America's largest supermarket chain, Kroger, is under scrutiny as US Senators Elizabeth Warren and Bob Casey launch an investigation into the company's use of electronic price labels on store shelves. The senators are particularly concerned about the possibility of Kroger engaging in surge pricing, where prices fluctuate based on demand, and its potential impact on customers.

Surge pricing, also known as "dynamic pricing," is a common practice in various industries such as flights, hotels, and car-sharing services like Uber. It involves adjusting prices to match demand, leading customers to pay more or less depending on factors like time of day or season. While dynamic pricing can be controversial, its application to essential items like groceries raises additional concerns, including the fear that companies could exploit high demand to force customers to pay more.

Kroger, however, is not alone in implementing this pricing strategy. Walmart, the largest retailer in the US, announced its plan to introduce digital shelf labels in thousands of stores earlier this year. It remains unclear whether Walmart will also be subjected to the investigation.

In a letter addressed to Kroger's CEO Rodney McMullen, the senators expressed concerns that the company's technology, referred to as "electronic shelving labels," may allow for the adoption of dynamic pricing practices. The lawmakers worry that this could result in price surges for basic household goods based on various transient factors like time of day or weather. They argue that this could enable grocery chains to maximize profits while putting a financial strain on consumers, especially since Americans' spending on food is at a 30-year high.

The senators highlighted how analysts have suggested that the widespread use of dynamic pricing could lead to groceries and other consumer goods being priced similarly to airline tickets. By creating a sense of scarcity and urgency, sellers could extract the maximum profit from each customer.

Kroger, with its 2,750 stores in 35 states, has emphasized that its business model focuses on lowering prices over time to attract more customers. A spokesperson for the company stated that everything they do is designed to support this strategy, and customers are increasingly choosing Kroger due to its approach in fighting inflation and providing great value.

While Kroger did not directly address specific questions regarding the use of the technology and frequency of price changes, the company maintained its commitment to lowering prices for customers.

The senators, demanding answers from Kroger by August 20, criticize the surge pricing and corporate profiteering schemes by grocery giants, especially as families continue to struggle with food affordability.

Meanwhile, Walmart views the implementation of digital shelf labels as a means to enhance the shopping experience for customers. In addition to streamlining price updates, the technology eliminates the need for weekly manual labeling, a process that used to take store employees about two days.

It is worth noting that Walmart, known for its emphasis on everyday low prices, is unlikely to adopt surge-style pricing according to retail expert Neil Saunders from analysts Global Data. He believes such a move would go against the retailer's philosophy and potentially alienate consumers.

In a similar vein, earlier this year, Wendy's faced backlash after plans were revealed to introduce an "Uber surge-style menu" with varying prices based on the time of day. The fast-food chain quickly reversed its decision, clarifying that their intention was to lower prices during slower times rather than raise them during high-demand periods.

Kroger's recent controversy involving the unauthorized use of promotional photos from a family-owned peach business also came under scrutiny, adding to the company's growing list of challenges.

As the investigation into Kroger's use of electronic price labels unfolds, the outcome will shed light on the potential impact of surge pricing in the grocery industry and its implications for consumers and retailers alike.