Senate Hearing on AI Surveillance Pricing — Transcript, Witness Summaries & Key Exchanges

Chairman Josh Hawley — verbatim remarksI'd like to welcome everyone to this hearing today entitled Your Data Their Profit: The Consumer Cost of AI Surveillance Pricing. This is a hearing of the Senate Judiciary Committee Subcommittee on Crime and Counterterrorism, which I am delighted to chair and to work with my colleague, the ranking member, Senator Durbin. I want to thank especially all of our witnesses for being here, as well as everybody else who is in the room and those who are joining us online. You know, hardly a day goes by in this town without some booster of AI talking about how it's going to transform the American economy for the better.

Chairman Josh Hawley — verbatim remarksThe question is whose betterment will this transformation lead to? I noticed that one of the nation's largest newspapers, the Wall Street Journal, has a headline today saying that the AI boom is transforming the American economy beyond recognition. The question is, are the American people going to be left behind in this transformation? And we're here today to talk about one of the effects of this AI boom, the partnership between the AI industry and some of the biggest corporations in America to effectively scam consumers out of every last dollar they have in order to buy products that they need and rely on.

Chairman Josh Hawley — verbatim remarksWhat if I told you that a store like Staples, for example, charge more online based on your IP address or on your proximity to arrival? What if I told you that Target's shopping app tracked your location real time in order to charge you as much as $150 more for a vacuum the moment that you enter their store? What if I told you that Lyft has charged 55 separate riders in my home state of Missouri 29 different prices for the same exact route at the same exact time with a difference of $37 between the different fairs. These are all documented cases documented cases of what we are now calling AI surveillance pricing.

Chairman Josh Hawley — verbatim remarksThat is really in a nutshell when the corporations work with the AI companies to harvest your personal data and I'm talking about your home address, how many children you have, your internet browsing history, everything they can get their hands on and feed that data through their complicated algorithms which of course are totally opaque and unavailable to you in order to force you to pay the absolute maximum amount of money they can get out of your pocket for every single product that they can offer to you. This is one of the biggest scams in American history. This marriage between the AI industry and these mega corporations, and they're trying to pull it off against every American consumer. AI surveillance pricing is the unholy trinity of everything Americans hate.

Chairman Josh Hawley — verbatim remarksSpying on people, ripping them off, and taking away jobs. Let me just talk about each of those briefly in turn. First, spying on people. Did you know that your neighborhood grocery store is amassing your data and tracking your purchases all for their profit?

Chairman Josh Hawley — verbatim remarksFor example, take Kroger. Kroger is not just a grocery store, though it is certainly that, one of the largest. It is a data selling mega corporation. Kroger's loyalty program has a treasure trove of data on you if you're one of their customers.

Chairman Josh Hawley — verbatim remarksOne Kroger customer got a copy of his shopping profile recently. You want to guess how long it was? 62 pages. 62 pages of personalized data on this one person based on his shopping history. Last year, Kroger earned over $500 million from selling, yes, selling the data that it harvests from its loyal customers and giving it to other corporations. Do you know that accounts for 33% of its net income last year?

Chairman Josh Hawley — verbatim remarksA third of its income came from selling the personal data of its own customers. Let me just say that again. Kroger made half a billion dollars by tracking its customers in store and online and then selling that to other people. Second, ripping off consumers.

Chairman Josh Hawley — verbatim remarksYou know, AI weaponizes your data against you for profit. And I'll give you an example. On Delta's second quarter 2025 earnings call, Delta's former president Glen Hauenstein revealed its partnership, Deltas that is, with an outfit called Fetcher, which is a company that specializes in AI surveillance pricing. Now, after that earnings call, Bloomberg uncovered a Fetcher white paper that describes using AI with airlines to replace simple flat fairs with a complicated pricing scheme that will vary the fair. based on what they believe individual customers are willing to pay.

Chairman Josh Hawley — verbatim remarksFetcher went on, this company, to say that it's time for the airlines to enter an exploitation phase of AI technology. Think about that. These companies are salivating at the prospect of using AI technology and your personal data to exploit you, and they're not even pretending otherwise. Finally, taking away jobs.

Chairman Josh Hawley — verbatim remarksYou know, this practice of surveillance pricing is making its way to brick andmortar stores. It's not just online. Here's an example of that. Kroger and Walmart and other retailers are rapidly introducing digital shelf labels all across their stores.

Chairman Josh Hawley — verbatim remarksWe'll give you an example over my shoulder here of a picture. Here's a digital shelf label. These are appearing everywhere across the United States. These labels can be used because they can be changed instantaneously.

Chairman Josh Hawley — verbatim remarksThey can be used to implement AI surveillance pricing in the store, not just online. Now, of course, this will end up costing jobs in the store certainly, but think about where all of this is heading. Delta's former president, I mentioned a moment ago, really put it best when he said that the goal is the goal of the industry. The goal of all of these industries, these mega corporations, and the AI industry that's working with them, the goal is to charge what they call personalized prices.

Chairman Josh Hawley — verbatim remarksYou know, as if it's a benefit to you, personalized prices. Here's what he said. This is a full re-engineering of how we price and how we will be pricing in the future. We will have a price that's available on that flight, on that time to you, the individual.

Chairman Josh Hawley — verbatim remarksLet me just translate. In other words, they're going to figure out how they can rip you off one person at a time. They're not going to charge you the same fair they charge your neighbor. They're not going to charge you the same fair as the guy sitting next to you in the seat.

Chairman Josh Hawley — verbatim remarksThey're going to figure out how they can bill you out of every dime they're willing to pay every time you step on an airline. And it's not just going to be them. It's going to be the grocery stores and everybody else until we figure out how to bring transparency, how to bring honesty, and some protections for the American consumer. That's what we're here today to talk about.

Chairman Josh Hawley — verbatim remarksWith that, I turn to Senator Durbin.

