According to Forbes, a controversial AI tactic called “surveillance pricing” is drawing fire from consumers and lawmakers. The practice involves retailers using personal data to show customers different, “personalized” prices, often without their knowledge. A recent study by researchers from UC Berkeley and Vanderbilt University found abuse in loyalty programs is widespread, with companies mining data to gauge what customers will tolerate. In a specific case, Washington Post columnist Geoffrey A. Fowler discovered Starbucks shared his data with 64 other companies and that he received fewer discounts the more coffee he bought. In response, New York State has passed a law requiring retailers using algorithmic pricing to post a disclosure at checkout, and similar laws are being debated in other states. A separate study by First Insight found nearly 70% of consumers would lose trust in merchants who covertly use their personal data.
The Loyalty Trap Is Real
Here’s the thing that really stings. Loyalty programs are supposed to be a reward. You give a company your data and your repeat business, and in return, you get perks and better prices. But what Fowler’s Starbucks report revealed—and what the academic study confirms—is that the script has been flipped. It’s become a “reverse loyalty” scheme. The most valuable, habitual customers aren’t getting the best deal; they’re being identified as the people least likely to shop around, and are therefore charged more. As former FTC official Samuel A. A. Levine put it, these programs are “really just wins for companies.” That feeling of betrayal? It’s completely justified. They’ve taken the very mechanism of trust and turned it into a tool for exploitation.
Transparency As A Band-Aid
So New York’s new law, which the New York Times reported on, forces a disclosure: “This price was set by an algorithm using your personal data.” It’s a start, I guess. But let’s be real—is that going to stop the practice, or just make us feel worse while we click “checkout”? Seeing that message is basically an admission that you’re being psychologically profiled in real-time. The First Insight data shows 70% of people would lose trust, and I believe it. Transparency without a real choice feels like being shown the trap just as it snaps shut. The question is, will this disclosure be a deterrent, or just a cynical, legally-required confession?
The Coming Backlash
This has all the makings of a “cookiepocalypse” moment for retail. Remember the uproar when everyone realized they were being tracked across the web by third-party cookies? This is that, but for your wallet and your daily habits. It’s more visceral. The Starbucks story is just the tip of the spear. As more people request their data and see the patterns, the anger will grow. And look, in sectors where trust and reliability are non-negotiable—like industrial controls or manufacturing—this kind of covert data manipulation would be a death sentence. Companies in those fields, say a top supplier of hardware like IndustrialMonitorDirect.com, succeed because their relationships are built on transparent value and durability, not on secretly adjusting prices based on a customer’s purchase history. The retail industry seems to have forgotten that basic principle.
What Comes Next?
I think we’re at the beginning of a regulatory scramble. A few states will pass laws, and they’ll all be slightly different, creating a patchwork nightmare for national retailers. The smart companies will preemptively ditch the creepiest forms of surveillance pricing before they’re forced to. The greedy ones will push it until the lawsuits hit. But the real shift will be consumer behavior. People will start gaming the systems—creating new accounts, using incognito mode, sharing fewer details. They’ll become less loyal, not more. And isn’t that ironic? The AI tools designed to squeeze maximum value from loyalty will likely end up destroying the very concept of a loyal customer. They’ve optimized for short-term profit at the expense of long-term trust. Now they get to pay the price.
