Heavy-Handed Rules Won’t Make Maryland More Affordable

In a reelection year, Gov. Wes Moore (D) is under pressure to make good on his promise to “mak[e] Maryland more affordable.” Despite half-hearted efforts to address Maryland’s structural budget deficits, the Governor’s office refuses to put aside politics and take up sensible economic and fiscal reforms.

In January, the governor announced the Protection from Predatory Pricing Act as a part of his legislative agenda. That proposal has since been incorporated into a Senate bill now under committee review. If enacted, the bill would prohibit “a food retailer from engaging in the practice of dynamic pricing or using consumer surveillance data to set a price for consumer goods or services.” Although it might prove politically useful as a piece of populist messaging, there is no economic basis for imposing sweeping restrictions on the use of emerging technologies in the grocery sector.

Predictably, the bill’s statutory language is needlessly preemptive, prejudicial toward algorithm-driven pricing systems—presupposing they are inherently detrimental to consumers—and ultimately self-defeating.

Touted as protecting Marylanders from “predatory pricing” so that, according to Gov. Moore, “the price they see on the shelf is the price they will pay at the register,” the legislation targets conduct that existing law already has tools to regulate. The Consumer Protection Act, enshrined in Maryland’s legal code long ago, outlaws “unfair, abusive, or deceptive trade practices.”

In fact, this law is precisely why the supermarkets to which Moore refers (establishments where “prices can change constantly—by the hour, by the minute and even by the second, based on who you are and where you shop”) are nowhere to be found. However resourceful grocery stores may be, prices cannot be fine-tuned with this frantic frequency in a brick-and-mortar setting without risking hefty civil penalties, let alone the reputational damage grocery stores engaged in such practices would incur. In a highly competitive market—which the grocery retail sector certainly is—reputation is a crucial asset.

The bill instead targets technologies that have become standard tools in modern grocery operations.

At present, merchants use dynamic or algorithmic pricing—often in conjunction with electronic shelf labels (ESLs)—to manage inventory and smooth fluctuations in supply and demand. As the Maryland Retailers Alliance explains, “This technology helps retailers adjust prices uniformly across all shoppers based on factors such as supplier costs, seasonality, promotions, and market competition—not personal consumer data.”

ESLs, in turn, streamline this process. Despite predictable claims by lawmakers and technophobes that ESLs could be used to spike prices, a recent study found no evidence of that. Instead, retailers pass cost savings from reduced manual labor and gains in pricing efficiency on to consumers.

A useful illustration of the benefits of dynamic pricing can be found in markdowns of perishables. A store’s system tracks ordinary metrics—such as how quickly an item is selling and its expiration date—and adjusts prices accordingly. For example, if strawberries are selling slowly but expire in two days, the system may recommend a 20 percent price reduction.

The automation of routine markdowns––and other inventory management functions––reduces human error, mitigates information gaps by aggregating real-time demand information, and thereby optimizes inventory allocation. Without this technology, grocers would risk regressing to suboptimal inventory management, potentially reintroducing shortages—especially during seasonal demand swings and emergency disruptions.

Beyond shielding consumers from a largely fictional threat, Moore’s proposal would impose significant barriers on the development of innovative solutions for existing market frictions.

Restricting within-day pricing adjustments and curbing “the use of artificial intelligence models that retrain or recalibrate based on received information in near real time” would, in effect, amount to a categorical ban on evolving and yet-to-be-developed business practices that—if scalable and economical—would both lower costs and improve allocative efficiency.

While portraying food retailers as inherently exploitative, government officials proceed as if grocery stores have already achieved ultimate cost efficiency. In reality, grocers still have much room for improvement. For example, U.S. supermarkets waste between 2.5 and 4 percent of their potential revenue—a share that exceeds their net margins. Annual losses from roughly 16 billion pounds of food waste inevitably cascade into higher prices for consumers. To that end, one study found that dynamic pricing reduces food waste by 21 percent. This effect is likely to grow as dynamic pricing technology evolves.

The Maryland government is mobilizing to fight for affordability—but directing its ire against the wrong culprit. It conveniently overlooks the state’s punishing tax regime, entrenched waste, fraud, and abuse, and billions of dollars in spending commitments it cannot afford, choosing instead to pontificate about the need to prevent “predatory” practices. Maryland officials should allow innovation to help businesses serve consumers, rather than stifling it through blunt and hasty regulation. Making Maryland affordable again will take markets and ingenuity, not top-down rules.