If you’ve ever been online shopping and thought, “Hmm, this item’s price is different than usual,” or if an ad pops up for something that you swear you were just thinking about, you may in fact be experiencing the results of “surveillance pricing.” Surveillance pricing, also referred to as “personalized algorithmic pricing,” occurs when a company creates dynamic prices based on individual customers’ personal data and online habits.
In January 2025, the Federal Trade Commission (FTC) released preliminary research findings regarding the prevalence of surveillance pricing and associated practices. The study noted that once a company has collected personal information from actual or potential customers, it then has the ability to “use a variety of features to target prices to specific consumers and charge particular groups higher prices.”
These types of tools (branded as “solutions”) are often offered to businesses by third-party intermediaries and may include artificial intelligence technology. The study identified three primary types of tools:
Some of the factors and datapoints these algorithms might collect and leverage are:
While the FTC’s inquiries into surveillance pricing have been halted under the Trump Administration[1], the states have begun to take more action to tackle this issue. True to form, New York State appears to be heading up the efforts to, if not restrict the practice, then at least to make it more transparent.
New York State’s novel surveillance pricing law, the Algorithmic Pricing Disclosure Act (N.Y. Gen Bus. Law § 349-a), went into effect in November 2025. The new law mandates that companies using algorithmic pricing must disclose this fact to consumers. The bill stipulates that Companies using surveillance pricing must include a conspicuous disclosure to customers that states:
“THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA”
This disclosure must be included near and contemporaneous with every advertisement, display, image, offer, or announcement of a price for which customer data was used.
In a consumer alert issued by NY State Attorney General Letitia James’ office, she said of the new law: “New Yorkers deserve to know whether their personal information is being used to set the prices they pay, and if businesses are charging customers different prices for the same products. I will not hesitate to take action against those who try to mislead New Yorkers and use their personal information to manipulate prices without their knowledge.”
The National Retail Federation (NRF) had previously filed a complaint against James in July 2025 over the new law, arguing that it violated its members’ First Amendment right to free speech by compelling disclosure. Proponents of surveillance pricing, like the NRF, have argued that the practice actually helps lower prices and enables companies to serve consumers better.
Additionally, the NRF argued that having to include pricing disclosures could lead consumers to “falsely conclude” that prices invariably relied on sensitive personal information (e.g. race, gender, income level, etc.) and that this information was only ever used to increase prices. The federation argued that the lack of context surrounding the disclosures would create mistrust and confusion among consumers and would misrepresent the risk of these pricing practices.
However, in October of last year, a federal judge dismissed the suit, stating that the NRF had not plausibly alleged that the new disclosure requirement violated its members’ First Amendment rights. In the opinion, Judge Jed Rakoff noted that the required disclosure statement is plainly factual and that the NRF’s claims that consumers will find it misleading are speculative.
Thus it appears that, at least for now, the law will stand. While the federal government has backed off pressing the surveillance pricing issue, several other states are in the process of trying to increase its regulation, often as extensions of existing data privacy, antitrust, and anti-discrimination laws. As consumer fears and legal concerns around data privacy and the uses of artificial intelligence continue to mount, the regulatory landscape of surveillance pricing is also likely to continue evolving.
If you have any further questions regarding algorithmic pricing and related legislation, please contact Roger E. Barton.
[1] It should be noted that the January 2025 preliminary findings were released by an outgoing, majority Democratic FTC staff at the end of the Biden Administration. Andrew Ferguson, the new Republican FTC Chairman under the Trump Administration, issued a dissent regarding the research summaries on January 17, 2025.
Roger E. Barton