Ranking Member Richard Durbin — verbatim remarksThanks, Senator Hawley. I can't add much to that. It's pretty great presentation. I appreciate that very much.

Ranking Member Richard Durbin — verbatim remarksI read recently, I'm trying to find it again through AI, uh that Amazon made more money on data than they made on merchandise sales. In other words, more money on their consumers personal information than they did on selling to their consumers. Hard to imagine, but after you hear this explanation from Senator Hawley, it may not be impossible. It's possible.

Ranking Member Richard Durbin — verbatim remarksI would just add for a little consideration here something else. When it comes to payments and privacy, every click we make on the internet leaves a trail of personal data. We know that that data is collected, tracked, and sold. Congress can address it.

Ranking Member Richard Durbin — verbatim remarksAnd there's another thing Congress can do right now for the cost for consumers and small businesses is to pass the Credit Card Competition Act, a bipartisan bill I sponsor with Senator Marshall of Kansas. This bill would bring down the cost of swipe fees. The V Visa and Mastercard take out of every purchase we make with a credit card. You don't know it, your retailer does.

Ranking Member Richard Durbin — verbatim remarksFor some small businesses, these swipe fees become their second or third largest expense and many have been hired forced to raise prices as a result. Americans pay the highest swipe fees in the world. The credit card competition act would bring these down leading to sav savings for businesses and lower prices for consumers. Look forward to hearing the witnesses today.

Ranking Member Richard Durbin — verbatim remarksAnd Miss Caron, welcome from Illinois.

Thank you very much, Senator Dur. It's the practice of this subcommittee to swear in our witnesses before we hear testimony. So, if you would, if you would rise and raise your right hand and then take the following oath with me.

Do you swear that the testimony you're about to give is the truth, the whole truth, and nothing but the truth? So help you God. Very good. Well, let me now introduce each of you in turn and we'll just start down here at the dis with Dr.

Owens. After I introduce you, I'll give you an opportunity to make an opening statement if you'd like. First up is Miss Lindseay Owens. Miss Owens is the president and CEO of Groundwork Collaborative, which is a think tank that has done tremendous work in this space.

Miss Owens, the floor is yours.

Lindsay Owens, Groundwork Collaborative — remarks paraphrasedLindsay Owens, president and CEO of Groundwork Collaborative, testified that surveillance pricing is coming for every line of the household budget — groceries, gas, concert tickets, airfares — and defined it as charging different people different prices for the same item based on their personal information. She argued that the fixed price tag, invented in the late 19th century, replaced haggling with a shared expectation that everyone pays the same, and that firms are now abandoning simple cost-plus pricing in favor of capturing the maximum each buyer will pay, using hidden fees, price-hike coordination, and AI pricing experiments on unsuspecting shoppers.

Owens said companies can now buy, track, and analyze personal data — location, purchase history, even cursor movements — at vast scale, that loyalty programs are used to harvest information, and that agentic AI shopping assistants such as Walmart's "Sparky" could exploit an urgent purchase (her example: a parent buying a thermometer and medicine at midnight). She cited Target's app raising prices when a shopper is in the store, DoorDash tailoring by inferred hunger, Expedia charging users from high-cost cities more, and Kroger's loyalty program predicting income, and noted a 2025 FTC report confirming surveillance pricing in major industries.

Owens said the fix cannot be teaching consumers to beat the machine but setting rules so the machine plays fair, and pointed to more than 40 bills across 24 red and blue states this year and polling showing over three-quarters of Americans support banning the practice. She closed: "We can start by pricing products again rather than people."

Thank you very much. Next is Mr. Robert Hedges. Mr.

Hedges formerly served as Visa's chief data officer. He now works as a digital fellow at the MIT initiative on the digital economy. Mr. Hedges, nice to have you.

Robert Hedges, MIT (former Visa chief data officer) — remarks paraphrasedThe floor is yours. Robert Hedges, a former Visa chief data officer now a digital fellow at MIT's Initiative on the Digital Economy, testified that he had submitted detailed written testimony on how surveillance pricing works, its data flows and tech stack, the major data-ecosystem players, the patent and acquisition history, how to quantify consumer harm, and policy options. He explained that retailers and platforms collect data from shopping history, web browsing, location, inferred purchase intent, device type, battery life, mouse clicks, loyalty programs, and card activity, and assemble it into an "identity graph" — a single profile that infers behavior, preferences, health conditions, relationship status, and the presence of children.

From that, Hedges said, firms derive "willingness to pay" signals: a high willingness to pay means a shopper is less price-sensitive, has urgent need, or will not negotiate. He said the inputs are specific — location and IP address as an income proxy, time of day, purchase and loyalty history, device fingerprint, referral source, on-site dwell and cart-abandonment behavior, and the number of product pages opened — and that willingness to pay then feeds pricing across groceries, household goods, apparel, airlines, and hotels. Hedges argued no consumer would knowingly hand over behavioral data to be used against them, which is why they are never asked, and that requiring informed consent would likely end the practice.

His three recommendations: focused regulation with simple, clear disclosure of what behavioral data is collected and how it is used; use-case-specific consent before that data may be used in pricing models; and a requirement that firms tell shoppers their prices will not be derived from behavioral data unless the shopper opts in.

Thank you. Next is Mr. Lee Hepner. Mr.

Hepner is an antitrust lawyer and senior legal counsel for the American Economic Liberties Project. Mr. Hepner, floor is yours.

Lee Hepner, American Economic Liberties Project — remarks paraphrasedLee Hepner, senior legal counsel at the American Economic Liberties Project, testified that surveillance pricing targets different prices at individuals or narrow segments based on private information — location, social and professional networks, shopping history, marital status, inferences about health and finances, browsing habits, even cursor movement — to estimate the highest price a person will pay and to erode any notion of a fair, predictable price. He said American law has long assumed a common market price and has barred parties from exploiting superior information to discriminate against weaker participants, but that a gap in laws written when individualized price discrimination seemed impossible has been read by companies as a green light.

