Beware of Algorithmic Pricing as the New Year Begins

There are so many things to be excited about this coming year: a family vacation; traveling to see one of your favorite musicians in concert, like Bad Bunny; or getting tickets to one of the World Cup matches right here in our area.

That’s why we need to be aware of a new practice that will significantly impact our shopping habits and how we buy things. We recently issued a consumer alert warning New Yorkers about the practice of algorithmic pricing, also known as surveillance pricing, which allows companies to automatically adjust prices displayed on an app or digital storefront based on a user’s personal data. While this business practice might seem like an opportunity for companies to offer personalized deals that benefit consumers, some companies have taken advantage of this practice to charge consumers more for the same products, using factors such as their GPS location, annual income, and past purchasing habits.

These pricing schemes are commonly used in company apps or as part of “loyalty programs,” where consumers may receive individualized discounts with personalized pricing. We’ve already seen instances across the country where Target customers are being targeted with these types of price increases. In one case, Target was charging its customers $2.99​​for peanut butter, while Instacart was charging them a higher price of up to $3.59. Other Target customers saw the price of a box of cookies, which cost $3.99, jump to a price range between $4.59 and $4.69, depending on the customer’s personal data.

A new law is already in effect to protect New Yorkers, and my office is responsible for enforcing it. The New York Algorithmic Pricing Disclosure Act, which went into effect in early November, requires companies that use algorithmic pricing to clearly display a notice to New York consumers, through a clear and conspicuous statement that reads: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA,” indicating that prices are being set using their personal data.

Companies that fail to comply with the law can face a fine of $1,000 for each violation.

As you plan and prepare for what the new year will bring, my office has information on how you can protect yourself from being overcharged by companies using algorithmic pricing:

• Compare the prices offered to you online with the price shown for the same product to other shoppers. If you are offered a different price, it’s possible that the prices were set using your personal data.

• Compare the discounts offered to you, especially those that appear in your app or online account, with those offered to others. If you receive a discount that only you can see, it’s likely personalized and created using your data.

• Compare the prices of an item before and after making a transaction that the store you visited can track.

As more and more companies are using algorithmic pricing, using your personal data, we ask that you, as a consumer, pay attention to the prices of each item you purchase online or through an app on your phone or tablet.

While companies promise that algorithmic pricing will save you money, we must all work together to ensure that New Yorkers are not scammed or overcharged. In today’s economic climate, every dollar counts for so many families, and as your Attorney General, I want you to know that my office and I will protect you.

Letitia James is the Attorney General of the State of New York