California Moves to Ban AI-Driven Surveillance Pricing

California legislators are advancing a bill to prohibit retailers from using artificial intelligence and personal data to set individualized prices for consumers, a practice known as surveillance pricing that has drawn scrutiny from regulators nationwide.

Assembly Bill 2564, which the state Senate was scheduled to consider in late August, would make it illegal for companies to adjust prices based on factors like a customer's income, location, search history, or inferred desperation for a product. The Assembly approved an earlier version in May, and supporters expressed confidence the measure would pass before the legislative session ended.

How surveillance pricing works

The practice involves collecting granular data about shoppers—from IP addresses and ZIP codes to how far they scroll on a webpage or whether they highlight product names—to estimate their willingness to pay. Companies or third-party pricing software can then charge different customers different amounts for identical goods.

In 2022, California reached a $5 million settlement with Target over allegations the retailer charged varying prices on its mobile app depending on customer location. A 2025 lawsuit against JetBlue Airlines alleged the carrier used personal data to adjust ticket prices; a company representative had suggested a customer clear their browser history to find lower fares, though JetBlue denied using surveillance pricing.

The Federal Trade Commission surveyed eight companies in 2024 that advertised using AI for real-time pricing, including Mastercard and JPMorgan Chase. Researchers found firms could infer price sensitivity from behaviors like choosing faster shipping, potentially charging more to customers flagged as desperate—such as a new parent shopping for a baby thermometer.

The fairness debate

Assemblymember Christopher M. Ward, who authored the California bill, framed the issue as one of basic fairness. Polls show 76% of Americans believe it's unfair for retailers to charge different prices based on personal data, and three-quarters worry about how their information is used.

Yet some economists argue personalized pricing can benefit consumers. A 2022 study of ZipRecruiter found that more than 60% of customers received prices lower than the optimal rate when the company used data-driven pricing, while the business increased revenue by attracting more buyers. Colorado Governor Jared Polis vetoed a similar ban in June, saying it could prevent companies from offering discounts.

Critics counter that even if some shoppers pay less, the lack of transparency erodes trust and makes it impossible to know what products should actually cost. "You'll always be guessing," said Jen King, a privacy fellow at Stanford's Institute for Human-Centered Artificial Intelligence.

Why it matters

The California bill represents a significant test of whether states can rein in algorithmic pricing before it becomes standard practice. If passed, it would join New Jersey's existing restrictions and a pending New York ban, potentially setting a precedent for federal action. The debate highlights a fundamental tension: whether data-driven personalization serves consumers through targeted discounts or exploits them through opaque discrimination.

These details were first reported by the Los Angeles Times as part of its equity reporting initiative.