New legislation seeks to ban companies from using AI to jack up prices

AUSTIN (KXAN) – U.S. Rep. Greg Casar (D-Austin) introduced legislation Wednesday to ban companies from using AI price tools to raise prices on customers. 

This legislation comes soon after news broke of Delta Air Lines reportedly planning to expand its use of an AI-powered pricing tool to 20% of its domestic routes by the end of 2025. 

“Now that AI is developing so quickly, we need the law also to develop,” said Casar, who introduced the legislation along with U.S. Rep. Rashida Tlaib (D-Michigan). “It should be banned for an airline to know that you have been Googling a family obituary, and then they jack up your airline ticket prices because they know you’re desperate to get to a funeral,” Casar told KXAN. 

According to NBC reporting, Delta president Glen Hauenstein indicated the company’s goal was to have 20% of its Domestic fares set by the AI tool. In a statement, the company indicated the tool was not using personal information to adjust prices.

“There is no fair product Delta has ever used, is testing, or plans to use that targets customers with individualized offers based on personal information or otherwise. Delta always complies with regulations around pricing and disclosures,” the statement read. 

Casar said his legislation would block any company from utilizing the practice. 

“Companies should have to price their products based on supply and demand. Companies should have to price their products based on how expensive it is to create a service or provide a service or product. They shouldn’t be using AI to try to squeeze every last penny out of you,” he said. 

How it works

Commerce companies have long used targeted advertising to reach consumers. Experts say what is likely to come next is targeted pricing. 

Companies already utilize what is called dynamic pricing.

“Dynamic Pricing tends to focus on shifts in supply and demand. So as there are fewer seats on the plane, the price goes up,”  said Lindsay Owens, Ph.D., Executive Director of the Groundwork Collaborative, a Washington, D.C.-based economic think tank.

“Personalized pricing would take it to a new level. The pricing would be set based in part on individual characteristics of you as a consumer,” she continued.

Owens said AI models could eventually incorporate personal data – like the device you’re using, the zipcode you live in, or where you chose to travel  – to adjust prices.

“What zip code are you logging on from? Is it a more affluent zip code? Maybe I can charge you a little more,” she said. “Are you logging on from a PC or a Mac? If it’s the latter, maybe I can charge you a bit more.”

“This is the worry about where Delta could be headed with their new AI pricing partnerships,” she continued.