New York has become the first U.S. state to regulate how retailers use artificial intelligence (AI) to set prices online, marking a significant step toward broader consumer data protection. The new law, quietly passed this month, addresses a practice called “personalized pricing” or “surveillance pricing,” where retailers leverage customer data to dynamically adjust prices based on individual spending habits and behavior.
How Personalized Pricing Works
This AI-driven tactic allows companies to charge different customers different amounts for the same products. For example, a shopper with a history of purchasing high-end items might see inflated prices for similar goods, while others are shown lower rates. The goal is to maximize profit by extracting the highest amount each customer is willing to pay.
The New Law’s Requirements
Under the New York law, retailers who employ personalized pricing must now display a prominent disclaimer: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.” This transparency requirement is designed to make consumers aware when their data is being used to manipulate prices.
Mixed Reactions and Ongoing Debate
The law has drawn criticism from business groups who argue it is overly broad and could create confusion. Some consumer advocates, however, believe the disclosure requirement doesn’t go far enough, as it doesn’t ban the practice entirely. Despite these concerns, the law recently withstood a federal court challenge, solidifying its legal standing.
Why This Matters
This move sets a precedent for AI regulation nationwide. The debate over personalized pricing reflects a broader struggle between consumer privacy, business interests, and the unchecked use of data-driven algorithms. As AI becomes increasingly integrated into retail, expect other states to grapple with similar legislation.
The New York law is not just about prices; it’s about who controls the data that shapes our economic choices. The fight over algorithmic pricing is likely to escalate as more states consider how to protect consumers in the age of AI.
