In brief

Retailers are increasingly adopting electronic shelf labels (ESLs) to streamline pricing updates and enhance operational efficiency. ESLs offer quick price adjustments, improved accuracy, and reduced labor. However, concerns about price gouging, demographic-based pricing, and technical glitches have emerged. Lawmakers and regulators are scrutinizing the technology, emphasizing the need for businesses to consider legal risks before deployment.

Recommended actions

While the use of ESLs offers retailers innovative ways to engage with customers, businesses must take precautions to avoid legal liability or reputational harm. We recommend developing a set of internal guidelines for ESL usage that address both general and sector-specific risks. Clear communication with consumers and regulators about these guidelines is crucial.

1. Given that ESL-related liability can arise from various legal areas such as antitrust, data privacy, antidiscrimination, consumer protection, and more, businesses should thoroughly assess and mitigate these diverse risks. This can be achieved by establishing an internal risk framework or conducting an impact assessment around the tool and the data collected before deploying ESL features.
2. Businesses should evaluate whether their use of ESLs, in conjunction with dynamic pricing, could result in price gouging, bias, price collusion, or price-fixing. If these risks are identified, it is crucial to implement guardrails and organizational processes to ensure that pricing practices remain fair and compliant with relevant laws.
3. Businesses should exercise special caution when implementing ESL implementations combined with AI and facial recognition technologies. These features should be assessed rigorously to ensure that they don’t result in discrimination or bias.

Background

Retailers are progressively adopting ESLs to simplify pricing updates and boost operational efficiency. These digital displays, which can be updated remotely, allow businesses to respond quickly to fluctuating costs, improve pricing accuracy, and reduce labor-intensive tasks. As the technology becomes more widespread, it is changing the way consumers interact with prices and how businesses use remote technologies to engage with consumers in real time.

Despite the benefits, the potential for misuse of ESLs has attracted the attention of US policymakers and consumer advocates. Critics worry about dynamic pricing leading to price gouging and the use of facial recognition technology to target pricing based on consumer demographics. Technical issues have also caused some retailers to close stores due to incorrect pricing displays. Businesses considering ESL deployment should carefully assess these risks and implement internal guidelines to mitigate potential legal liabilities.

To learn more, read our full article published on Law360, where we delve into retailers’ adoption of ELS and examine the associated legal and regulatory risks.