Seattle, Wa. has become the first U.S. city to prohibit grocery retailers from using consumers’ personal information to set individualized prices, adding a significant new layer to the emerging debate over artificial intelligence, loyalty programs and personalized pricing in food retail.
The Seattle City Council voted 7-2 on Sept. 22 to approve its Fair Pricing and Transparency ordinance. The measure prohibits covered grocery retailers from using algorithmic-based price discrimination to modify prices based on information such as a shopper’s behavior, location, demographics or other personal information. It also applies to certain mixed-use retailers and grocery delivery services.
The ordinance is broader than simply prohibiting a retailer from charging two customers different base prices. It also addresses electronic shelf-label systems and requires covered retailers to disclose how certain discounts are determined and to retain records demonstrating compliance. Consumers who are injured by violations will have a private right of action, while the Seattle City Attorney will have enforcement authority.
But the final legislation also illustrates exactly the distinction raised in our June dynamic pricing analysis: surveillance pricing, personalized pricing, loyalty pricing and dynamic pricing are not necessarily the same thing.
Seattle’s ordinance does not eliminate conventional loyalty programs or every form of targeted promotion. Discounts available to all members of a retailer’s Seattle loyalty program remain permissible.
The ordinance also permits certain discounts based on prior purchase history when consumers are placed into defined tiers rather than assigned an individualized price, provided the retailer does not use that purchase history to infer an individual’s price sensitivity or combine it with other personal information. Volume discounts, manufacturer-funded coupons and discounts available to broadly defined groups such as seniors, students or military personnel also remain permitted under specified conditions.
That distinction matters because the grocery industry’s concern has been that legislation aimed at preventing consumers from being charged more because of their personal data could inadvertently sweep longstanding promotional practices into the same category.
That concern was explicitly raised during Seattle’s debate. Councilmember Maritza Rivera, one of the two votes against the measure, said she supported banning algorithmic pricing but believed the ordinance could limit popular loyalty discounts and potentially increase grocery prices.
Seattle’s action follows a number of states, and Maryland’s enactment in April of the nation’s first state law restricting certain forms of personalized, data-driven grocery pricing. Maryland’s law applies to food retailers and third-party delivery platforms, making the issue considerably more than a theoretical technology debate for the grocery industry.
The Seattle legislation also draws directly on the controversy surrounding Instacart’s pricing experiments. A Consumer Reports/Groundwork Collaborative investigation found that shoppers using Instacart could receive different prices for identical products, including differences of as much as 23 percent in some cases. The Seattle ordinance cites those findings, including an experiment in which shoppers using Instacart at a Seattle Safeway were shown different prices for the same saltine crackers.
Seattle’s ordinance does not take effect immediately. The legislation specifies an effective date of Sept. 1, 2027, giving covered retailers nearly a year to understand the requirements and adjust their pricing, loyalty and data practices.
That makes Seattle an important test case for the grocery industry. The question is no longer simply whether retailers should be allowed to use consumer data to personalize prices. It is how regulators will draw the line between discriminatory individualized pricing and the increasingly sophisticated promotional systems that retailers use to reward loyalty and target discounts.
And that brings the industry’s original problem back into focus: the technology may be moving faster than the industry’s ability to explain exactly what it is doing. Seattle has now drawn a regulatory line. The grocery industry’s next challenge will be demonstrating to consumers and lawmakers which side of that line its pricing and promotional technology actually falls on.