California Bill Targets AI Price Gouging by Ride-Hailing Apps
California lawmakers are poised to address a contentious intersection of technology and consumer rights, with a proposed bill aiming to prevent companies from leveraging artificial intelligence to inflate prices based on personal data. At the heart of the debate is the practice of “surveillance pricing,” where a company’s AI might infer a customer’s desperation or willingness to pay more from information stored on their phone, such as a dangerously low battery, an older device model, installed applications, current location, or even residential address.
Democratic Senator Aisha Wahab of Hayward is spearheading this effort with Senate Bill 259, which seeks to prohibit retailers from employing AI in this manner. “Our devices are being weaponized against us in order for large corporations to increase profits, and it has to stop,” Wahab stated last month before the Assembly Judiciary Committee. Her bill is part of a broader legislative push in California this year to regulate the burgeoning field of AI, joining 29 other proposals, including measures to ban algorithmic systems from setting rent prices and to protect individuals from automated discrimination in critical decisions concerning employment, housing, healthcare, and criminal sentencing.
Senator Wahab’s measure has garnered significant momentum, partly because it aligns with Democratic pledges to reduce costs for Californians post-election, and notably, it enjoys robust support from the state’s influential labor unions. These unions, including the American Federation of State, County and Municipal Employees (AFSCME) and the California Labor Federation, have collectively contributed at least $8.5 million to lawmakers over the past decade. They contend that AI-driven price increases are inherently discriminatory and should be outlawed. Ivan Fernandez, a lobbyist for the California Labor Federation, characterized surveillance pricing as a “high-tech assault on working people,” arguing that it exacerbates the state’s already high cost of living by allowing companies to “squeeze every cent they can” from consumers.
Opposing the bill are various business and tech organizations, such as the California Chamber of Commerce, TechNet, and Chamber of Progress. These 17 groups have collectively donated at least $11.7 million to legislators since 2015. They argue that SB 259 is unnecessary given California’s existing data privacy laws, would stifle innovation, erode tech company profits, and ultimately lead to higher prices for consumers. Ronak Daylami, a policy analyst with the California Chamber, conveyed in an opposition letter that the bill “would unfairly cause companies to overhaul their pricing models and strategies at significant cost, to the detriment of both the businesses themselves and their consumers.”
Despite this opposition, the bill has faced little resistance from lawmakers, easily passing the California Senate and progressing through the Assembly with a 10-4 vote in the Judiciary Committee. Republican Assemblywoman Diane Dixon of Huntington Beach is among the few dissenting voices, asserting that such “overregulation is impeding how we do business” and that “the market resolves these issues.” Some Democrats, like Assemblymembers Chris Ward and Lori Wilson, have raised questions about enforcement and potential exceptions for “legitimate uses” of geolocation data, but overall, Wahab has received strong backing. Assemblymember Liz Ortega of Hayward, a former political director for an AFSCME local union, compared the practice to “modern-day redlining,” evoking the historical discriminatory lending practices. “It was not OK then, and it’s not OK today,” Ortega stated, implying that without safeguards, companies could use data for similar price discrimination.
Senator Wahab, who describes herself as a “former tech worker in Silicon Valley” and business IT consultant, has leveraged her industry background while aligning strongly with labor interests. She has painted tech companies as profit-driven entities unscrupulously using personal data. Wahab cited a ProPublica report alleging Princeton Review charged higher online SAT tutoring prices in zip codes with a high percentage of Asian residents. She also referenced an SFGate report claiming hotel booking platforms upcharged Bay Area users by up to $500 per night, and a Consumer Watchdog report alleging ride-hailing apps like Uber and Lyft charged more to users with low phone batteries – a claim both companies deny. Uber spokesperson Zahid Arab stated that “suggestions that our systems manipulate pricing unfairly or discriminate are simply false,” while Lyft’s Shadawn Reddick-Smith affirmed the company “does not base fares on battery percentage.”
David Evan Harris, a lecturer at UC Berkeley’s Haas School of Business and former Meta research manager, dismisses the business groups’ concerns about stifling innovation as “wildly overblown.” He contends that “industries have built a business model around systematically violating our privacy in ways that we do not want, and generally do not consent to.” Conversely, Robert Boykin of TechNet noted that California’s existing privacy law already grants consumers “meaningful rights,” including the ability to opt out of precise geolocation data sales and protection from discrimination.
SB 259 is expected to be heard by the full Assembly after lawmakers reconvene in mid-August, potentially reaching Governor Gavin Newsom’s desk soon after. Newsom has historically maintained a more cordial relationship with tech companies than the Legislature, having vetoed several AI regulation bills last year, including bans on self-driving trucks and weaponized robots, and a measure compelling AI model testing. The governor recently convened a panel of California tech executives to identify state government inefficiencies and reportedly even sent “burner” phones to nearly 100 tech executives for confidential communication. His office, however, has declined to comment on the pending legislation.