New York Attorney General Letitia James has issued an alert that the state’s Algorithmic Pricing Disclosure Act takes effect on Nov. 10. It requires most companies that use algorithmic pricing to clearly display a disclosure notifying consumers that prices are set using their personal data. Algorithmic pricing allows some consumers to be charged more or less for products or services than other consumers are charged depending on factors like their location, income, and previous shopping habits.
The act requires that businesses using algorithms to determine how much to charge a consumer must include a specific disclosure of what they’re doing: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.” Businesses that do not comply with the law can face a $1,000 penalty per violation.
“The law is clear: if businesses use algorithmic pricing, they must notify consumers,” James said. “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.”
Algorithmic pricing is sometimes used as part of loyalty programs, where consumers may receive an individualized discount offering a different, personalized price. Examples of this include customers being charged more for hotel rooms when booking from a high-income ZIP code and Target shoppers seeing prices increase when they browse online inside a Target store.
A second law on algorithmic pricing in real estate that was signed into law by Gov. Hochul last month is due to go into effect on Dec. 15. It prohibits certain uses of algorithmic pricing in the residential rental market to prevent price coordination between landlords. It bans landlords from coordinating with each other to set rental prices or other lease terms using algorithmic pricing software.
According to Hochul’s office, recent data show that price fixing algorithms had cost tenants nationwide an estimated $3.8 billion more in inflated rents during 2024. Her office says that the companies that have developed the software make no secret that private data algorithms are intended to drive rent increases, with some openly advertising that they can help property owners outperform the market, resulting in housing market distortion and hurting tenants. By signing the new law, Hochul made New York among the first states in the nation to address rent price fixing collusion using algorithm pricing software.
James urged consumers who become aware of algorithmic pricing that is not being properly disclosed to file a complaint with her office. She provided three tips to help determine whether algorithmic pricing is being used:
- Compare the price you are offered online with the price listed for the same product offered to others. If you are offered a unique price, it may have been set using your personal data.
- Compare discounts you are offered by a company – particularly those offered within a company’s app or online account – with those offered to others. If you are receiving a discount that only you can see, it is more likely to be a personalized one set using your data.
- Compare the price of an item before and after taking an action that the business you are shopping from can track. For example, if you are offered a new price after searching for an item elsewhere online or shopping from a new location, it may be a sign that the price is set using your personal data.