Hepner said antitrust courts have recognized that superior data access can itself be a competitive restraint, and that consumer-protection law addresses deceptive "fake discounts," but that surveillance pricing erodes the idea of any prevailing price at all. He cited pending class actions against JetBlue and The Washington Post — in the latter, subscribers paid 50 cents a week, 99 cents a month, or $20 a year, with one seeing a 300% jump in a year — and said that where every price differs, there is a credible argument every price is misleading.

Hepner urged Congress not to wait for the courts: ban using personal data to price goods and services, with narrow exceptions that would still permit senior, student, and veteran discounts and loyalty programs whose benefits are offered equally to all members. He praised a Colorado bill vetoed earlier in the year and Sen. Gallego's One Fair Price Act, and closed by quoting the Heritage Foundation's 1980 Mandate for Leadership calling selective price gouging and secret rebates "contrary to basic American precepts of justice."

Thank you. Next up is Miss Hillary Caron. Miss Caron serves as policy counsel to the United Food and Commercial Workers International Union. Did you say that she's from the state of Illinois?

Deerfield Illinois, we're glad to have you and the floor is yours.

Hillary Caron, UFCW — remarks paraphrasedHillary Caron, policy counsel to the United Food and Commercial Workers International Union, testified that the UFCW is the largest private-sector union in the U.S., representing 1.2 million members including more than 800,000 grocery workers, and focused on electronic shelf labels (ESLs) in grocery. She said food prices are up more than 30% since 2020, that some price moves are within retailers' control, and that ESLs are digital price tags, changeable remotely and in real time, that let dynamic, surge, and surveillance pricing migrate from apps into physical stores.

Caron said grocers began using ESLs in the U.S. in 2018 and Walmart plans them chain-wide by year's end; that companies claim they are only for discounts but would not spend up to $400,000 per store without a profit motive; and that ESLs are connected to inventory, point-of-sale, and pricing systems — and sometimes cameras and sensors — that use consumer data and AI to maximize profit and can change prices multiple times a day, removing the "speed bump" of paper tags. She relayed accounts from UFCW members: "Haley," who worried a family on a budget might not be able to buy baby formula if the listed price changed, and "Jenny," who said stable milk prices from Monday to Tuesday let customers plan.

Caron said scan-team workers in one Georgia store were moved to overnight shifts rather than freed for customer-facing work, cited polling that 67% of Americans favor banning ESLs and surveillance pricing in grocery stores, and praised New Jersey's Fair Price Protection Act and a federal bill from Sens. Luján and Merkley.

Thank you very much. And finally, Professor John Zhang. Dr. Dr.

Zhang is a professor of marketing at the University of Pennsylvania Wharton School. Professor Zhang, thank you for coming. The floor is yours.

Prof. John Zhang, Wharton — remarks paraphrasedJohn Zhang, a professor of marketing at the University of Pennsylvania's Wharton School, testified in his personal capacity and offered an economic defense of what he called personalized pricing. He said he came to the U.S. from China more than 40 years ago, has taught and studied pricing for three decades, and considers "surveillance pricing" a prejudicial label. Zhang argued that consumers differ in willingness to pay, so a single uniform price forces a trade-off: a high price earns margin but excludes many buyers, while a low price reaches more buyers but sacrifices margin, and a uniform price is therefore not always fair to lower-income, price-sensitive consumers.

He said society also loses to "deadweight loss" when mutually beneficial sales do not happen, that allowing multiple prices can expand access for price-sensitive buyers even if less price-sensitive buyers sometimes pay more, and that research shows personalized pricing can intensify competition and reduce profits, benefiting mainly firms with higher-quality products and loyal customers. Zhang pointed to airline yield management since 1978 deregulation, with average U.S. domestic fares down roughly 40% after inflation and about 978 million passengers a year, and concluded that the right response to a data-rich monopoly is to address the monopoly, not to reject a pricing tool that he said can benefit consumers and society.

Thank you very much. Thank you to all of the witnesses. We're now going to begin rounds of questioning. We're going to do seven minute rounds.

And uh I will begin. I want to start with you, Miss Owens, if I could. And I want to talk about the techniques that these mega corporations are using in conjunction with the AI industry. Let's just start with a real life incident.

Earlier this year, there was a a disturbing incident that played out on Twitter on X that shed some light, I think, on how airlines are using surveillance pricing in real time right in front of us. I think I've got the relevant exchange over my shoulder here. You have an ex-user who in April, this is April of this year, posted that he had seen a $230 price increase in one day when he was booking travel for a funeral on JetBlue. 200 $230 price increase. Now, here's the interesting thing.

JetBlue's own corporate account helpfully responded to him and instructed him to clear the cache and the cookies or use an incognito window. Now, Miss Owens, you're familiar with this this incident, I assume. Can you explain to us broadly what what is what's going on here?

Lindsay Owens said she was familiar with the JetBlue incident.

You click your microphone there. How about now?

Lindsay Owens, Groundwork Collaborative — answer paraphrasedGo ahead. Keep going. We'll see if we can turn you up. Owens said the episode showed two things: JetBlue was tracking the user's browser history, and it was using the data it collects in its pricing decisions — here, to raise the price for this individual based on that history.

She said it mattered because it showed surveillance pricing is not only about income: this person was trying to get to a funeral and needed the ticket urgently, and that desperation, not jet-fuel costs, was what drove the price.

Yeah. I I think that everybody who flies, let's just stick with that particular industry. Everybody who flies, I think, has the sense intuitively that they're being ripped off in some way on these airlines. And here's a smoking gun.

