New York Moves to Block Personalized Pricing Based on Income, Age and Race

New York lawmakers have approved legislation that would prohibit companies from using consumers’ personal information to charge different prices for identical products.

The One Fair Price Act focuses on surveillance pricing, a practice in which algorithms analyze extensive information about individual shoppers to determine what price they may be offered.

Critics say the practice goes far beyond tracking ordinary shopping habits, such as grocery purchases or hotel bookings. They argue companies could use information including income, ZIP code, occupation, IP address, age, gender and even race to estimate how much a particular consumer would be willing to pay for products such as headphones or winter clothing.

Supporters of the legislation describe it as a safeguard against undisclosed forms of price discrimination.

State Sen. Rachel May compared surveillance pricing with the period before standardized price tags, when merchants could potentially charge customers different amounts for the same merchandise.

“We’re back in that kind of Wild West period, when you didn’t know what you were going to pay or whether it was fair,” said May, D-Syracuse, earlier this year.

However, even if Gov. Kathy Hochul signs the legislation, it would not eliminate price changes that occur while consumers are selecting concert tickets, requesting an Uber or using loyalty points to purchase coffee. Businesses would still be permitted to adjust prices according to supply, demand and factors such as road conditions, a practice known as dynamic pricing.

There are also questions about just how prevalent surveillance pricing actually is among online and traditional retailers. Retailers dispute claims that they monitor customers’ personal information to determine what prices they should pay.

Business groups instead warn that the legislation could produce unintended effects, including limiting certain discounts.

“At a moment when New York is in the grip of an affordability crisis, we do not believe the state should enact a law that has the effect of reducing the number of discounts, promotions, and loyalty benefits available to New Yorkers, even unintentionally,” a coalition of business and retail organizations wrote to Hochul in August.

Another unresolved issue is enforcement. It remains uncertain how state officials would identify violations and whether consumers would have sufficient authority to challenge questionable pricing practices.

What exactly is surveillance pricing?

Surveillance pricing is a form of personalized pricing in which companies use algorithms and consumer information to determine different prices for different people purchasing the same products or services.

The information can include browsing and purchasing histories, geographic location and device information, along with data that may reveal or help companies estimate characteristics such as age, income or household circumstances.

The legislation would also prohibit companies and their service providers from using or sharing such information for the purpose of establishing those prices.

Is surveillance pricing different from dynamic pricing?

Yes.

Dynamic pricing is based on market conditions rather than information specifically.