New Yorkers can report companies secretly using algorithmic pricing under new law
The Algorithmic Pricing Disclosure Act, passed earlier this year and set to take effect Monday, requires companies to disclose their use of consumer characteristics to determine prices. Credit: Getty Images/Alistair Berg
New York consumers can report companies that fail to disclose their use of personal data to set prices under a new law set to take effect Monday, the state attorney general’s office said Wednesday.
The Algorithmic Pricing Disclosure Act, passed earlier this year, requires companies to disclose their use of consumer characteristics to determine prices. Now, the attorney general is seeking New Yorkers’ help to enforce the law.
"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," Attorney General Letitia James said in a statement. "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."
Price discrimination occurs when a company charges customers different prices for the same good or service. The attorney general cited several examples including Target's past use of consumers’ location data to change its pricing. The retailer paid $5 million in 2022 to settle a California lawsuit that alleged Target showed customers different prices on its mobile app after they entered stores, The Associated Press previously reported.
James’ office also cited hotels that charge consumers higher prices when they book from high-income ZIP codes, a practice that could affect Long Island's wealthy communities.
The new law requires businesses to issue a clear disclosure stating, ‘This price was set by an algorithm using your personal data.’ Companies could face $1,000 fines for each violation.
Large retailers have opposed the law. The National Retail Federation, the largest retail trade association, sued James in her capacity as attorney general, alleging in a federal case that the law compels retailers to "express a misleading and controverted government-scripted opinion without justification" in violation of the First Amendment.
A federal judge in Manhattan dismissed the lawsuit in October, ruling NRF failed to show how the law violates the First Amendment. The trade group told Newsday late Wednesday the state's required disclosure language misrepresents companies' use of customer data to offer loyalty discounts. NRF plans to appeal the ruling.
"This forced disclosure directly suggests that retailers have engaged in nefarious behavior when they have done no more than reward loyal customers with products and prices that they want," Stephanie Martz, NRF's chief administrative officer and general counsel, said in an emailed statement.
The attorney general said consumers can uncover the behavior by examining whether they receive the same prices as others online, see different discounts online or in an app than other customers or notice a change in pricing after shopping for a product online.
Consumers can file complaints online at ag.ny.gov/file-complaint/consumer.
The disclosure law was one of several consumer protection measures Gov. Kathy Hochul signed this fall to address algorithmic price setting. A separate law, which takes effect Dec. 15, will prohibit landlords from using algorithms to set rents.
Some of the country’s largest property managers, including several operating on Long Island, faced federal lawsuits this year for using software created by the company RealPage to allegedly conspire to inflate rents. Greystar, the country's largest landlord, settled one of those cases with the Department of Justice in August.
New York's law prohibits landlords from using software to collect and analyze historical or current market data and recommend rents, according to an analysis by attorneys at law firm Wilson Sonsini.
Companies that charge different prices for the same goods or services need to be careful that they aren’t explicitly or implicitly treating customers differently based on certain personal characteristics, said Ian Wilder, a consumer advocate and executive director of Long Island Housing Services in Bohemia. He noted the example of real estate brokerage Redfin, which paid $4 million in 2022 to settle a lawsuit with fair housing groups including Wilder’s, after the groups alleged Redfin discriminated against minority homeowners.
A fair housing investigation showed Redfin’s past policy of declining to offer brokerage services to homeowners’ selling below a certain price resulted in discrimination against non-white sellers, including on Long Island.
"Once you start charging people based on who they are, you open yourself up to discriminating against people illegally," Wilder said.
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
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