I want to emphasize this is their own corporate account. And they did not say in response, "Oops, we were hacked." What they said is is we made a mistake. No doubt they did. The mistake of cander where they confessed inadvertently what they're really doing.

Let let me just ask you, Dr. Owens, because I I think it's pretty clear, but what's the motive here? I mean, what is JetBlue's motive? What would you say?

Lindsay Owens said the motive is profit.

Owens said the data powering surveillance-pricing engines is projected to be a roughly $700 billion industry by 2030.

What kind of data do companies like JetBlue have on us? I mean, we talked about uh the browser history, the fact that they're clearly tracking this person around. they can see uh their what's in their cache and so forth. But what else? What other kinds of information do these companies have that they can use to set these personalized scam I would say prices?

Owens said that, unfortunately for consumers, companies like JetBlue now have access to "nearly everything" — location data, behavioral data (what you buy, don't buy, and leave in your cart), and demographic data such as family size and children pulled from loyalty logins — and that as firms build enterprise AI agents, consumers volunteer still more by conversing with them.

Airlines are not the only companies that are doing this. Your initiative, your organization, the groundwork collaborative, issued an expose on Instacart earlier this year. What your findings betray is and put onto the record is just incredible. Your report exposed how Instacart is charging different shoppers different prices for the same groceries at the same time.

And the amount of money that we're talking about here is really extraordinary. Your report found that the price swings for an average family could end up being in the neighborhood of $1,200 per year. $1,200 per year. That is a lot of money. Tell us about what you found in your report and why it's so significant.

Owens said Groundwork uncovered a large experiment Instacart was running on millions of shoppers: different customers were offered different prices for the same basket, at the same time, from the same pickup location. She said it was not occasional — more than three-quarters of the items tested came at different prices, sometimes as many as five prices per item, and as much as a 23% difference on a carton of eggs.

Wow. Um Mr. Hedges, if I could just turn to you, let's talk a little bit about the role that the credit cards play in this. Let's go back to that poster about JetBlue and just just think about the information that these companies have.

You are Visa's former chief data officer. Talk to us a little bit about what you know about what the industry what kind of information the industry gathers. And I want to zero you in on one thing in particular. JetBlue works reportedly with one of your former competitors, Mastercard, to make assumptions and draw profiles about its customers about JetBlue's customers.

And they use categories like confident or satisfied or focused or in love with JetBlue. This Mastercard subsidiary then flags if a JetBlue customer is likely to pay an above average fair. This seems extraordinary. tell us about what you have learned about what this subset of at least some of the credit card industry is doing to participate in surveillance pricing.

Robert Hedges, MIT (former Visa chief data officer) — answer paraphrasedRobert Hedges said the Mastercard subsidiary in the chairman's example is Dynamic Yield, one of whose specialties is calculating willingness to pay. He said only a small part of that calculation is card-transaction data; the rest comes from many sources — for an airline, where you usually travel, when you booked, whether you already booked a hotel, whether you have friends or relatives at the destination, and how long ago the trip was organized — all of which shape the willingness-to-pay score.

But just so I understand, the credit card transactions form and this in this case of this Mastercard entity, they form the backbone of this data. Is that correct? Hedges said card transactions are part of the data.

Hedges said he would not call card data the backbone; browsing activity, the ability to track where someone shops, and inferences about where they live and how urgently they want to buy come from many different data sources.

because there's so much of it because there's so much data.

Hedges said the browsing ability, the ability to track where someone is shopping, and the ability to infer where they live and their sense of urgency come from lots of different data sources.

I just think it would be it is an extraordinary revelation to most Americans. It certainly is to me that what you're doing with a credit card over here could be used by a company over there to set a price for you that's different than the price that they would give to Senator Durbin or to Senator Lee or anybody in the audience. I mean, that is extraordinary. And what say do I have in any of it?

None.

Well, whatever.

Hedges said that, to the chairman's point, the transaction itself lets the seller or airline know it is you — the culminating point of the search or shopping process where all those factors get actioned.

Do you prefer Karen or Coron?

Hillary Caron said her surname is pronounced “Karen.”

Tell me about Norway.

Caron said Norway is a warning worth heeding: an early adopter of electronic shelf labels, where shoppers are used to seeing prices change while they shop — by one estimate as much as a hundred times a day — and where the competition authority found the three major grocery chains, which together hold about 95% of the market,

were essentially price-fixing. Caron said the chains colluded to fix prices, visiting each other's stores to compare, and that when they saw a competitor's higher price the electronic shelf labels let them raise their own instantly; they were hit with a record fine that was recently upheld. She said the lesson is that Norway had an aggressive regulator that caught them, and the U.S. should be aware the same could happen here.

Dr. Zhang, I don't think we consumers have a fighting chance. The information that's being gathered about us involuntarily is hard to describe in terms of any limitations. Facial recognition.

For goodness sakes, you can walk in the front front door of the store and they'll identify you on the spot. I'm told that many stores, particularly grocery stores, track the customers in their journey through the store, dwell time at certain shelves. All this is being accumulated. I don't think it's any coincidence that most stores put dairy products as far away from the front door as possible.

So they think people want to buy milk before they go home or eggs. It's way over there in the corner of the store. You have to wander through the store to get over there. It's all designed in terms of measuring and influencing consumer behavior.

Does a consumer have a chance?

Prof. John Zhang, Wharton — answer paraphrasedZhang said consumers do have a chance, because information is very important to how the economy functions, so businesses will collect it — and the economy needs that information to work.

my information my personal information

Zhang said that because consumers are individuals, firms have to collect individual information to know the market, that firms must also make a profit to survive, and that he is not sure supermarkets are especially profitable — many close each year, which to him suggests they have not always used information well. Now, if I'm buying online though, it's another story, right?

Zhang said buying online is a different story and firms can capture more information from you.

