New York sued by National Retail Federation over surveillance pricing law

New York state was sued on Wednesday by the National Retail Federation over a new law requiring retailers to tell customers when their personal data are being used to set prices, known as surveillance pricing.

The world’s largest retail trade group said New York’s Algorithmic Pricing Disclosure Act, which would take effect on July 8, violates many members’ First Amendment free speech rights.

Governor Kathy Hochul signed the first-in-the-nation law in May, saying the practice of charging different prices based on customers’ willingness to pay was “opaque,” and prevented those customers from comparison shopping.

In its complaint filed in Manhattan federal court, the National Retail Federation objected to requiring members to affix “misleading and ominous” warnings to prices set by algorithms linked to customer data.

It said the law reflected “speculative fear” of price gouging, even though retailers use algorithms to offer promotions and reward customer loyalty, sometimes resulting in lower prices.

According to the complaint, the law violates the U.S. Constitution by compelling a broad range of retailers to express misleading “government-scripted opinion” without justification, or face potential civil fines of $1,000 per violation.

The only defendant is state Attorney General Letitia James, who enforces New York laws. Her office did not immediately respond to requests for comment after business hours. Hochul’s office did not immediately respond to a similar request.

In January, a divided Federal Trade Commission issued a study on surveillance pricing, saying location data and online browsing histories could permit retailers to “target” individual consumers with different prices for the same products.

FTC Chairman Andrew Ferguson, then a commissioner, dissented from issuing the study, saying it was rushed out three days before Donald Trump succeeded Joe Biden as U.S. president to meet a “nakedly political deadline.”