Algorithmic pricing at the heart of a tug-of-war with US retailers

As of July 8, the State of New York wants to force retailers to inform customers that their data has been used to set a sale price. The National Retail Federation has filed an appeal in federal court.

The New York Algorithmic Pricing Disclosure Act was passed by the state last June. For Governor Kathy Hochul, the aim is to combat the opacity of certain prices, which fluctuate according to consumers, and prevent comparative pricing. A study published in January by the Federal Trade Commission pointed out how the use of data made it possible to target each consumer with different prices. In other words, it was possible to charge higher prices to those for whom a product was most needed.

An unjustified accusation, according to the powerful National Retail Federation, which denounces a “speculative fear” and points out that data is generally used to offer discounts and personalized promotions. The NRF refuses to see its members forced locally to issue “misleading and alarming” warnings to customers about the use made of their data.

“Algorithms are created by humans, not computers, and they are an extension of what retailers have been doing for decades, if not centuries, to use what they know about their customers to serve them better,” argued Stephanie Martz, NRF’s administrative and legal director.

“This is simply happening on the scale of the modern economy. Stigmatizing tools that lower prices turns promotional offers into a liability, and consumers will end up paying more.”

In response to the Algorithmic Pricing Act, the NRF is suing New York State Attorney General Letitia James, who is responsible for enforcing the law. The federation is attacking the text from a constitutional angle, stating that it amounts to forcing retailers to express “opinions dictated by the Government.” This would violate the 1st Amendment of the U.S. Constitution, which deals with freedom of expression.

Retailers who fail to comply with the display of the price-customization warning risk a $1,000 fine for each purchase.