New York has implemented the first law in the United States requiring retailers to disclose when prices are determined by algorithms that use a shopper’s personal data. The rule applies to both online and in-store retailers and seeks to improve transparency around the use of artificial intelligence in pricing.
What Algorithmic Pricing Means for Consumers
Algorithmic pricing, sometimes called personalized or surveillance pricing, adjusts the cost of an item based on a consumer’s behavior. Retailers may use browsing history, past purchases, or location to determine what a specific shopper pays. Examples include charging more for clothing to people who frequently buy high-end brands or raising hotel rates for users who recently booked flights.
The law requires retailers using these techniques to display the notice: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.”
Reactions From Consumers and Business Groups
Advocates for consumer rights say the rule gives shoppers clarity about how their data influences pricing and allows them to compare prices more fairly. They argue that hidden personalized pricing can lead to unfair differences in cost between similar customers.
Retailers and business associations have pushed back. The National Retail Federation filed a lawsuit claiming the disclosure was overly broad and would confuse customers. The group also argued that the requirement violated the First Amendment by compelling businesses to use specific language.
A federal judge dismissed the lawsuit in October, ruling that the disclosure serves a legitimate public interest and represents factual commercial information.
Enforcement and Compliance
New York Attorney General Letitia James has urged consumers to report any suspected violations. Companies that fail to provide the required notice may face fines of up to one thousand dollars per incident. The Attorney General’s office has warned that enforcement will be particularly active during the busy holiday shopping season.
Retailers operating in New York must now review their pricing systems to determine whether algorithmic methods are being used. If so, the disclosure must appear clearly at the point of sale.
Concerns About the Law’s Limitations
While praised as a step toward transparency, the law does not restrict companies from using personalized pricing. It only requires disclosure. Some privacy groups argue this leaves consumers vulnerable to potentially exploitative pricing practices, even if they are now made aware of them.
Others warn that similar laws may appear in additional states, creating complex compliance requirements for national retailers.
Implications for National AI and Data Regulation
The implementation of this law positions New York as a leader in the regulation of artificial intelligence and commercial data usage. Legal experts expect other states to watch closely as they consider their own responses to emerging AI-driven business practices.
For retailers, the new rule may influence long-term decisions about pricing strategies, data collection practices, and customer transparency across the country.
