By Jonathan Stempel
NEW YORK (Reuters) -A federal judge on Wednesday dismissed a lawsuit by the National Retail Federation challenging a New York state law that requires retailers to tell customers when their personal data are used to set prices, known as surveillance pricing.
U.S. District Judge Jed Rakoff in Manhattan said the world’s largest retail trade group did not plausibly allege that New York’s Algorithmic Pricing Disclosure Act violated its members’ free speech rights under the Constitution’s First Amendment.
Neither the NRF nor its lawyers immediately responded to requests for comment after business hours. Spokespeople for New York Attorney General Letitia James, whose office defended the law, did not immediately respond to similar requests.
The first-in-the-nation law required retailers to disclose in capital letters when prices were set by algorithms using personal data, or face possible civil fines of $1,000 per violation.
Governor Kathy Hochul said charging different prices depending on what people were willing to pay was “opaque,” and prevented comparison-shopping.
The trade group said the law reflected “speculative fear” of price gouging and forced retailers to convey that algorithms were “dangerous,” though they could also be used to lower prices for promotions or to reward customer loyalty.
JUDGE SAYS LAW INFORMS CONSUMERS ABOUT PRICES
In a 28-page decision, Rakoff said the law was reasonably related to New York’s legitimate interest in ensuring that customers understand their transactions.
The disclosure “serves to ameliorate consumer confusion or deception by ensuring that consumers are better informed about how a merchant has set the displayed price,” the judge wrote.
New York’s law was to take effect on July 8, but was put on hold because of the lawsuit.
James agreed not to retroactively enforce the law for intervening violations.
In January, a divided Federal Trade Commission issued a surveillance pricing study that said location data and online browsing histories could let retailers “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 hurried out three days before President Donald Trump began his second White House term to meet a “nakedly political deadline.”
(Reporting by Jonathan Stempel in New York; Editing by Chris Reese and David Gregorio)
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