Democratic lawmakers in New York have introduced legislation to regulate AI-driven pricing practices, aiming to protect consumers from discriminatory and unfair price hikes.
The proposed Preventing Algorithmic Pricing Discrimination Act, unveiled by Bronx Assemblymember Emérita Torres, seeks to address concerns over businesses using personal data to set prices based on factors like ZIP code, race, or income level.
“Consumers have the right to know if they are being digitally profiled and charged more than someone else for the same product or service,” Torres said, highlighting the need for transparency in pricing practices.
The bill defines key terms such as “algorithm,” “consumer data,” and “dynamic pricing,” and outlines two main provisions to achieve its goals. First, businesses would be required to disclose when prices are determined by algorithms using consumer data, displaying a clear notice stating, “This price was set by an algorithm using your personal data.”
Second, the legislation would prohibit the use of “protected class data” to change prices for goods or services, including factors like ethnicity, national origin, age, disability, and more.
The bill aims to strike a balance between allowing companies to use data-driven pricing while minimizing potential biases. It includes exemptions for certain industries like insurance, banking, and investment advising.
Enforcement mechanisms would include subpoenas and injunctions issued by the attorney general, as well as court-ordered fines of up to $1,000 per violation. Individuals harmed by businesses using protected class data could also file civil lawsuits.
The proposed legislation is timely, following a Federal Trade Commission study that found retailers often set different prices for individuals based on various data points, including location, demographics, and behavior. This practice, known as “surveillance pricing,” can lead to discriminatory outcomes and undermine consumers’ ability to comparison shop or budget effectively.
Torres emphasized the need for New York to take action, given the lack of federal protections against algorithmic pricing discrimination. “We can’t wait for Washington to catch up; we must act now to ensure equity and transparency in our state’s digital economy,” she said.
If passed, the bill would take effect 60 days after being signed into law, giving businesses a window to update their systems and practices.
