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Your data has a price — and according to market statistics, its value might be a lot more than you think. Coming in at about $247 billion, the value of the data broker market has exploded over the last decade and is only expected to increase. The evolution of data brokering — or the collection and selling of consumer data for marketing purposes — into a highly lucrative and complex endeavor has significant implications for personal privacy.
With market revenue expected to surpass $400 billion by 2030, “big tech” companies such as Meta and Google stand to make enormous profits while consumers unwittingly hand over their data for free. While interacting or shopping in online spaces, consumers are no longer just purchasing products; they’ve become the product, and the cost is their privacy.
In the wake of the digital age, consumer privacy has become difficult to maintain. Everything, from email addresses to phone numbers to shopping habits, is constantly being collected and distributed as a data footprint that tracks individuals’ routines and can be monetized. In 2020 alone, online internet users generated 64.2 zettabytes of data — more bytes than the number of detectable stars in the cosmos. With these masses of information circulating online, the task of protecting one’s personal information can seem impossible.
All of this begs the essential question: Why is this information so valuable? The answer lies in the power of targeted advertising and personalized marketing practices. As companies use detailed data profiles to predict consumer behavior with incredible accuracy, they become equally capable of tailoring advertisements to individual preferences and behaviors. One of the latest trends in online marketing, surveillance pricing, offers predicted, individualized prices to every consumer.
As the age-old saying goes: Every man has his price. Fittingly, while the capacity for data collection and personalized marketing has continued to grow, this idiom has become chillingly close to reality. Artificial intelligence tools and complex algorithms now allow companies to predict just how much a given consumer would be willing to pay for a product with shocking precision. Lina Khan, chairwoman of the Federal Trade Commission, offered her own perspective on the dilemma in an interview with The American Prospect.
“We’re now in an environment (where) technologically it is possible to be serving every individual person an individual price based on everything they know about you,” Khan said.
Khan has been at the forefront of efforts to curb surveillance pricing and other online price-gouging practices. This includes an official investigation launched this past July into eight major corporations, ranging from Mastercard to McKinsey & Company. One of the companies under the probe, Revionics, specializes specifically in the construction of AI-powered systems that its website refers to as “price optimization solutions” — a description that sounds eerily similar to that of surveillance pricing.
Despite economists’ best efforts to downplay the practice as “personalized pricing” that could result in added value for customers, the ethics of such an operation remain highly controversial. Rather than setting fixed prices governed by free-market fluctuations of supply and demand, the concept of data-driven pricing appears both corrupt and exploitative.
Currently a law professor at Fordham University, Zephyr Teachout previously worked in the New York Attorney General’s office where she personally helped draft antiprice-gouging regulations. Now, Teachout is calling for increased consumer protections, as the emergence of a data-driven economy continuously threatens free-market principles.
Without the protections of universal pricing, a disproportionate amount of power becomes concentrated in the hands of big corporations. Free market principles have long enshrined ideas such as “voting with your wallet,” the concept that the free choice of consumers to decide where they spend their dollars can help uplift ethical brands that better align with societal values. The advent of surveillance pricing, however, threatens to undermine this foundational principle by manipulating individual buying power based on personal data. Instead of a marketplace where consumers have equal footing, it creates a scenario where companies exploit knowledge about personal habits and preferences to maximize profits rather than offer equitable value.
Surveillance pricing does not just exist in theory. In fact, quite a few companies have already come under intense public scrutiny after being caught engaging in this pricing practice. In 2000, Amazon endured a public relations meltdown after randomly fluctuating the costs of popular products to test different price points. Users quickly caught on to the situation by comparing prices in online chat rooms, with one customer even discovering that deleting browser cookies led to reduced prices. Although the company defended its action as a business experiment, the situation resulted in severe backlash and thousands of refunds.
Such occurrences don’t end here. A research study in 2015 found evidence that the Princeton Review was charging significantly higher prices for SAT test prep and tutoring courses for zip codes that contained higher population percentages of Asian residents. Just three years earlier, in 2012, the popular travel site Orbitz was caught directing Mac computer users to more expensive hotels based on findings that they typically spend 30% more per night.
All of these situations reflect the alarming need for regulatory oversight. Trends of discriminatory pricing no longer remain merely isolated incidents; as long as data privacy remains largely unaddressed by policymakers, opportunities for profit-driven abuses remain high.
And indeed, as these practices of surveillance pricing threaten to become more widespread, it raises fundamental questions about consumer rights and the market integrity: How might consumers make informed decisions when prices are tailored to their perceived willingness to pay? How can corporations claim to conduct ethical transactions if their entire business is modeled around these breaches of customer privacy and data?
Such issues are only likely to worsen, as the technology and AI boom of the past decade shows no signs of cooling down anytime soon. Without proper regulations, these technologies will only become harder to govern. These technological developments are not only being integrated within online spaces, but also in the realm of everyday, offline transactions.
The advent of digital price tags, for instance, has quickly become a cause for concern. Adopted by grocery chains including Walmart and Kroger, digitized price tags can be updated remotely within just a few minutes. While this allows for the possibility of lowering prices of food items nearing the end of their shelf life, it also introduces the potential of surging grocery prices for products in high demand. With fear of inflation growing and grocery store prices up 25% from prepandemic levels, technologies like these threaten to take advantage of the already vulnerable American consumer.
The time to act is now. As we enter further into the era of surveillance capitalism, customer data is quickly becoming the United States’ new gold standard. It is essential for governments and regulatory bodies to step up their efforts in drafting legislation and enforcing comprehensive data privacy laws.
The vast majority of online spaces remain underregulated. Complex algorithms have prompted a transition from observable marketing practices to much more shadowy territory. As this technology continues to advance, so too must our legal frameworks. This means not only creating sufficient privacy protections but also pushing for corporate transparency in data collection and usage practices. Currently, there is no comprehensive U.S. internet privacy law governing how businesses and mass corporations collect, use and sell individuals’ private data. Current FTC regulations only enumerate protections for financial privacy, such as confidential financial information and the internet privacy of children, which was required by law. Beyond these limited categories, online privacy governance remains scant.
Consumers need clear, accessible information about how their data is being used and the right to control its distribution. Congress should consider enacting policy on internet privacy before the problem becomes even more unwieldy. There are many aspects to be considered, but delegating a specific government agency to oversee internet privacy protections seems like a good place to start. If these qualifications remain unmet, the social and financial fallout is certain to be costly. So, the question remains: What price are you willing to pay?
Tate Moyer is an Opinion Analyst from Los Angeles. She writes about digital culture and technology and can be reached at moyert@umich.edu.
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