Yeah, they seem to read your mind. I I don't have any of Claude or any of those helpers in my home to monitor what's going Zhang said he gets upset too, but noted that when prices move from high to low, consumers also get the chance to buy at the low price, so shoppers retain some agency to seek out lower prices in that environment.

Mr. hedges. Uh many years ago, many many years ago, I walked into this room and sat down at the corner over there for Arlen Specter, who had a hearing on swipe fees and interchange fees. I'd never heard of them. I listened and understood that if I had a business, a restaurant, Springfield, Illinois, and I wanted to have Visa and Mastercard, uh, I had to pay a swipe fee, a percentage of the cost of a dinner that I'm going to serve, and add that on to my cost.

The consumer still doesn't know how much that is by and large. Uh, and yet that fee continues to be charged. uh and and most retailers will tell you it's a big piece of their profit. Is that fair? I

Robert Hedges asked Sen. Durbin to confirm whether he was asking if the practice is fair.

There's no negotiation. Take it or leave it, Mr. Retailer. Try living without Visa and Mastercard.

Robert Hedges, MIT (former Visa chief data officer) — answer paraphrasedSee how you Hedges said he retired from Visa about 10 months earlier and that, as chief data officer, he was not involved in interchange or swipe-fee management.

We're not going to prosecute you. go forward.

Mhm.

Pardon me.

We're not going to prosecute you. Go ahead.

Hedges said that pricing clarity and transparency should be the governing principle and that he wholeheartedly embraced that, but that he was not well positioned to discuss Visa's pricing because he never managed it. Our hearing is about uh information being gathered and consumers paying a higher price because of it. That is our concern. I think chairman's illustrated that pretty effectively.

I think the same thing applies when it comes to Visa and Mastercard. I think there ought to be disclosure to the consumer about what you're charging in that indust what you did charge in that industry with your former employer as part of it. Thanks, Mr. Chairman.

Senator Lee.

Thanks so [clears throat] much, Mr. Chairman, for holding this hearing. This hearing raises interesting questions. Uh, you know, AI surveillance pricing is a new development and it's one that finds itself at the crossroads of a whole bunch of developments in in a different bunch of different concerns including consumer privacy, competition, artificial intelligence, and I appreciate the opportunity to flesh some of these out.

Last month, I I wrote a letter to Uber and to Lyft uh seeking some information about whether to what extent in what ways their algorithms might use personal data, uh behavioral signals or competitor information to help determine writer affairs and uh driver compensation at any given moment. I look forward to their responses. Uh but the those questions relate to a a broad question before us today which involves when whether to what extent in what way does legitimate dynamic pricing at some point morph into something more troubling uh more troubling that that raises serious legal and policy concerns and then what if anything do existing laws have to say about that and are are existing laws sufficient to deal with it? Uh Dr.

Dr. Owens, I'd like to start with you if if that's all right. Now, you support prohibiting companies, as I understand it, from from using personal data to set individualized prices. What kind of test, if we were writing a law, what sort of statutory text would you suggest that we use in order to distinguish between um surveillance pricing on the one hand and lawful dynamic pricing on the other hand? you know just um utilizing um the basic inputs like uh supply, demand and inventory uh as well as time to set prices.

Lindsay Owens, Groundwork Collaborative — answer paraphrasedOwens said dynamic pricing can be a useful tool — usually understood as factoring market conditions, managing supply and demand, and bringing scarce resources into equilibrium — whereas personalized pricing is about setting individualized prices, and surveillance pricing sets them from data the company has collected on you and turned against you,

using your unique vulnerabilities that they may have access to or may be aware of even more than you are.

Owens said yes — information asymmetries and unique vulnerabilities. She praised Sen. Lee's efforts against carmakers that spy on drivers and sell the data to insurers to raise premiums, calling it an important curb on surveillance pricing in auto insurance, but said dynamic pricing still has a place, citing FIFA's first-ever use of it for World Cup tickets, which she said priced out loyal fans and turned the sport into a luxury box for the wealthy.

Yeah. Um, now to that end, taking concerns like that into account, you've recommended restricting data pooling and potentially even winding some uh previously completed transactions in which companies um are are pooling data sets. Is that right?

Owens said yes, and that the real question with dynamic pricing is the goal of the strategy — whether it is to sell genuinely scarce resources to the highest bidder — and that using dynamic pricing for goods that are not scarce, like boxes of Wheat Thins, is strange.

It could happen theoretically.

Owens said that setting aside genuine shortages, what she sees with dynamic pricing and electronic shelf labels in grocery is practices like raising the price of ice cream on a hot day when stores know customers want a cool treat. What uh what sorts of tools or um data sets should antitrust enforcement personnel be looking for when when flagging instances of these when identifying surveillance uh surveillance price uh pricing? How best you differentiate the wheat from the chaff, the good from the bad?

Owens said there are antitrust and data-privacy angles but that new law is really needed, since the practice sits in a legal gray area exploiting existing loopholes; she supported FTC enforcement and state attorneys general using UDAP laws, but said a federal standard would better protect consumers. One of the things that you've talked about uh is um making sure that anytime somebody's using an AI purchasing agent and an an agent powered by AI authorized by the consumer to make a purchase on behalf of that consumer u that the AI agent must be required to act in the consumer's best interest. H how would you define and and police that? Owens said she has started writing about this, noting Sen.

Warner's draft AI Agent Act; that a human agent in the brick-and-mortar economy — a realtor, a book agent — must act in the client's best interest, while AI chatbots shopping and booking travel on a consumer's behalf carry no similar

expectation of a fiduciary responsibility.

Owens said exactly, and that as agentic commerce — projected at $5 trillion by 2030 — reshapes the economy, one has to ask what shopping looks like if chatbots are shopping on Gemini's or ChatGPT's behalf rather than the consumer's; she said a best-interest standard is one interesting approach, that she has supported Sen. Warner's approach, and that other options are worth considering.

