On July 2nd, the National Retail Federation (NRF) filed a lawsuit at the Southern District Federal Court in Manhattan, challenging the impending implementation of the “Algorithmic Pricing Disclosure Act” (N.Y. Gen. Bus. Law §349-a) in New York on July 8th. This law requires retailers to display a warning when using customers’ personal data to set prices (known as price monitoring), stating: “This price is determined by an algorithm that uses your personal data.” NRF argues that this provision violates the First Amendment of the Constitution, constituting forced commercial speech.
This law was signed by Governor Kathy Hochul in May and is a first of its kind in the United States. The governor stated that the practice of differential pricing based on personal data is opaque and undermines consumers’ ability to compare prices. However, NRF believes that the law reflects a “speculative fear of price gouging,” as most retailers use algorithms to provide promotional offers and loyalty rewards, rather than harm consumer interests.
The complaint points out that this law is equivalent to the government forcing businesses to display “misleading and negatively suggestive” messages on price tags, tarnishing legitimate and common practices of personalized pricing. It not only damages consumer trust but also increases compliance costs, with potential fines of up to $1,000 for each violation.
NRF’s main argument in the lawsuit is that algorithmic pricing is a modern technology that uses data voluntarily provided by customers (such as purchase history, location, browsing habits) to offer discounts and loyalty benefits, ultimately helping consumers save money and improving retail efficiency. Moreover, existing laws already prohibit unfair pricing practices, such as pricing discrimination based on race or income.
NRF further points out that this law lacks legislative process and empirical support, mainly based on hypothetical fears of technology abuse and exempts various industries such as finance and insurance, with vague and discriminatory standards. Mandatory slogans can mislead consumers into believing that retailers misuse sensitive personal information and deliberately raise prices when, in reality, most data such as zip codes or shopping habits are voluntarily provided by customers and enhance the consumer experience.
According to a series of constitutional precedents, NRF believes that the government has no authority to compel private enterprises to express views they do not endorse.
The sole defendant in the lawsuit is New York State Attorney General Letitia James. NRF requested the court to declare the law unconstitutional, prohibit the state attorney general from enforcement, and award legal fees and other appropriate relief. Letitia James’s office has not yet responded to Epoch Times’ request for comment, and Governor Hochul has also not issued a statement.
It is worth noting that the Federal Trade Commission (FTC) released a preliminary report in January on algorithmic pricing (surveillance pricing), revealing that retailers and intermediaries often use consumers’ personal information – such as geographic location, demographics, browsing history, purchase history, and even mouse movement behavior – to set different prices for the same product or service.
This research was conducted through a 6(b) order to retrieve documents from multiple companies (such as Mastercard) and focused on how retailers’ hired intermediaries adjust prices through algorithms and determine target prices.
FTC found that personalized pricing and promotional strategies of this nature have been widely used, with about 250 retailers partnering with these data intermediaries, covering multiple industries from daily necessities to clothing. For example, certain cosmetics may offer discounts for specific skin tones, while new parents may be directed to see higher prices for parenting products.
FTC’s chairman emphasized that these practices affect price transparency and fair competition, and consumers have the right to know how their data is used for pricing. However, there was internal controversy at the FTC regarding this issue. Two commissioners opposed the early release of the preliminary report, questioning its political intent and research foundation. Nevertheless, the report was ultimately published with a 3-2 majority vote.