr. Alí R. Bustamante, Professor of Practice, University of New Orleans Department of Economics and Finance, and Director, Worker Power and Economic Security Program, Roosevelt Institute.
Sen. Brown’s prepared remarks include the following excerpt:
“Big Tech has exported their data-mining business model to retailers, and that has made all of this even easier for companies.
“As more people shop online, retailers learn more about our browsing and shopping habits by collecting every bit of our online data. They can charge you more based on your search history.
“You start shopping around to try to find the lowest price on a new washing machine. Now online retailers realize that you’re in the market for appliances, and start showing you higher and higher prices.
“Spying on people and charging them more for the products they need isn’t innovation – it’s price gouging.”
The full hearing can be viewed on the following YouTube video:
