New shopping law could change how millions are charged

New York has enacted a law which requires retailers to disclose when they use personal data and AI algorithms to set personalized prices for shoppers.

The law, which came into force this month as part of the state budget, aims to increase transparency surrounding the practice, which is used to charge customers different amounts for the same product.

Why It Matters

The law is one of the most significant efforts yet to regulate how retailers use consumer data, and could have broad implications for digital commerce. 

What To Know

Under the new law, retailers that use personalized pricing are required to disclose to customers: “This price was set by an algorithm using your personal data.”

The law follows growing concern from regulators about algorithmic pricing, in which retailers using artificial intelligence and customers’ personal data to change prices by, for example, charging more to shoppers who appear willing to pay higher prices.

The law has been welcomed by consumer advocates and privacy experts, who say it shines a light on previously opaque pricing practices.

Critics, including some business groups and retailers, argue that it could disrupt loyalty programs and create regulatory burdens for businesses.

The National Retail Federation attempted to block the rule by filing a lawsuit on First Amendment grounds, but a federal judge allowed it to move forward last month.

The new law on personalized pricing comes alongside a separate new measure requiring retailers in New York to accept cash payments, which will come into force in March 2026.

What People Are Saying

New York Attorney General Letitia James said in a press release: “New Yorkers deserve to know whether their personal information is being used to set the prices they pay, and if businesses are charging customers different prices for the same products. I will not hesitate to take action against those who try to mislead New Yorkers and use their personal information to manipulate prices without their knowledge.”

New York Governor Kathy Hochul said in a press release: “This new law shines the light on hidden online pricing tactics that take advantage of consumers.”

Goli Mahdavi, a lawyer at the firm Bryan Cave Leighton Paisner, told The New York Times: “It certainly is a big deal,” adding: “Algorithmic pricing bills are probably the next big battleground in A.I. regulation.”

Chad Yoes, co-founder of retail brokerage and consulting group Waypoint Retail, told The New York Times about the law: “Fundamentally it’s going to start breaking trust between retailers and consumers.” 

Stephanie Martz, the chief administrative officer and general counsel of the National Retail Federation, told The New York Times: “I wish I understood what harm exactly lawmakers think they are solving.”

What Happens Next

Lawmakers in at least ten states are considering similar measures, ranging from disclosure requirements to outright bans on personalized pricing, The New York Times reported.