HB 2481 Appropriations testimony
Appropriations is a fiscal committee, and I had heard that a lot of the battle around whether to advance HB 2481 related to its budget, so that's what I focused on in my live testimony. There were various proposals floating around to reduce costs, but rather than talking about any one in particular I just wanted to convey that from my perspective it made sense to do whatever was needed to advance the bill. The written testimony went into more detail on why it's so important to prohibit this unfair business practice.
Live testimony
Chair Ormsby, Ranking Member Couture, and members of the committee,
I'm Jon Pincus of Bellevue, and I run the Nexus of Privacy newsletter. My position on HB 2481 is PRO. Maximizing profits by charging some people more than others is unfair and anti-consumer, so should be prohibited, My testimony today focuses on the bill's fiscal aspects; my written testimony will cover other aspects as well.
Last year, Consumer Reports' found that Instacart's surveillance pricing could cost a family of four up to $1,200 per year. For people across Washington, this adds up to extra costs of over a billion dollars a year at a time when so many families are struggling to make ends meet.
The current fiscal note's operating expenses of $790,000 this biennium translate to less than fifty cents per family. If even that is too much, there may be ways to reduce costs.
One way or another, please advance this bill. Banning surveillance pricing is a big fiscal win for Washington families at a time when we badly need it.
Written testimony
Chair Ormsby, Ranking Member Couture, and members of the committee,
I'm Jon Pincus of Bellevue. I run the Nexus of Privacy newsletter, and served on the state Automated Decision Systems Workgroup in 2022. I strongly support HB 2481. Charging some people more than others for the same item is unfair and should be prohibited.
At the hearing I talked about the financial impact of surveillance pricing of groceries – up to $1,200 / year for a family of four, which means up to a billion dollars a year for the people of Washington. The need for prohibiting this anti-consumer practice is especially clear when it comes to grocery stores. Food is not a luxury. Purchases of food are necessary for survival.
Before I go into more detail on where that number came from, though, I first want to describe how surveillance pricing works, and talk about some of the other harms surveillance pricing leads to.
On some of the other automated decision systems-related bills I’ve worked on, it can be very challenging to explain the situation to people. With surveillance pricing, it’s easy: they'll charge you more if they think they can get you to pay more.
And the people I talk with about surveillance pricing are invariably outraged. My Mom said it best: “How can they get away with doing that? That shouldn’t be legal!” Indeed. And HB 2481 quite rightly prohibits surveillance pricing for retail items in grocery stores. The need for prohibition is especially clear when it comes to grocery stores. Food is not a luxury. Purchases of food are necessary for survival.
Prohibiting Surveillance Prices and Wages, whose co-authors include Electronic Pricacy Information Center (EPIC), AI Now, Tech Equity, Groundwork Collaborative, and American Economic Liberties Project, has a pithy summary of how surveillance pricing works:
“Corporations collect information about where we go, what we watch, what we like, who we know, what food we buy, what videos our cursors linger over, and what loans we take out. Giant firms can run those data points through algorithms to set individualized prices and wages, rigging the market to charge us as much as possible for goods and services”
At the policy hearing on HB 2148, John Marshall of UFCW talked about one example: the algorithms that set the prices know if you’ve just been paid. People who live paycheck-to-paycheck often have to wait to buy groceries for their family until they are paid, so it’s a perfect time for stores to maximize profits by charging them more.
Prohibiting Surveillance Prices and Wages has another good example of how surveillance pricing can work in practice:
“A woman is charged more for sanitary products because her period tracking-app shows that she is menstruating”
Obviously, the privacy implications of surveillance pricing are disastrous. EPIC’s Big Tech’s Holiday Wish List: Secretly Charging You More with Surveillance Pricing notes
"[S]urveillance pricing is built on the mass data sharing of personal data through data brokers, and it incentivizes even more intrusive data collection to predict an individual consumers’ likelihood to purchase products at certain price points. Such personal data collected for commercial purposes often end up in the hands of third parties, including law enforcement agencies, and used for unrelated purposes. In sum, surveillance pricing and the mass data collection that fuels it undermine consumer privacy, autonomy to make purchasing decisions, and fair treatment of consumers."
The FTC Surveillance Pricing Study goes into more detail on the wide range of personal data used to set individualized consumer prices.
Less obviously, Prohibiting Surveillance Prices and Wages also discusses how surveillance pricing hurts small businesses while giving large corporate powers a competitive advantage:
“Dominant firms typically have superior access to data and advanced technologies to exploit surveillance-wage-and-price-setting systems, and once dominant firms begin using surveillance wage and price setting, they can collect even more data, refining algorithms and widening their advantage. Smaller firms often lack the market power and technology to demand access to or exploit surveillance data.”
And surveillance pricing is a worker safety issue as well. I'll admit that I didn't actually realize this until the powerful testimony from grocery workers at the policy hearing on HB 2481. Once they explained it, though, it was blindingly clear.
When a customer gets upset because they're getting charged more for eggs than the person ahead of them in line, who are they going to take their frustrations out on?
Grocery workers!
And as the workers testifying at the hearing pointed out, angry customers sometimes get physical.
Returning to the financial impact, the $1,200 / year number comes from the fascinating Same Cart, Different Price study that Consumer Reports, Groundwork Collaborative, and More Perfect Union did last year, looking at Instacart's surveillance pricing.
The approach the study took was ingeniously straightforward. Different people added items to their carts at the same time. Researchers compared the prices. A few highlights from the report:
- 74% of the items had different prices shown to different people.
- The exact same basket of groceries on Instacart from a Safeway store in Seattle cost some shoppers $114.34, while other shoppers were shown $119.85 and $123.93.
- Some shoppers found grocery prices that were up to 23% higher than prices available to other shoppers for the exact same items, in the exact same store, at the exact same time.
- Based on the average of about 7% difference in basket totals and the amount that Instacart says the average household of four spends on groceries in the U.S., that could translate into a cost swing of about $1,200 per year.
For people across Washington, this adds up to extra costs of over a billion dollars a year at a time when so many families are struggling to make ends meet.
Research to date on surveillance pricing has focused on online purchasing, and at the hearings on HB 2481 industry representatives have emphasized that they are not yet doing surveillance pricing in their retail locations here in Washington state. But vendors of in-store systems are pitching "smart retail solutions," where sensors, cameras, and RFID tags "feed relevant information to machine learning algorithms". For customers running apps on their smartphones, systems can also set up geofencing alerts that literally track the customer through each aisle. So even if they’re not doing it yet, grocery retailers certainly have the ability to implement surveillance pricing. The best time to ban it is now.
While I certainly understand the challenging fiscal circumstances legislators are dealing with this session, HB 2481's current fiscal note's operating expenses of $790,000 this biennium translate to less than fifty cents per family. If even that is too much, there may be ways to reduce costs.
Please advance HB 2481 and work with your colleagues to ensure the legislature passes it. Banning surveillance pricing is a big win for Washington families at a time when we so badly need it.
Jon Pincus, Bellevue