One year after a similar bill died in its first committee hearing, a new proposal is advancing in the Colorado Legislature to bar companies from using surveillance data gathered online to set individualized prices for customers or individualized wages for job applicants.
Sponsoring Democratic Reps. Javier Mabrey and Jennifer Bacon of Denver told the House Business Affairs and Labor Committee during a hearing Thursday that some corporations use tools such as search history and location data to determine the highest price someone will pay for a good or the lowest salary they will accept for a job. This can lead to individualized pricing that boosts costs of, say, an airline ticket for someone flying to a funeral or individualized wages that can be set lower for someone whose online behavior indicates they are in financial straits and desperate for work.
House Bill 1210 would prohibit the use of individualized price and wage setting based upon this type of surveillance data and would declare that a person violating this statute is guilty of a deceptive trade practice that could lead to civil action. Sponsors on Thursday added some exemptions, allowing businesses to continue offering special pricing for loyalty-club members or extra discounts for people who already have purchased a product, but emphasized that individualized data can’t be used to determine costs or salaries.
“The largest companies in the world are not investing millions of dollars into this technology to make less money,” Mabrey said, arguing that concerns about the bill inhibiting discounting missed the more significant financial practices it seeks to ban. “That is not the free market. That is economic exploitation dressed up as technology.”
Could bill wipe out discount efforts?
But opponents warned that the definitions in the bill are still so broad that they will undermine routine practices and set Colorado on an island for the types of things that retailers and employers are not allowed to do. And they pushed back on the claims of nefarious behavior being undertaken by retailers and employers, saying that while there is much talk about what could be happening, there is little proof, even in a Federal Trade Commission report that several bill supporters cited.
“We are opposed to the bill because it does not allow businesses to be responsive to customer needs or to use common beneficial business practices,” said Rachel Beck, executive director of the Colorado Chamber Foundation. “We are hearing from our members that the definitions are still too broad. And, as a result, they are likely to scale back or stop offering targeted discounts because they are not sure they can comply with a lot of the terms that are still in the bill.”
Civil- and consumer-rights advocates told committee members that companies are collecting data now based on individuals’ online behaviors that they are using to jack the costs of goods when it’s clear those goods are needed the most.
People who search for medical advice for celiac disease may be charged more for gluten-free products by online retailers than other customers, said Nina DiSalvo, policy director for the Toward Justice law firm. Or they could raise prices for medicine for people whose online history indicates that they have a certain ailment, said Zephyr Teachout, a Fordham University School of Law professor.
Individualized wages target applicants in financial straits
Rydge Rath, an attorney representing the Plaintiff Employment Lawyers Association, said that some companies use the surveillance data to create “desperation scores” showing which applicants are more likely to take a job at any wage. These are people who the data shows have applied recently for payday loans or have applied for unemployment insurance benefits in the past year, he said.
HB 1210, which cleared the committee on a 7-6 vote after several hours of testimony, defines individualized price or wage setting as a practice in which an algorithm analyzes surveillance data to determine a price or wage based on online behaviors. Those behaviors could include web-browsing history, purchase history, geolocation or inferences associated with a class or group of individuals with similar measurable habits, preferences or financial circumstances.
Mabrey argued that this definition precludes civil action for differential pricing for consumers who meet publicly disclosed eligibility criteria (say, discounts for seniors or veterans) or who have signed up for a mailing list or discount club.
Business and technology leaders disagreed, however, saying that the wording remains so broad that it is likely to trip up retailers using some common ways of engaging customers.
Other individualized discounts could have to go
Andrew Wood, central regional executive director for industry group TechNet, said the proposed regulations would not permit companies to offer discounts to prior customers or even to potential customers who left goods in an online shopping cart without purchase. Colorado would become the first state in the nation to outlaw this behavior, Wood added.
The bill also would ban companies from using targeted data about preferences of potential customers to seek out new customers with discount offers, said Katie Wolf, lobbyist for the Colorado Retail Council. And the “surveillance” practices it bans when determining salary offers are so broad to include a routine study of employee behavior, she said.
Several Democrats, who passed HB 1210 on a largely party-line vote over the objections of Republicans and Democratic Rep. Bob Marshall of Highlands Ranch, said they were persuaded by the exemptions added for things like block discounts and loyalty clubs. Rep. Gretchen Rydin of Littleton, for example, noted that while some of the objections to the bill are “considerable,” she supported it Thursday because of its attempts to get at the bigger issue of protecting Coloradans from having their data used against them.
HB 1210 moves next to the House floor, where it is likely to generate significant debate.
That discussion comes as legislators are considering a slew of other technology bills proposing to do everything from making social-media companies respond more quickly to law-enforcement inquiries to limiting the use of artificial intelligence in healthcare fields. Meanwhile, a governor-appointed task force is still working to recommend a fix to a yet-to-be-enacted AI regulatory regime that opponents have said is so strict that it could stifle the growth of the sector in this state.