Okay. So, in other words, I'm out of time, but it sounds like part of what you're talking about is that consumer needs to know what's happening. And just because it's part of AI doesn't necessarily mean it's foolproof. Doesn't necessarily mean that there aren't other influences at play, including acting on behalf of somebody who's a part owner of the agent or uh maybe given money to the agent in order to preference their product over somebody else's.

Lindsay Owens agreed.

Okay. Thank you. Thanks, chairman.

Thank you, Senator Blumenthal.

Thank you, Mr. Chairman. Thank you for having this hearing. uh and I think you can sense a bipartisan feeling of urgency around this topic uh particularly among members of this subcommittee. In my view, we ought to be having this hearing with the full committee and we ought to be working on legislation that incorporates some of the ideas that have been advanced here.

Senator Hawley and I have a framework for legislation. We've also pursued individual pieces of of legislation dealing with AI. Uh and I agree with you that there may be a difference uh Dr. Owens between surveillance pricing and dynamic pricing.

But for the consumer who sees prices rising, they don't care. Right now, we have an affordability crisis and we ought to be doing something about the use of AI regardless of what the retailer says the goal is because it's a little bit like a spitball that's thrown. It doesn't really matter whether the spit got there purposefully or whether it just happened to pass by the lips of the pitcher. The effect is the same. and we outlaw the pitch in baseball because it is unfair to the batter.

And the same principle applies here. We need a law. We need a federal law. We need federal standards.

We need national safeguards. And uh to that end, I am deeply disappointed that the present chairman of the FTC has abandoned the work that began under the prior FTC chair. uh Lina Khan uh issued legisl investigative demands for data from retailers on this practice and at the end of her term the commission published a preliminary report that found quote retailers frequently use people's personal information to set targeted tailored prices for goods and services from a person's location and demographics down to their mouse movements on a web page. and uh end quote. Uh and actually she raised the possibility that I think you raised, Dr. Owens, about a parent needing a thermometer.

As a parent of four, I know I've been out there searching frantically for certain things for our first of four children. I was less frantic on the third and the fourth, but uh we know that it's not just the availability of the product that surveillance pro pricing looks at. It's also the need and capacity to pay of the consumer and that's where some of the problem arises. So I'm very disappointed the FDC has abandoned that effort.

On the other hand, states have begun to lead. in particular, uh, my state of Connecticut, uh, along with the state of New York, uh, has passed laws that regulate surveillance pricing. Some of these laws are stronger than others, uh, with restrictions ranging from corporate transparency to complete bans. New York's one fair price act prohibits businesses from using algorithms to set prices in whole or in part based on personal data. Connecticut commendably also signed onto a bill that prevents retailers and third-party delivery services from engaging in personalized prices.

These laws ought to be commended and el elevated u because states eventually and I'm talking now as a state attorney general will force the federal government to act. It's happened again and again and I've seen it in action uh toys with small parts warnings. Connecticut championed a law. it was upheld by the courts and then the industry wanted a national standard so it wouldn't face a patchwork of different laws but in the meantime we need to build from the states a gold standard to stop these predatory practices so let me ask um all of you but beginning with Dr. Owens uh Miss Caron and Mr.

Hepner, what has worked? What seems most promising at the state level? And um should the FTC be acting more aggressively?

Lindsay Owens, Groundwork Collaborative — answer paraphrasedOwens said she has been heartened by state-level policy activity but that it has also exposed the difficulty of acting state by state: Colorado passed a strong bill only to have Gov. Polis veto it, and New York passed what she views as the strongest ban to date but was still awaiting Gov. Hochul's signature. She said delays and vetoes have led to industry efforts to water proposals down until they are nearly meaningless, that she is glad states are moving but a federal standard is the right approach, and that the hearing was an important first step because "75% of Americans want to see this put to bed."

Mr. Hepner and then Miss Caron.

Lee Hepner, American Economic Liberties Project — answer paraphrasedHepner said he agreed the vetoed Colorado bill was probably the strongest, starting from the simple premise that personal information should not inform price, with narrow, familiar exceptions for things like student and senior discounts that may require sharing some personal information to qualify, but not a sweeping exception for "personalized discounts," which he said are no different from personalized prices.

He said loyalty programs can be handled with a simple rule that benefits be valued equally across members so they are not a "Trojan horse for price discrimination," cited a report on McDonald's Monopoly promotion being used to charge some customers more and a Washington Post retention discount three times higher than the price a canceling subscriber was paying, and said that if the FTC dislikes the term "surveillance pricing" it could call it individualized price discrimination and reopen its study.

If the chairman will permit uh Miss Caron to answer.

Hillary Caron, UFCW — answer paraphrasedCaron said she agreed that loyalty-program discounts should be the same for everyone and that state legislation should be tightened to require uniform discounts, since personalized discounts are essentially surveillance pricing. She again praised New Jersey's grocery-specific law, which she said addresses both surveillance pricing and electronic shelf labels, puts a one-year moratorium on the labels, requires a study, and requires the industry to give pricing-practice information to the state's Division of Consumer Affairs. Caron said the FTC can and should do more under existing authority, that this is not anti-capitalism — she said she believes in capitalism, and that corporations will use whatever data is available to raise revenue, which is why safeguards are needed.

Thank you, Senator Blumenthal. Thanks for your leadership on this. Dr. Zhang, if I could just come back to you and give you an opportunity to expand your views and maybe enlighten mine.

Um, I'm a lawyer, not an economist. So, you know, you have to walk me through it slowly, but just help me understand. In my state, we have very robust price gouging laws. And I know that because it used to be my job to enforce them.

Mhm.

