Is dynamic pricing illegal?

Not inherently. Adjusting prices based on demand, inventory, or competition is a long-standing and legal practice. Scrutiny increases when pricing uses personal consumer data to charge different people different prices for the same item.

What is the difference between dynamic pricing and surveillance pricing?

Dynamic pricing reacts to market-wide signals like demand or stock levels. Surveillance pricing, as defined in the FTC's 2024–2025 inquiry, uses individual data such as location or browsing history to set a personalized price for a specific shopper.

Are electronic shelf labels the same as surge pricing?

No. Electronic shelf labels are a delivery mechanism that lets retailers update prices remotely and instantly. Whether that capability is used for surge pricing depends on the retailer's policy, not the technology itself.

Which regulators are involved?

At the federal level, the FTC has led the inquiry into surveillance pricing. At the state level, New York now requires algorithmic pricing disclosures, and Maryland has advanced legislation targeting individualized grocery pricing.

Does dynamic pricing actually hurt consumer trust?

Consulting research suggests it can: PwC survey data shows a majority of consumers will stop buying from a brand after one bad pricing or service experience, which is why several retailers have publicly distanced themselves from the term “surge pricing” even while using dynamic pricing technology.

Dynamic Pricing in Retail How Far Is Too Far?

A grocery shelf tag that changes silently from a central computer. A fast-food menu board that prices a cheeseburger differently at lunch than at 3 p.m. An online cart that shows two shoppers, on the same street, two different prices for the same item. None of this is hypothetical anymore it is the current state of retail pricing technology, and it has moved fast enough that regulators, lawmakers, and consumers are now openly asking where the line sits between smart merchandising and exploitation.

What Dynamic Pricing Actually Is

Dynamic pricing is the practice of adjusting prices continuously in response to signals such as demand, inventory, competitor pricing, and time of day. It is not new airlines and hotels have used it for decades but retail has adopted it at a scale and speed that changes its character. Amazon remains the clearest example: academic analysis of the company's marketplace pricing behavior found it was making more than 2.5 million price changes a day, a pace that works out to roughly 1,700 changes every minute across its catalog.

The Infrastructure Behind the Price Tag

What used to require a store employee walking the aisles with a label gun is now a wireless push from a central system. Electronic shelf labels (ESLs) let a retailer update prices across an entire chain in seconds. Kroger began testing the technology in 2018 and has since expanded it to roughly a quarter of its store base, a pace fast enough that in some markets, such as the Cincinnati area, digital tags now sit on shelves in nearly every location. Retailers describe this as an efficiency and accuracy upgrade; critics see the infrastructure for real-time, unannounced price changes at a scale that was never previously possible.

Figure 1: The frequency of Amazon's algorithmic price updates illustrates how far pricing decisions have moved from human hands to automated systems. Source: academic analysis of Amazon marketplace pricing data.

Where It Starts to Cross a Line

Surveillance Pricing Draws Federal Scrutiny

In July 2024, the Federal Trade Commission opened a formal inquiry into what it termed “surveillance pricing” the use of personal data such as location, browsing history, and purchase patterns to set individualized prices. The agency issued information demands to eight firms, including Mastercard, Accenture, and McKinsey & Co., and its January 2025 staff findings concluded that personalized pricing based on granular consumer data was becoming widespread across the economy. The distinction the FTC draws matters: dynamic pricing that reacts to overall supply and demand is a different practice from pricing that reacts to who, specifically, is looking at the screen.

That distinction became concrete in December 2025, when a group of U.S. senators cited an independent study finding that Instacart charged different prices for identical grocery items purchased under identical circumstances, with variation exceeding 20% on everyday staples and affecting close to three-quarters of the products tested. The senators asked the FTC to determine whether the practice violated the FTC Act's prohibitions on unfair and deceptive conduct.

Figure 2: Three data points capturing the pressure driving today's dynamic-pricing debate. Sources: U.S. Bureau of Labor Statistics; U.S. Senate letter to the FTC (Dec. 2025); PwC 'Inside NRF 2025' consumer survey.

The Grocery and Fast-Food Backlash

Grocery prices have risen roughly 31% since March 2020, according to Bureau of Labor Statistics data, a pace that has outstripped overall inflation and left little public patience for pricing technology that even appears to raise costs during high-demand moments. That backdrop is why Wendy's faced sharp criticism after its CEO mentioned, on a fourth-quarter earnings call, a planned $20 million investment in digital menu boards that would allow item-level pricing flexibility by time of day; the company subsequently clarified it would not raise prices during peak hours. Kroger faced a similar reaction to its ESL rollout, prompting a formal response from group vice president Paula Kash: “Kroger does not and has never engaged in surge pricing.”

Where the Industry and Regulators Are Landing

The National Retail Federation, the industry's leading trade association, has pushed back on the surge-pricing framing, arguing that electronic shelf labels function as a communication tool rather than a decision engine, and that they can reduce food waste and improve pricing accuracy. At the same time, state legislatures are moving faster than Congress: New York's Algorithmic Pricing Act now requires companies to disclose when a price was set by an algorithm using personal data, and Maryland has advanced legislation aimed squarely at preventing individualized surge pricing in grocery retail.

Consulting research suggests retailers have real financial reason to tread carefully. PwC's 2025 Customer Experience Survey found that 52% of consumers have stopped buying from a brand entirely after a single bad experience, and separate PwC research presented at the 2025 NRF Big Show found that price influences the purchase decisions of 76% of shoppers slightly ahead of product quality. Deloitte's consumer research reinforces the same point from the value side: as shoppers shift spending toward brands seen as offering better value for price, that shift alone could represent an estimated $1.3 billion in annual revenue opportunity for a single large grocer, according to Deloitte's transaction-panel analysis.

Drawing a Reasonable Line

Transparency: price changes tied to demand or inventory are broadly accepted; price changes tied to a specific shopper's data profile are not, and increasingly must be disclosed by law.
Predictability: consumers tolerate fluctuation on flights and hotel rooms because it is expected; applying the same logic to milk, eggs, or a cheeseburger breaks an implicit pricing contract.
Vulnerability: regulators are most focused on essentials groceries and fast food precisely because price volatility there falls hardest on lower-income households.

Conclusion

Dynamic pricing itself is not the controversy retailers have quietly automated price optimization for years without incident. The controversy begins the moment pricing shifts from reacting to the market to reacting to the individual, or from adjusting slowly to adjusting invisibly. With federal regulators watching, state legislatures acting, and consumer trust data showing exactly how quickly shoppers walk away, the retailers winning this moment are the ones treating disclosure as a feature, not a liability.