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With AI-driven pricing more prevalent, lawyers must grapple with algorithms that adjust prices based on consumer behaviour, demand, and market conditions.
On a recent podcast of the Lawyers Weekly Show, Maddocks’ partner in the dispute resolution and litigation team, Shaun Temby, discussed how artificial intelligence continues to transform law practices and businesses in general, especially through dynamic pricing, where algorithms adjust prices based on consumer behaviour, demand, and market conditions.
In Australia, existing consumer protection laws are being tested as businesses increasingly rely on automated decision making.
Temby noted that staying informed about technological advancements is becoming essential to providing effective legal advice in an increasingly complex profession.
AI, dynamic pricing, and consumer law
The conversation explored how AI-driven dynamic pricing is reshaping the relationship between businesses and clients, raising questions about transparency, fairness, and legal accountability.
“Dynamic pricing at its simplest is the practice of adjusting the price of a good or a service in real time or close to real time based on supply, demand and other market variables,” Temby said.
“What you’re seeing then is businesses pivoting back and taking some of the advantages that consumers were winning and taking that power back to business.
“The risk for consumers is that they are not necessarily getting the best deal; they’re getting the deal that an AI tool determines if it’s priced at the amount that they are willing to spend.”
As businesses are using algorithms to personalise prices and influence purchasing decisions, Temby highlighted that Australia’s existing consumer protection laws face the potential challenge of ensuring that these practices remain ethical and transparent.
“One of the broadest protections that is available for Australian consumers is the prohibition in the Australian Consumer Law against misleading or deceptive conduct,” Temby said.
“The other thing, which I think is a little bit more out there and which I don’t think we’re anywhere near at the moment, is that companies are given the rights and obligations of a person.
“We have the law in that area, very well established, and you can imagine that it is possible that at some point in time, legal personhood will be given by Parliament or given by courts to an AI model that is capable of independent thought.”
Legal challenges of implementing technologies
As AI becomes significantly more embedded in business operations, Temby warned that lawyers must adjust their approach to advising clients, assessing liability and managing the legal risks that come with these rapidly evolving technologies.
“The starting point is to be across the tech and to be thinking about the way in which it’s being deployed within your clients, and businesses,” Temby said.
“You’ve really got to be there with those clients and, in the rooms where some of those conversations are taking place with the people who are having those conversations, to make sure you’re staying abreast of all of those sorts of changes and the way in which the law could apply to them.”
With AI systems advancing in sophistication, Temby noted that they present intricate challenges regarding market competition and the capacity of current legal frameworks to govern decision making.
“If you don’t train your AI model properly and you tell it your goal is to maximise profits and it’s negotiating with another AI, they form a cartel,” Temby said.
“Because, of course, the way to maximise profits in a small, tight market is to form a cartel.
“You’ve got to experiment with it, you’ve got to be across how it operates, how it thinks, how it presents information.
“You need to understand hallucinations, you’ve got to be really in the mix in order to properly advise clients who are playing in that space.”
