New York has become the first state in the US to require companies to disclose when they use algorithms and personal data to set prices. A federal court has rejected industry efforts to block the law.
According to the New York Times, the measure targets what regulators describe as surveillance pricing. Online retailers must now inform customers whenever prices are calculated using personal data and artificial intelligence. The intent is to protect consumers from hidden price increases, such as cases where wealthier customers are shown higher prices for the same product. Companies that rely on such methods must display a notice stating that the price was determined algorithmically using the shopper's personal information.
The National Retail Federation tried to stop the law in federal court, arguing that the disclosure requirement was misleading and infringed on free speech. Judge Jed S. Rakoff rejected the challenge.
A new front in AI regulation
Experts say the law could set an important precedent. Goli Mahdavi, an attorney focused on AI and privacy, told the New York Times that algorithmic pricing is poised to become a major regulatory battleground. Similar proposals are already under discussion in California and at the federal level.
Lina Khan, the former chair of the FTC, called the measure essential for regulators and warned that data-driven pricing practices are spreading rapidly through the economy. She argued that additional state and federal rules will likely be needed.
Uber has started displaying the required notice in New York but has criticized the law's wording and scope. The company maintains that it does not use individualized data beyond location and demand to set fares. Consumer advocates report seeing cases where users received different prices for the same route at the same moment.
How personalized pricing is regulated in Germany and Europe
Personalized and dynamic pricing is also allowed in Europe but now operates under tighter rules. Since 2022, online retailers in the EU, including Germany, must clearly disclose when a price is tailored to an individual using automated systems and personal data. Additional regulations cover how prices and discounts must be presented, and privacy law (GDPR) sets the boundaries for profiling and data use.
In practice, online prices often fluctuate depending on timing or competitor activity. Variations based on location or device type can also occur. A report published in October by the German consumer association found almost no evidence of individualized pricing in day-to-day online shopping, even though it would be legal. The association offers guidance to help consumers navigate dynamic pricing.
The EU AI Act addresses the issue from a different angle. It bans certain manipulative AI practices and imposes strict requirements on high-risk systems used in areas like finance or public administration. Price algorithms in online retail generally are not treated as high risk, but they can fall under stricter rules if they exploit consumer vulnerabilities or feed into credit or insurance decisions.
For now, the main constraints on surveillance pricing in Europe come from existing consumer and privacy law, along with upcoming initiatives like the planned Digital Fairness Act, which aims to curb dark patterns and exploitative personalization in online commerce.
