Senators Are Investigating Kroger for Potential Surge Pricing

Massachusetts Senator Elizabeth Warren and Pennsylvania Senator Bob Casey announced their investigation of one major U.S. grocery store chain and its potential use of surge pricing.

On August 7, Warren released a statement explaining she and Casey sent a letter to the chairman and CEO of The Kroger Co., Rodney McMullen, in which they raised “concerns” over Kroger’s use of Electronic Shelving Labels (ESLs) to “surge grocery prices and exploit consumers.” 

ESLs, which display store pricing under individual items, could allow “companies to engage in dynamic pricing, changing the prices of goods based on temporary factors such as the time of day or the weather,” the senators wrote in their release. “By updating price tags with the simple click of a button, corporations can price gouge, suddenly raising the consumer costs at times when certain products are in highest demand.” 

According to the lawmakers, Kroger’s ESLs, which launched in 2018, were developed in partnership with Microsoft and in this particular store are known as the Enhanced Display for Grocery Environment (EDGE). The technology, Warren and Casey added, may enable Kroger “to gather data on customers to determine how much price hiking they can tolerate” and present customers with personalized pricing based on the data. 

“I am concerned about whether Kroger and Microsoft are adequately protecting consumers’ data, and that as Kroger expands the personalized customer experience, customers will ultimately be offered a worse deal,” they added. 

Now, they are asking Kroger to fork over information about how they use EDGE and how they both collect and protect customer data. The senators sent a list of 11 specific questions to McMullen, including “Has Kroger prepared internal estimates regarding the potential to increase prices or profit margins by adopting dynamic pricing with EDGE, “How does Kroger establish dynamic prices using the EDGE system,” “What factors does Kroger consider when changing prices,” and “How does Kroger inform customers of recent or upcoming price changes?” 

For its part, Kroger told Cincinnati.com that their current strategy is to decrease costs for customers but would not share how often they use the tech to change displayed pricing. 

“Kroger’s business model is to lower prices over time so that more customers shop with us, which leads to more revenue that we then invest in lower prices, higher wages, and an even better shopping experience. Everything we do is designed to support this strategy, and customers are shopping more with Kroger now than ever because we are fighting inflation and providing great value,” a spokesperson for Kroger shared with media outlets, including Progressive Grocer and Cincinnati.com. “Any test of electronic shelf tags is to lower prices more for customers where it matters most. To suggest otherwise is not true.”

And now, McMullen has until Aug. 20 to provide Warren and Casey with all the specific answers.