I was the chief prosecutor, the attorney general of the state of Missouri, and we quite robustly enforce those anti-pric gouging laws. And a good example of this is is that after a major storm or natural disaster, which we have on a fairly regular basis in my state, state law prohibits retailers from jacking up prices. Now, I have to tell you, this surveillance pricing sounds a lot to me like price gouging, where you've got information about a consumer who may be in a position of vulnerability. I mean, let's look again at the JetBlue poster and just think about this particular individual who is flying for for a funeral and JetBlue using their information asymmetry knows that and so therefore turns the price up by 230 bucks in a day.

Why isn't that just price gouging? And otherwise, why isn't this this surveillance pricing just uh personalized pricing? Call it what you like. Why isn't that just a more sophisticated form of price gouging where you're really exploiting people and their vulnerabilities?

Prof. John Zhang, Wharton — answer paraphrasedZhang said that if surveillance pricing is price gouging, existing laws would already cover it, so no new law would be needed. He said price-gouging laws (he is not a lawyer) apply to emergencies and necessity goods, and that capping prices in a true shortage — for example gasoline after a hurricane — can lead people to hoard and create allocation problems for the remaining stock.

but we do but we do do that,

Zhang began to respond.

but why wouldn't we let's just pull that through.

We do that because we think it's wrong. We make a moral judgment. We think it's wrong to exploit someone who's in a position of vulnerability. We think that when there is such an asymmetry in bargaining power, we say, "Wait, wait a minute.

Wait a minute. We're not going to allow you to exploit this person. You could exploit them because their need is tremendous. This individual's need was tremendous. he was trying to get to a funeral

and the corporation knew that.

Now in in other contexts, my point is in an analogous context, we say no, we're not going to let you do that. Why why shouldn't we say that with regard to surveillance pricing? I'm trying to discover if there are any limits to your support for it. I mean, do do you think that it would be fine to double or triple the price of an airline ticket for someone flying to a funeral?

Do you have any issue with that?

Zhang said he wanted to return to the JetBlue case, and noted that his own mother had recently died, so if he faced that situation he would be very angry. He said that if JetBlue used AI and knew the customer was flying to a funeral, there was no good purpose in making the customer angry, and that this went too far.

Well, no, but wait a minute. But they absolutely have a purpose in trying to get this customer to pay. I mean, if he's really in duress as he is, he needs to get to that funeral. They're just trying to maximize their profit and and he may he's willing to pay that fair.

He may be angry about it, but he'll pay it by golly. The only reason it didn't work out for him is because it was all public.

Zhang said JetBlue probably had the wrong data and made a mistake charging that person, which is why the airline then offered a lower price if the customer took other steps.

Well, no, I don't think so. I think they had great data. The problem was is that he put this out there for all the world to see and Jet Jet Blue exposed the fact that they've got all this information on it. My my question is, don't you think we should put some limits on this?

Isn't there isn't there some limit to the exploitation of a consumer's vulnerability, whether it's somebody who's trying to get to a funeral or a parent who has a sick child? I mean, don't you think that we should say at at a certain point, listen, I mean, fair in the legal context, you you referenced fair prices early earlier. Fairness in the legal context means treating similar parties similarly,

the equal justice under the law. It's that there's not a rule for me and a rule for Senator Blumenthal and a rule for Senator Lee. There is one rule that applies to all similarly situated parties. The problem with this surveillance pricing is is that it seems to say, "No, there's going to be a different rule for every single person." And the corporations have all the information.

We have none of it. The a the asymmetry is astounding. They know everything there is to know. I have basically no ability to set the price.

They've got all of the information. Doesn't that doesn't there seem to be something that is fundamentally wrong with that?

Zhang said he fully agreed there has to be a boundary, most likely on how information is collected, processed, and used rather than on having multiple price points, and that he does not accept the premise that personalized pricing always makes prices both variable and higher. He said prices are already variable without AI, that firms change prices in many ways, and that he recently wrote an article criticizing firms for giving the impression that personalized pricing always means prices go up.

Well, but isn't the goal of of surveillance pricing always to maximize profit? I mean, and this gets back to aren't the firms going to do that unless we just like let give you a different example also from the law. Just like firms would absolutely run right over your property rights if we didn't have laws that define them. If we didn't have laws that say, "No, actually that belongs to you, and I can't just take it from you." Why?

Because we have property laws that say that's yours and you can enforce it against me. In this case, the consumers have no protections. They've got no protection. The firm has all of the information.

The corporation's got all of the power. I have no power to set the price. The only thing I can do is hope and beg that maybe at 2 am when my child is running a 102-degree fever and I desperately need Tylenol, if Walmart Plus is charging me 30 bucks for it, gee, if I can drive to an open CVS, maybe I'll get lucky. I mean, I'm just at their mercy, right?

That just seems fundamentally wrong to me. And I think it seems fundamentally wrong to most Americans, which is why we're here today. Mr. Hepner, I want to ask you here as our time runs out, but I'm the chairman, so I can just go on indefinitely.

I'll come back to you, Senator Blumenthal. For those of you who have been in hearings with Senator Blumenthal and me, the two of us together can go on quite a long time, and I'm happy to do that today. Let me just ask you about a JetBlue lawsuit. There's now a class of putative JetBlue customers who are suing the company.

Lee Hepner, American Economic Liberties Project — answer paraphrasedAre you following this? And what can you tell us about their claims and why this is something we should be aware of? Hepner said it is an important class action alleging much of what the hearing had covered: that a wide breadth of personal information collected through JetBlue's website and Google Pixel was taken from would-be travelers, shared with third parties, and used for discriminatory pricing. He said the suit alleges civil and criminal trespass, federal wire-fraud violations, and state consumer-protection violations, that a key question is whether consent buried in a privacy policy defeats those claims, and that federal transportation law preempting state regulation of rates, routes, and services (as with New York's passenger bill of rights) could complicate the state claims.

