The ‘New York Algorithmic Pricing Disclosure Act’ is part of the state’s budget bill signed by Governor Kathy Hochul on 9 May and will be effective 8 July.
The act mandates retailers to announce next to each product affected that its price was determined from the customer’s personal data.
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Attorney General Letitia James, defendant, is responsible for enforcing the act.
The enforcement process begins with the Attorney General issuing a cease-and-desist letter that outlines the supposed infractions.
If the recipient fails to address these issues within a timeframe determined by the Attorney General, she can pursue an injunction and impose fines up to $1,000 for each violation.
Consequently, if a business displays a single product to 1,000 customers without providing the mandated disclosure, it could face potential penalties totalling $1m, says NRF.
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By GlobalDataIn the lawsuit, filed in the US District Court in Manhattan, the retail group argues that retailers employ algorithmic pricing strategies to offer cost savings and tailored promotions to consumers by analysing data such as purchase history, cart contents, zip code, and other ‘voluntarily’ provided information.
It contends that this practice benefits customers financially and should not be portrayed negatively through mandated disclosures.
“This law interferes with retailers’ ability to provide their customers with the highest value and best shopping experience they can,” says Stephanie Martz, NRF chief administrative officer and general counsel.
“Algorithms are created by humans, not computers, and they are an extension of what retailers have done for decades, if not centuries, to use what they know about their customers to serve them better. It’s just done at the scale of the modern economy. Stigmatising tools that drive prices down turns offering deals into a liability, and consumers will end up paying more.”
NRF claims the law was passed in “less than two months after its introduction” with minimal debate and suggests that the act lacks a factual basis for the assertion that algorithmic pricing misleads or harms consumers.
According to the challenge, the law seems to stem from “a speculative fear” that retailers might exploit sensitive data for discriminatory pricing or price gouging —actions already illegal under existing laws.
Furthermore, the act “arbitrarily” exempts certain sectors of the economy without rationale.
Consequently, it forces a subset of retailers to communicate a “misleading and controverted government-scripted opinion”, all without sufficient reason, said NRF.
“Algorithmic pricing mechanisms lower overall consumers prices in the aggregate,” the suit said.
The NRF lawsuit requests the court to declare that the law infringes upon the First and 14th Amendments. It requests that the court issue both “preliminary and permanent injunctions” to prevent the law’s enforcement.
In April, the organisation forecasted that retail sales will grow by 2.7% to 3.7% in 2025, surpassing the revenue numbers from 2024, despite economic uncertainties.
