[co-author: Stephanie Kozol]*
On November 10, New York’s Algorithmic Pricing Disclosure Act officially took effect, requiring businesses that use individuals’ personal data to set prices to comply with the act’s disclosure requirements. New York Attorney General (AG) Letitia James, charged with enforcement of this new law, has stated that enforcement is a top priority and has urged businesses to comply and consumers to report any violations.
Overview of the Algorithmic Pricing Disclosure Act
The act requires businesses that use individuals’ personal data to set prices for goods or services to disclose this practice to consumers. Specifically, entities using personalized algorithmic pricing must include the following statement:
“THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.”
The law applies broadly to entities domiciled or doing business in New York, with a few limited exceptions for entities subject to the insurance law or applicable regulations, financial institutions and affiliates subject to Title V of the Gramm-Leach-Bliley Act, and financial institutions under subsection (f) of section 801 of the Financial Services Law. The law also does not apply to prices for existing subscription-based contracts or agreements when the price is less than the price set forth in the agreement.
The act is enforceable by the New York State AG and requires the AG to first issue a cease-and-desist letter outlining the alleged violation and providing a timeline to cure. If the business fails to comply, the AG may seek an injunction and civil penalties of up to $1,000 per violation.
New York AG’s Enforcement
A few days before the law took effect, on November 5, James issued a consumer alert, affirming her commitment to enforcing this new law. She encouraged New Yorkers to file complaints about instances where algorithmic pricing is used without proper disclosure to the AG’s office and provided a direct link for individuals to submit complaints.
James’s consumer alert offered tips for consumers to identify potential algorithmic pricing, including comparing prices across different users, monitoring discounts, and checking for price changes after searching for an item elsewhere online.
Why It Matters
James has clearly stated her intention to enforce the new Algorithmic Pricing Disclosure Act. Companies that utilize personalized pricing algorithms should promptly review their practices and disclosures to ensure they are appropriately identifying listing prices. Noncompliance carries the risk of injunctive penalties and substantial civil penalties.
*Senior Government Relations Manager
