Federal Court Upholds New York Surveillance Pricing Law
A New York state law requiring retailers to disclose when they are using algorithmic pricing doesn't impede businesses' First Amendment rights, a federal court ruled Wednesday, rejecting a motion challenging the measure.
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Unlike full bans on commercial speech, “disclosure requirements ‘trench much more narrowly’ on sellers’ First Amendment interests because they do not prevent sellers from conveying any message of their own but merely require them ‘to provide somewhat more information than they might otherwise be inclined to present,’” said Judge Jed Rakoff of the U.S. District Court for Southern New York (case 1:25-cv-05500).
The statement that the law requires to be displayed -- “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA” -- is factual, not misleading, said Rakoff, contrary to what the National Retail Federation (NRF) argued. And it's uncontroversial, since it doesn't suggest if algorithmic pricing is good or bad, he said.
Additionally, “the challenged disclosure is reasonably related to the government’s legitimate interest in ensuring that consumers are ‘inform[ed]’ about the terms on which products are offered to them, including the price,” the judge said.
The NRF sued New York in July over the Algorithmic Pricing Disclosure Act, alleging it violated the First and Fourteenth Amendments and harmed consumers (see 2507070042). The U.S. Chamber of Commerce agreed, arguing that it violated the First Amendment (see 2508220023).
New York Attorney General Letitia James (D) maintained that the law doesn't violate the First Amendment (see 2507290049), nor does it stop algorithmic pricing. Instead, it requires that companies post a clear notice informing consumers if a price was set by an algorithm using personal data (see 2508290054).
Marc Rotenberg, executive director of the Center for AI and Digital Policy, celebrated the court's decision in a LinkedIn post.
“For many years, I have argued that algorithmic transparency is critical for AI accountability,” he said. “Without the ability to assess the basis of automated decision-making, AI systems are essentially black boxes, producing results that even those who deploy them cannot verify.”
Rotenberg noted that state laws requiring transparency have often been struck down for First Amendment violations, as courts have ruled disclosures to be “a form of ‘compelled speech.’"
“I never agreed with these judgments because this ‘compelled speech’ occurs in a commercial context where (1) the First Amendment interest of the speaker -- the business -- is far less than that of a political speaker and (2) the interest in ensuring AI accountability is substantial,” he said. “Taken to the logical extension, these compelled speech cases would prohibit all warning notices on every consumer product. That's crazy.”
James previously stated she would start enforcing the law 30 days after the district court issued a final order on the case, despite the original July 8 effective date (see 2507150052).