That is exactly the topic I wanted to explore, state consumer protection laws, because you can't have the Federal Trade Commission on the one hand saying there's nothing to enforce here and then have a judge say state enforcement of consumer protection laws against surveillance pricing is somehow preempted. States have very broad authority under their state consumer protection laws. Every state has one and they are extremely adaptable. I sued the tobacco companies under our state consumer protection laws.

Everybody had a very convoluted theory of how we needed new laws, and I said they're breaking our consumer protection laws. This is deceptive and misleading practices. And I think the same theory could be applied here. It takes a long time around here to get a law passed, and there are more reasons not to pass a law than to get one done.

The elephant in this room is the one that Dr. Owens mentioned. The industries are tooth and nail against any of these restrictions. They will seek to water them down and stop them from passing, and it's much easier for them to do at the federal level than at the state level.

I've been in our state legislature and I was also state attorney general for 20 years. So can't we use existing law more expansively and aggressively to go after some of these practices?

Hepner said yes — that in his opening testimony he had noted general consumer-protection laws against fraud, misleading prices, and deception can be brought to bear. He said he had not seen a case alleging a price is inherently misleading because everyone is charged differently, but that there is an inherent net deception in that kind of pricing.

He said he is not sure industry is more influential at the federal level than the state level, and warned about laws like one in Maryland that he said was riddled with loopholes and also carved a hole in that state's century-old consumer-protection law so it could no longer be enforced against the conduct the new law covered — a risk, he said, of industry using new legislation to relitigate traditional notions of fairness and build a permissive regime.

I see a few nodding heads. So if anyone has other comments, I'd welcome them on that question. A witness added that there was little to add with two former state attorneys general in the room, but that some states are getting creative — Washington State has gone after stores for inflating baseline prices to make discounts look bigger — while noting it is hard to prove consumer harm without a paper trail, that regulators can only see a small fraction of what happens, and that some existing data-privacy protection effectively comes from the EU's GDPR rather than U.S. law.

Another witness added that antitrust laws are also potentially applicable — citing real-estate cases where companies used AI to coordinate near-instant price increases, and consolidated markets such as airlines offering more opportunity for that kind of collusion — and thanked the chairman for holding the hearing.

There's just one more thing that I'd like to get on the record factually. Dr. Owens, if I could just ask you about it. But I want to ask you about a patent, an actual patent that the Walmart Corporation has.

This is a patent for a shopping cart. And I think we have a graphic to this effect. This is a a patent for a shopping cart. There it is.

That uses sensors to track the speed of your cart, your heart rate, your body temperature, and then feeds it into a server for analysis. I emphasize this is not a joke. This is not some AI didn't invent this, sadly, but AI is going to use it. Walmart has this.

Wh why would why would Walmart want something like this and and tell us how this feeds in to the kind of unbelievable information asymmetry that is driving this surveillance pricing?

Owens said companies deny using surveillance pricing but that their patents, investor disclosures, and acquisitions of AI pricing-tech startups paint a different picture; she called Walmart a "treasure trove" of patent data on personalized pricing and promotions, said the shopping-cart patent is only a first step toward using cameras, cooler screens, and cart sensors to feed "consumer intelligence" and "agitation" scores, and noted DoorDash has a patent application for measuring how agitated — how desperate — a customer is.

Uh Uber monitors your phone's battery life. And why? Because they say one of the strongest predictors of whether or not you're going to be sensitive to a price surge is how much battery you have left on your cell phone. When your cell phone battery gets low, think about this next time you order a number.

When your cell phone battery gets low, people start saying, "Well, I need to go home." And so, they think they can probably raise the fairs. Now, the point is, I think what we've seen today and what all of you, thank you for your testimonies, which you've helped us to get onto the record, is companies, the biggest companies all over this country are doing this. AI is helping them do it. And who loses time after time?

It's the consumer and particularly it's working people in this country. You know, Professor Zhang made the point, and I don't doubt don't doubt this is true, that the the rich may end up paying more in certain circumstances, and that's fine, but what I'm really concerned about is time after time after time, it's working people who are going to be paying more, who are going to be forced to pay more, and frankly, the needy. Because the whole point here is to maximize the profit of these already wildly profitable corporations. I Walmart, wildly profitable corporations who are trying to exploit every vulnerability.

And the truth is, in America, everything costs too much already. It costs too much. Gas costs too much. Houses cost too much.

Cars cost too much. Groceries cost too much. All of it costs too much. And now these corporations who are the most profitable corporations in the history of the planet are scheming with the biggest tech companies in the history of the world to figure out how to exploit you even further.

And I would just submit that our capitalist system and our free market system, which I love and support, is based on a moral framework where we agree together, and we call those things rights, where we agree together, that people have certain rights, and we protect those rights. And we need to give consumers and working people and families in this country rights against this kind of surveillance and exploitation. If we don't do that, the basic foundations, the moral foundations of our economy and of our country will be devastatingly eroded. And you see it already.

And this is why people don't trust anything. They don't trust any institution. They certainly don't trust any of these companies we've talked about today. Nor should they because they're being exploited constantly.

And it is this body's job to do something about that. So, we need to stand up and say, "We're going to protect the American people. We're going to give them rights. We're going to preserve that basic moral foundation that makes our economy and our country more broadly work and that we agree on together.

So, it makes us Americans. It's done us pretty good for the last 250 years. I think maybe we ought to preserve it. I'm going to give you the final word, Senator.

I I associate myself with your remarks, Mr. Chairman, or in a different vernacular. Amen. Thank you.

Very good. Thank you again to all of the witnesses. Before we close, I'd like to note the subcommittees received statements from the following interested parties. Professor Christian of the University of Michigan, Airlines for America, the National Retail Federation, the Center for Democracy and Technology, and the Walmart Corporation.

Without objection, we'll put all of those into the record. This uh record for this hearing will remain open for 15 days until Wednesday, August 19th at 5 p.m. for the submission of statements and questions for the record. And with that, this hearing is adjourned.