Walmart has recently been awarded patents by the U.S. Patent and Trademark Office (USPTO) for AI tools that help set pricing decisions. Those patents are getting attention on social media this week as consumers worry about the future of dynamic pricing and so-called surveillance pricing, the practice of charging people different prices for the same goods and services based on their unique attributes.
One of the new patents, US-12524776-B2, includes ways for “dynamically and automatically updating item prices” on e-commerce platforms. The patent filing explains that it combines price elasticity data and predicted demand for a given item, and then an algorithm generates a “first markdown price.”
When the price elasticity data and predicted demand data aren’t available, it creates a “bounded price” that allows for a range to be chosen to set a new price on the platform.
Another patent recently granted to Walmart, US-12572954-B2, involves the use of machine learning to predict the demand of various items and recommend prices. The schematic in the filing even shows that third-party data may be used to help determine the price, a controversial practice when it’s employed by other businesses like airlines to set fares.
Walmart announced earlier this month that it had rolled out digital shelf labels that allow the company to quickly change the price consumers see in store, with the goal of every Walmart location utilizing the tech by the end of the year.
The patents awarded to Walmart involve e-commerce rather than brick and mortar locations, but it’s easy to see how AI tools could be used in the future to create split-second changes to the price of goods based on any number of factors, like time of day or the number of people already in a given physical store.
Walmart didn’t respond to questions from Gizmodo emailed on Thursday, but seemed to claim to the Financial Times that the patents were “unrelated to dynamic pricing.” The logic, as best we can tell, is that one of the patents at issue “was specific to markdowns,” perhaps trying to suggest that prices would only be lowered, though it’s not clear.
The other claim was that another patent was “designed for merchant teams to make decisions, not the technology,” according to the Financial Times, which seems like a distinction without a difference when it comes to the practical reality of how this might be applied in the real world.
Hypothetically, it doesn’t really matter if a store manager or someone in a central office is pinged to give final approval for a price adjustment. That simply looks like good quality control to benefit Walmart, not a serious protection for consumers from fast-paced price changes.
At least a dozen states are considering legislation to regulate dynamic or surveillance pricing this year, though New York is the only state that has passed a law on the topic. Consumers must be notified when an algorithm and personal data have been used to set a price, something that Washington Post subscribers recently received an email about.
Democrats have introduced bills in both the Senate and the House that would ban surveillance pricing at grocery stores, but that legislation seems unlikely to pass while the Republicans control the House, the Senate, and the White House.
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