The Big Squeeze: Inflation as a Cover for Profiteering

Get ready for "dynamic pricing."

Andrii

Prices are surging all over the world.

It's getting worse, not better.

Even as governments take credit for battling inflation, they do almost nothing to stop corporate price gouging. Stores like Walmart and Target have even started to remove price tags from their items, replacing them with bar codes that allow them to manipulate prices in real time. According to a story in NPR, "the new labels allow employees to change prices as often as every ten seconds." Industry leaders promise not to abuse this new technology, even as they brag about being able to charge us more for water during heat waves.

These announcements have blown up the internet over the last few weeks, sparking justifiable outrage.

This move has disturbing implications.

As one person put it:

"Hurricane coming? Price increase. Snow storm coming? Price increase. Heat wave coming? Price increase."

These moves always come with a cover excuse, that the changes will save resources or make our lives easier. Marketing experts are coaching companies on how to "explain" their new tools to consumers, focusing on discounts and bargains while downplaying the true purpose, to maximize profits.

A report from the Groundwork Collaborate showed that profit-seeking behaviors explain more than half of overall inflation. In other words, corporations don't have to raise their prices to offset their costs.

They're doing it to make more money.

They're doing it because they can.

This profit-seeking doesn't know moral bounds, and it exploits us at our most vulnerable moments. We've seen countless examples of businesses big and small jacking up prices during climate disasters, resulting in cases of water going for $99 or plane tickets surging to thousands of dollars during wildfires and other disasters. They've used pandemics and wars alike as excuses to jack up prices on virtually everything. Despite laws, it keeps getting worse. State and federal agencies get more complaints than they can investigate. In the best case scenario, you get a reimbursement months later.

Companies across the board are embracing what they call "surge pricing" or "dynamic pricing," a practice that energy companies have used for a long time to squeeze people for profits. It became more widely known as Uber and Lyft incorporated it into their business models, charging more for rides depending on your location and demand at the time. In 2017, Uber used price surging on people trying to flee a terror attack in London.

Earlier this year, even fast food franchises like Wendy's announced plans to adopt dynamic pricing, arguing that they want to offer discounts and promising they won't use it to fleece their customers. This has gone on for a long time. As a piece in The American Prospect points out, soft drink companies once wanted to add thermometers to their vending machines, "triggering them to raise the price of a soda on a hot day."

An article in The Financial Times argues that surge pricing "will eventually be everywhere." It's coming to grocery stores, restaurants, bars, concerts, and amusement parks. Venues want to maximize their ability to charge more during peak demand, regardless of the ethical implications. We saw the logical conclusion of dynamic pricing last year at a Taylor Swift concert in Brazil, where venue organizers decided to let fans suffer heat stroke and die from dehydration rather than give away water.

It gets worse.

Food and grocery delivery apps have generated a wealth of personal consumer data that industries can exploit for surge pricing. The more information we give them, the more they know about us and our habits. As one finance expert told News Nation, companies can "use that data to figure out not only how to get us to buy something, but how to buy something at that time at the highest price that we are willing to pay at that time."

Artificial intelligence promises industry heads a new way to determine how much we're willing to pay for something at a given time and place, with swift precision. Algorithms powered by AI can figure out how much of something you buy and when, then change the price accordingly.

So if you love coffee, they can charge you more for your favorite brand on Thursday afternoon. They can anticipate when you'll run out, and then jack up the price while you're shopping. Finance gurus suggest hiding as much of your personal data as possible to help prevent that, like clearing your browser caches and keeping your order histories clear.

Amazon has already tried to implement dynamic pricing, and they're currently facing an FTC lawsuit over it. The lawsuit says Amazon made $1 billion in profits by using a covert algorithm to manipulate prices. They turned their algorithm "on and off" to avoid public scrutiny, and they only suspended the program after it started attracting federal attention.

We've also seen dynamic pricing in the rental market. An investigation by ProPublica revealed that landlords across the country have been using a software program called RealPage to inflate their rental rates and maximize their profits. They feed privileged information about their properties into an algorithm, and in return it tells them how much they can charge.

This scandal led to a DOJ lawsuit, where federal prosecutors describe algorithms as "the new frontier" of collusion. As you can imagine, "antitrust enforcers have struggled to apply decades-old laws to new technologies" that "have changed the way competitors interact with one another and consumers." Fortunately, lawsuits at the federal and state level are finally holding these corrupt landlords accountable. Some of the largest rental companies in the country have already started to admit fault and settle over these claims.

As Judd Legum reported in Popular Information, rental market collusion has played a major role in the nation's housing crisis. In places like Atlanta, where RealPage dominates, the software has driven rates up more than 50 percent. In short, landlords have taken advantage of an existing housing shortage, making things worse by collaborating to raise prices.

Bad actors across every industry are using technology to circumvent laws and make price gouging difficult to prosecute.

They're making it legal.

Even utility companies are seeing surges in profits, raking in billions of dollars as their customers struggle through unpredictable weather in the summer and winter. The worse it gets, the more money they make.

Meanwhile, tech companies drive prices even higher with their relentless demand for energy to power artificial intelligence. According to a recent piece in Bloomberg, a single new data bank will use as much electricity as 30,000 homes. As they say, "the almost overnight surge in electricity demand from data centers is now outstripping the available power supply in many parts of the world," leading to "concerns of outages and price increases."

So if you happen to live near one of these giant data centers, you get stuck with a higher energy bill, and little recourse.

These trends have disturbing implications for our dystopian future. It's bad enough that we have to live through a collapsing climate punctuated by increasingly unpredictable weather. It's bad enough that we have to deal with more severe storms, more floods, more wildfires, more droughts, and more heat waves. Now we have to navigate an increasingly hostile consumer landscape designed to exploit us just for trying to survive.

So, there you have it.

The inflation crisis has very little to do with printing too much money, or whatever excuse rich people want to give. It has everything to do with dynamic pricing, price surging, collusion, and disaster capitalism. We're on the right track when we bust these price-fixing rings and hold them accountable. We're on the wrong track when anger and confusion lead to aimless blame at vulnerable groups or even politicians we otherwise don't like.

Instead of fighting climate change, giant food and utility corporations will leverage it to maximize their profits at our expense. Everyone from your grocery store to your utility company is going to be looking to charge you more for water, more for food, more for electricity, and more for basic shelter. They'll justify it by saying they want to offer you more bargains.

They don't want to fix our problems.

They want to profit off them.

---

If you appreciate this newsletter, please support it.