Hidden cost of convenience

Online Shopping — WILLIAM GARY/The Star

AS online shopping, food delivery and ride-hailing services become more popular in Malaysia, concerns are emerging about how prices for these conveniences are actually set behind the screen.

While much attention has focused on the United States, where artificial intelligence is being used to personalise prices for individual consumers, similar practices may already be taking shape closer to home.

In the US, experts have raised concerns about “surveillance pricing”, where companies use AI and personal data such as location, browsing history, past purchases and even device type to estimate how much each consumer is willing to pay. This means different users can see different prices for the same product, and some would unknowingly pay more.

For example, a major study on a grocery e-commerce app found that the same items from the same stores were listed at different prices for different users. In tests covering hundreds of orders, nearly 75% of products had varying prices – with some differences reaching up to 23%, all without the customers being notified.

While there is no public evidence that large scale surveillance pricing is fully entrenched in Malaysia, legal scholars here, such as Angayar Kanni Ramaiah and Dr Jaspal Kaur Sadhu Singh, have cautioned that AI-driven pricing and algorithmic systems could create anti-competitive outcomes and leave consumers vulnerable.

The Malaysia Competition Commission (MyCC) is also actively reviewing the digital economy, including e-commerce and ride-hailing platforms, to understand how dynamic pricing and algorithmic practices affect competition and fairness.

Many of the same global e-commerce, travel and ride hailing platforms operating in the US also operate in Malaysia, often using similar AI-driven systems, and experts are warning that the line between demand-based pricing and personalised price discrimination is becoming increasingly blurred.

Malaysia’s current legal framework may not be fully equipped to address this emerging challenge. While the Personal Data Protection Act (PDPA) 2010 regulates the collection and handling of personal data, it does not explicitly govern how AI-driven systems may use such data to personalise or influence pricing decisions.

Similarly, the Competition Act 2010 was drafted before the widespread adoption of automated, real-time algorithmic pricing, thereby complicating efforts to detect or prove unfair or manipulative practices.

The issue becomes even more relevant during major festive periods such as Chinese New Year. In the weeks leading up to the celebration, demand for groceries, festive foods, new clothes, flight tickets and online gifts surges.

During these high demand periods, AI-driven pricing systems could take advantage of consumers’ urgency and emotional spending behaviour. A shopper searching repeatedly for mandarin oranges, reunion dinner ingredients or last minute travel deals may unknowingly signal a higher willingness to pay, potentially resulting in higher prices than those shown to other users.

This raises an important question: Should Malaysian consumers be vigilant? The answer is yes. Even if surveillance pricing is not yet widespread, the rapid adoption of AI in commerce means the risk is growing.

Greater transparency from platforms, stronger enforcement of consumer protection laws and up-to-date regulations that address AI-driven decision-making are essential.

Public awareness is equally important. Many consumers may not realise that their online behaviour can influence the prices they see. Without clearer rules and safeguards, the true price of online shopping may not be obvious at checkout but quietly calculated by algorithms in the background.

DR ASRAF MOHAMED MOUBARK and DR SERI MASTURA MUSTAZA

Faculty of Engineering and Built Environment

University Kebangsaan Malaysia