New York City has passed a law targeting companies that use personal data to determine how much individual customers pay. The measure bans companies from using algorithms and consumer data to charge different prices for identical goods and services.
The City Council approved Implementation 891-A on November 12th. The legislation, sponsored by Council President Julie Menin, targets price monitoring, a practice that can result in the same product costing different amounts depending on the customer. The measure is among the strongest restrictions on monitoring prices in the country.
This is how monitoring pricing works
Monitoring pricing relies on algorithms that analyze personal data to determine what customers pay. Companies may be able to use shopping behavior, location data and other personal data to adjust prices for individual consumers. These systems can operate in secret, leaving shoppers unaware that their personal information is influencing displayed prices.
Several investigations have uncovered examples of this practice in various industries. An investigation found that a major food delivery platform conducted algorithmic pricing experiments. This resulted in price differences of up to 23 percent for certain products.
Another investigation documented a price increase for televisions at a retail store. The TV reportedly cost $499.99 before the price rose to $599.99 as the buyer entered the store’s parking lot.
Ride-hailing services have also come under scrutiny for personalized pricing. A behavioral economist who previously worked for a major ride-hailing company revealed how low phone battery levels can affect fares.
The application reportedly increased prices when a customer’s battery was low. Its pricing system may have taken advantage of situations where customers had fewer alternatives for getting home.
Companies must expect new restrictions
Introduction 891-A defines surveillance pricing as a pricing method determined in whole or in part by algorithms using personal information. The practice consists of offering different prices to customers who purchase identical goods or services.
Menin described the council’s approval as an important consumer protection measure against companies that exploit personal data.
“When companies use algorithms and personal data to charge different people different prices for the same products, it is unethical and worsens our affordability crisis,” Menin said.
The legislation gives the Department of Consumer and Worker Protection the authority to investigate complaints and impose fines of up to $1,000 per violation.
Each affected consumer or transaction may constitute a separate breach. This provision could increase financial penalties for companies that apply individualized pricing to large groups of customers.
Small businesses also have the opportunity to correct certain violations in a timely manner and avoid penalties. The legislation preserves legitimate promotional offers, including loyalty rewards, student discounts and veteran discounts.
Buy-one-get-one-free promotions also remain permitted within the restrictions. These exceptions distinguish normal promotional prices from algorithms that use personal data to determine individual prices.
The council’s approval puts a new limit on how businesses can use consumer data to set prices in New York City. It also gives local regulators an enforcement mechanism against surveillance pricing practices in the five boroughs.
