New Jersey ESL Moratorium Puts Electronic Shelf Labels at Risk

New Jersey has placed a one-year moratorium on new electronic shelf labels (ESLs), and retailers led by Walmart are now fighting to prove the technology will not enable arbitrary or personalized price hikes.

Walmart made its case in person last month. During a tour of its North Bergen, New Jersey, Supercenter, where about 90% of tags have been replaced with ESLs, team leader Victor Lopez, 21, tapped his work-issued smartphone and entered $10 under the field labeled "Enter new price" for a bottle of barbecue sauce. The price did not change. Store manager Kyle Boyd said that was the point.

"We cannot take prices up in the store," Boyd told Retail Brew. "We can only take prices down in the store."

The demonstration comes as political pressure on ESLs intensifies. In July, New Jersey Governor Mikie Sherrill signed the Fair Price Protection Act, designed to protect consumers from "discriminatory surveillance pricing"—defined as using personal data to set prices—and imposing the moratorium while the state studies the technology's effects. Maryland passed a similar law earlier this year, and legislation is pending in several other states. A recent report from the Groundwork Collaborative, Consumer Reports, and More Perfect Union also claimed that Instacart's AI pricing tool offers individualized prices on the same items.

Critics of the New Jersey legislation argue digital price tags simply save time and cut costs. Supporters argue the tags make it easier for retailers to manipulate and raise prices. Companies and industry groups are now working to distance ESLs from unpopular terms such as surveillance pricing, dynamic pricing, and surge pricing.

"Electronic shelf labels are not tools for surge pricing, but rather tools for efficiency and affordability," Macy Lemon, vice president of state government affairs at the National Grocers Association, said in a statement. Lemon urged Governor Sherrill to change the New Jersey law before she signed it, citing concerns it would make it harder for stores to offer affordable groceries.

The United Food and Commercial Workers (UFCW) International Union takes the opposite view. Ademola Oyefeso, international vice president of the UFCW, told Retail Brew it is not a matter of if, but when, companies start using the technology for dynamic pricing.

"A retailer may not be doing it right now, but they are laying the groundwork for it," Oyefeso said.

The union wants a full ban on ESLs, which it views as a "tool for price-gouging and job loss." Oyefeso pointed to Norway, where a number of grocery chains engaged in rapid repricing on a daily basis after installing digital tags.

The stakes are high for an industry that appeared ready for widespread adoption. Walmart committed to rolling out ESLs across its entire US footprint by the end of the year. Kroger has added the technology to a number of stores across the country, and Whole Foods is testing digital tags at nearly 50 stores.

Walmart says the fears are misplaced. Robyn Babbitt, director of corporate communications at Walmart, said ESLs "operate on a closed system and do not interact with shoppers or collect any information about them." She called the legislation an "overreaction."

"There is nothing like a camera or microphone in them; they just display prices," Babbitt said in an email to Retail Brew.

Price increases to a product's base price—unlike rollbacks or promotions—happen at the corporate level and usually outside regular shopping hours, not spontaneously while customers walk the aisles, Babbitt said. "They're centrally controlled through our pricing team," she added during the North Bergen tour, noting that human beings remain in control of all pricing actions.

Suppliers of retail planning technology largely echo that view. Asa Farquhar, strategic principal of price and promotion at RELEX, a retail planning platform, said he works closely with retailers on merchandising and promotional strategies and has not seen the technology used for dynamic pricing among his clients. Instead, retailers use ESLs to reduce errors and optimize price adjustments that were happening anyway.

"I have never seen them talking about how we can use these tools to get a leg up on customers," Farquhar said.

He acknowledged the technology could theoretically make it easier for retailers to price more dynamically, which could result in "any number of negative pricing scenarios." But he does not view that capability as evidence of bad practice.

"If a price can be changed faster, easier, and with less expense, I think it's fair to say that could lead to retailers being willing to change prices more often," Farquhar said. "But I think it's a stretch to say just because a price could change more often or is executed more operationally efficiently that we would see any kind of nefarious strategies around that."

With Maryland's law already enacted and more states considering their own measures, retailers' ability to keep rolling out ESLs nationwide may now depend less on the technology itself than on whether they can convince consumers and lawmakers it will not open the door to problematic pricing.