According to PYMNTS.com, New York has become the first state to regulate AI-driven personalized pricing through legislation enacted with the state’s budget. The law requires retailers to notify customers when they use artificial intelligence and customer data to set prices, a practice also known as “algorithmic pricing.” Businesses must now display this specific disclosure: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.” The legislation aims to prevent stores from abusing customer data to set high prices, like hiking hotel room costs for someone who just spent heavily on airline tickets. Business groups argue the law is too broad and will cause confusion, while consumer rights groups worry it’s too narrow. Former FTC chair Lina Khan called the measure “absolutely vital” while warning that personalized pricing threatens to “fully creep across the economy.”
The New AI Regulation Battleground
Here’s the thing – this isn’t just about price tags. We’re talking about the fundamental relationship between businesses and consumers in the age of AI. Goli Mahdavi, a lawyer specializing in AI and data privacy, nailed it when she said algorithmic pricing bills are “probably the next big battleground in AI regulation.” And she’s absolutely right.
Think about it. We’ve been having these abstract conversations about AI ethics for years, but now we’re seeing concrete regulation that directly impacts how companies can use your data to make money off you. The FTC under Lina Khan already dubbed this “surveillance pricing,” which honestly feels more accurate than the technical term. It’s not just smart business – it’s watching everything you do and adjusting prices accordingly.
Where This Is Headed Next
So what happens now? Other states will almost certainly follow New York’s lead. California’s probably already drafting something more comprehensive. And at the federal level? There’s definitely going to be pressure for nationwide standards.
But here’s the tricky part – how do you regulate this without stifling legitimate price differentiation? Student discounts, senior rates, loyalty programs – these are all forms of personalized pricing that consumers generally like. The difference is transparency and consent. When you get a student discount, you know why you’re paying less. When an algorithm quietly charges you more because you browsed from an expensive neighborhood? That feels different.
Basically, we’re entering an era where your digital footprint directly impacts your wallet. And while New York’s law is just a disclosure requirement for now, it sets the stage for much deeper regulation. The question is: how much do we want algorithms deciding what we can afford to pay?
