McDonald's sued over AI pricing

A federal antitrust lawsuit filed against McDonald's alleges the fast food giant uses an AI-powered pricing engine to set menu prices across U.S. locations and overcharge customers for Big Macs and fries.

McDonald's denies targeting individuals

McDonald's has denied using AI to determine what individual customers are willing to pay. It said it provides franchisees with tools, resources, research and recommendations to help them make informed decisions.

Retailers roll out AI pricing tools

Kroger uses an AI platform called FlashFood to mark down perishables nearing the end of their shelf life and market them via an app.

Dynamic pricing changes prices constantly

Dynamic pricing refers to frequent, rapid real-time changes in prices that could dramatically affect shoppers' experiences. Airlines, hotels and ride-hailing services have used it for years, but it is becoming more common in retail.

“Dynamic pricing means changing prices in response to changing market conditions, such as demand, timing, capacity or competitors' prices.”

AI enables individualized pricing

Bank of England economists said more sophisticated technology is leading to prices changing more frequently and becoming more individualized.

AI collects detailed consumer data

AI tools like electronic shelf labels and facial recognition checkout collect more consumer data than before, from transaction histories to browsing behavior, location and purchasing patterns. This blurs the line between dynamic and personalized pricing.

States move to restrict data pricing

New York requires most businesses using customers' personal data to set prices to disclose it clearly.Maryland has restricted food retailers and delivery services from using personalized, data-driven pricing to charge higher prices for certain food.

Shoppers lose ability to compare prices

When prices differ for the same product, consumers cannot understand why they received a particular price or compare it with prices offered to others.

“If consumers cannot understand why they received a particular price, cannot compare it with prices offered to others, and cannot effectively switch to another supplier, the normal disciplining effect of consumer choice becomes weaker.”

Personalized pricing splinters inflation

Personalized pricing splinters the consumer experience, meaning households face increasingly different inflation rates. When prices differ for the same thing, inflation becomes more personalized and aggregate measures may no longer reflect households' actual experience.