Seattle Is Poised to Ban Supermarket Algorithmic Price Discrimination

This coming Tuesday, in an effort to crack down on price gouging and discrimination, the Seattle City Council will vote on a bill prohibiting large grocery store companies from using customer personal information to customize prices and discounts.

Proposed by Mayor Katie Wilson and Councilmember Alexis Mercedes Rinck, the legislation will require grocery stores with more than 20 locations worldwide to stop using personal data to set individualized prices and discounts. It would also apply to third party delivery apps such as Instacart, as well as mixed-used stores like Target.

The idea that grocery companies are charging different people different prices based on their past purchases sounds like a futuristic dystopia. But it’s not far off. The practice isn’t in brick and mortar stores yet, but it’s a widespread reality for online shopping. And they’ve already been hoarding your data for years.

Back in 2019, the marketing arm of Kroger, the supermarket giant that owns QFC and Fred Meyer, boasted about collecting more than 2,000 data points on customers using past purchasing history and information bought from data brokers. That data will feed the new pricing algorithms.

Those algorithms are designed to estimate a customer’s purchasing power and how willing they might be to pay more. As part of a Consumer Reports study last year, 39 volunteers loaded up virtual Instacart baskets of products from a Seattle Safeway store. They received a range of prices from $114 to $124 for the exact same goods. That study estimated that this type of price manipulation, if applied to a family of four, could result in cost differences as high as $1,200 a year.

While currently algorithmic pricing is mainly limited to online shopping and loyalty apps, it’s right around the corner for brick-and-mortar stores with the introduction of electronic price labels, which allow stores to instantly change prices of goods. The city council ordinance will require these labels to be the same for different customers.

Uptown QFC cashier and florist Kristen Wilder told The Stranger that Kroger already started rolling out these electronic labels at her store in July. She says customers already hate that they can only access most coupons through an app which collects their data, and she’s worried about the impact of the new labels if the bill doesn’t pass. Wilder’s union, UFCW 3000, has been a key backer of the legislation.

Kerem Levitas, a senior policy advisor in Mayor Wilson’s office says Seattle would be the first city to enact a ban on grocery algorithmic price discrimination, though Portland and New York City are already working on similar legislation. This wouldn’t be entirely novel. Maryland, New Jersey, and Connecticut have already passed similar statewide regulations. The City’s legislation is partially based on a similar statewide bill introduced this year that did not pass.

Washington People’s Privacy founder Maya Morales believes the Seattle bill could be the most comprehensive. It doesn’t allow exemptions for individualized discounts, which can be used to get around fair pricing rules.

“What happens is people are offered these individualized discounts, but often they’ve used a deceptive pricing model and a deceptive discount model to actually end up with customers paying more,” Morales said. So even if the prices are the same, allowing customized coupons would still allow companies to discriminate.

Under the ordinance, large grocery store companies will have to offer discounts based on equal criteria. So, if you get a buy-one-get-one-free deal for accruing a certain amount of loyalty points, other customers must also receive the same deal. Discounts based on certain allowable characteristics—deals for seniors, for veterans—would still be allowed, as long as everyone in that category receives it.

Because company algorithms are proprietary, it’s hard for independent auditors to read the source code and see if they are violating civil rights laws. Morales argues that the only way to prevent pricing discrimination based on race or other protected classes is by banning individualized pricing altogether.

Predictably, big grocers are mad. Grocery store lobby groups are flooding city council with testimony asking for a personalized discounts loophole. The Northwest Grocery Retail Association even employed a mass texting service to ask Seattleites to send letters to the council. The form email is definitely not astroturfed: “Please amend the ordinance to make the rules clear: don’t use my information to charge me more, but don’t prevent it from being used to help me save.”

The Northwest Grocery Retail Association did not respond to a request for comment.

Lead sponsor Rinck says she hasn’t any constituents in favor of having their data used to get personalized discounts. In fact, she said the vast majority of real-life people who are showing up at public comment support the legislation.

“When I talk to people, they’ve expressed to me a lot of discomfort with how their data is now being used and how it could be used against them,” Rinck said. “The price of groceries should be based on the product, not on who the shopper is or what an algorithm thinks they will pay.”