A recently introduced law in New York mandates that retailers inform consumers if their personal data influences the pricing of basic items, such as eggs and toilet paper. While this law aims to promote transparency, it does not require businesses to disclose what specific data they use or how it impacts pricing. For instance, shoppers may notice price discrepancies at Target; a carton of Good & Gather eggs may be priced at $1.99 in Rochester but $2.29 in Manhattan.
The law stipulates that any algorithmically set prices based on personal data must be disclosed, although a "clear and conspicuous" format is required, which can be inconvenient for consumers to find. For example, Target’s disclosures require users to actively click for more information, raising questions about whether consumers are likely to do so.
This pricing strategy is not unique to Target. The retailer has employed location-based pricing for years, adjusting prices according to local market conditions. In 2021, reports revealed that site visitors would see different prices based on their geolocation. Target settled a lawsuit in 2022 concerning similar practices involving geofencing within their app.
The phenomenon of location-based pricing has been studied in various industries. In 2012, Staples was found to present differing prices online based on the estimated location of online shoppers. Similarly, the Princeton Review’s online tutoring prices varied significantly based on the zip code provided.
The Federal Trade Commission has also taken interest in "surveillance pricing," investigating how companies utilize consumers’ personal data and location in pricing strategies. Though New York’s law may prompt other states to adopt similar regulations, the extent of price variability among other goods remains unclear.
In light of growing regulatory scrutiny over algorithms and artificial intelligence in pricing, Target is also expanding its technological endeavors, such as integrating a shopping experience within OpenAI’s ChatGPT, aiming to offer personalized product recommendations to shoppers.
For further details about the New York legislation, visit the official site: New York State Law.
