AI Pricing Tools Spread Through Retail as McDonald's Faces Antitrust Suit Over Big Mac Prices

McDonald's denied that it uses AI to determine what individual customers are willing to pay. The company said it provides its franchisees with 'tools, resources, research and recommendations to help them make informed decisions.'

The suit comes as food businesses globally are increasingly digitizing operations with AI. Earlier this year, American grocery chain Kroger said it is using an AI platform called FlashFood to mark down perishables nearing the end of their shelf life and market them to shoppers through an app.

Electronic shelf labels, which display prices on digital screens, are becoming more common at supermarkets including Kroger, Walmart and Amazon Fresh. Whole Foods Market spokesperson Rachel Malish told CNBC the chain 'does not use dynamic pricing.' Malish said digital shelf labels 'simplify the price tag change process for our employees [and] reduce paper waste from traditional tags.'

The technology is also gaining traction among U.K. supermarkets such as Tesco, Morrisons and Asda. Morrisons declined to comment to CNBC on its electronic shelf labels. Andrew Opie, the British Retail Consortium's director of food and sustainability, said supermarkets have 'no intention to use dynamic or surge pricing in their stores' and that digital pricing is a way to update and check prices quickly. CNBC reached out to Tesco and Asda for comment but did not receive a response.

More recently, global financial platform Revolut trialed facial recognition checkout in select coffee shops, allowing customers to pay with just a picture at checkout. The technology relies on a pre-existing selfie ID that Revolut customers submit as part of standard security checks for comparison, and no additional information is collected, according to CNBC.

As AI use becomes normalized among retailers, experts warn it could lead to more dynamic pricing, which refers to frequent, rapid real-time changes in prices that can affect shoppers' experiences. Miroslava Marinova, a senior lecturer of commercial law at the University of East London, told CNBC that dynamic pricing means changing prices in response to changing market conditions, such as demand, timing, capacity or competitors' prices. She said the practice is not new and has been used for years by airlines, hotels and ride-hailing services.

Bank of England economists Clare Lombardelli and Rupal Patel said in April that more sophisticated technology is leading to prices changing more frequently and becoming more individualized. That could lead more firms to charge 'as close to the maximum price a consumer is willing to pay for a good or service,' which they defined as 'perfect price discrimination.'

The economists said these conditions could make it harder for statisticians to 'measure and interpret' month-to-month inflation data, because the consumer price index is based on a representative sample of prices for shoppers. They said that works well when prices mostly move slowly and uniformly, but when prices shift continually and differently for each shopper, the idea of a 'representative' price becomes strained.

While dynamic pricing has existed for a long time, the Bank of England economists and Marinova noted that AI tools such as electronic shelf labels and facial recognition checkout are changing the amount of information companies can collect on consumers, from transaction histories to browsing behavior, location and purchasing patterns.

On Wednesday, U.K. supermarket chain Sainsbury's released 'SmartLists,' an AI feature that helps customers create shopping lists and find products by uploading pictures of what they need or typing out meal ideas. CNBC reached out to Sainsbury's for comment but did not hear back immediately.

Marinova said the traditional distinction between dynamic and personalized pricing is becoming less clear in practice. Dynamic pricing responds primarily to market conditions, she said, while personalized pricing uses information about the consumer to estimate willingness to pay. As retailers combine market-level information with increasingly detailed consumer data, the boundary between the two becomes thinner, she added.

Walmart and Kroger have publicly insisted in recent years that they do not use dynamic or surge pricing to set individualized prices for customers, according to CNBC.

Editor's Summary

AI pricing and checkout tools are spreading through fast-food and grocery businesses, while a federal antitrust lawsuit accuses McDonald's of using an AI pricing engine to overcharge customers. Experts and Bank of England economists warn that more dynamic and personalized pricing could complicate how inflation is measured and blur the line between market-based and consumer-specific pricing.