A federal judge has dismissed a legal challenge from the National Retail Federation (NRF) against a New York law requiring businesses to alert customers when personal data is used to determine prices.
The decision supports efforts to bring more transparency to a growing practice known as surveillance pricing.
The NRF, which represents some of the largest retail chains in the country, argued that the law violates First Amendment protections by forcing companies to make disclosures they believe mischaracterize their pricing methods.
However, US District Judge Jed Rakoff ruled that the law is consistent with the state’s interest in helping consumers understand how prices are set.
Known as the Algorithmic Pricing Disclosure Act, the measure requires retailers to inform shoppers in capital letters if algorithms relying on personal data have played a role in setting a product’s price.
Retailers that do not comply could be fined $1,000 per violation.
In his 28-page opinion, Judge Rakoff wrote that the rule is intended to reduce confusion or deception by making sure consumers are aware of the factors influencing the prices they see.
He stated that the requirement is “reasonably related” to New York’s goal of ensuring informed transactions.
Governor Kathy Hochul defended the law when it was introduced, calling algorithmic pricing “opaque” and warning that it undermines consumers’ ability to compare prices fairly.
The NRF responded by arguing that the law was based on a “speculative fear” of abuse and unfairly suggests that algorithms are inherently dangerous, despite their common use in providing promotional pricing and loyalty rewards.
The law was scheduled to take effect on July 8, but enforcement was paused while the lawsuit moved forward.
Attorney General Letitia James, whose office defended the law, agreed not to impose penalties for any violations that occurred during the legal dispute.
Neither the NRF nor its attorneys offered a comment following the decision.
Earlier this year, the Federal Trade Commission issued a divided report on surveillance pricing.
The report warned that companies could use location data and browsing history to assign different prices to different customers.
