As New Yorkers scrolled, surfed and searched their way to digital deals on Black Friday, they had certain unique protections.<\/p>\n
This month, New York became the first state to enact a law targeting a practice, typically called personalized pricing or surveillance pricing, in which retailers use artificial intelligence and customers\u2019 personal data to set prices online.<\/p>\n
The law aims to prevent retailers from ripping off unwitting customers by abusing their data: jacking up the price of jeans for a shopper with a history of buying expensive pants, say, or lifting hotel prices for a traveler who already splurged on airline tickets.<\/p>\n
Enacted through the state budget<\/a>, the law requires retailers that use personalized pricing to post the following disclosure: \u201cTHIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.\u201d<\/p>\n The law attracted criticism and litigation from the start. Some business interests say it is far too broad and will cause confusion. And some consumers\u2019 rights groups, who sought an outright ban of the practice, which is also called algorithmic pricing, worry the law is too narrow to meaningfully protect all shoppers from price-gouging.<\/p>\n But just about everyone seems to agree that the law, which last month survived a challenge in federal court, is a significant step in the nationwide push to regulate how businesses use their customers\u2019 data.<\/p>\n \u201cIt certainly is a big deal,\u201d said Goli Mahdavi, a lawyer at the firm Bryan Cave Leighton Paisner who focuses on artificial intelligence and data privacy. \u201cAlgorithmic pricing bills are probably the next big battleground in A.I. regulation.\u201d<\/p>\n Lina Khan, the former chair of the Federal Trade Commission and a member of Mayor-elect Zohran Mamdani\u2019s transition team<\/a>, said in an interview that the measure would offer an \u201cabsolutely vital\u201d tool for authorities scrutinizing personalized pricing.<\/p>\n But Ms. Khan added that the practice was threatening to \u201cfully creep across the economy,\u201d and that there was a \u201cton more work to be done\u201d at the state and federal levels to regulate it.<\/p>\n There are bills pending in at least 10 states that would either ban personalized pricing outright or require disclosures, like New York. State lawmakers in California, a hotbed of A.I. development and regulation<\/a>, and federal lawmakers in Washington are considering broad bans<\/a> on the practice<\/a>.<\/p>\n The push comes as technological advancements have drastically changed the internet and digital marketplace.<\/p>\n In 2012, the travel site Orbitz caused a stir<\/a> by telling The Wall Street Journal<\/a> that it had sent Mac users ads for pricier hotels than it had sent P.C. users, apparently reasoning that those with more expensive laptops could afford to spend more on vacation. (Orbitz later abandoned the practice, according to Expedia, which acquired the site a decade ago.)<\/p>\n Now, with technology becoming ever more complex and pricing models ever more sophisticated, Orbitz\u2019s computer strategy looks almost primitive.<\/p>\n A report published by the Federal Trade Commission<\/a> in January found that retailers could track consumer behavior as subtle as movement on a mousepad. The commission described a shadowy third-party market for some products, and warned that retailers often used customers\u2019 personal information to set prices.<\/p>\n Still, it is hard to measure the extent to which large companies are deploying personal data, and some deny doing so.<\/p>\n