Retailers slam surveillance pricing warning label in Second Circuit appeal

New York requires merchants to print the following message if they set prices algorithmically: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.”MANHATTAN (CN) — The National Retail Federation on Monday sought to revive its lawsuit against New York over a novel law requiring an all-caps warning on any product that had its price individually set using customers’ personal data.Arguing to a trio of Second Circuit judges, the federation’s lawyer David Gossett said the required message is an affront to retailers’ First Amendment rights. When pressed on whether the statement was factually incorrect, Gossett called it “literally true, but misleading.”The New York law requires stores that engage in the practice of algorithmic pricing, commonly known as surveillance pricing, to print a message indicating that prices were “SET BY AN ALGORITHM USING YOUR PERSONAL DATA.” But Gossett argued this gives consumers the wrong idea.“When a consumer hears the phrase your personal data, what they’re going to think is that what’s at issue here is their age, their race, their Social Security number,” he said, noting surveillance pricing doesn’t always increase prices but can decrease them as well.U.S. Circuit Judge Denny Chin, a Barack Obama appointee, seemed hesitant that the warning breached free speech, though.“A merchant is able to provide an explanation along with the statement, right?” Chin asked. “There’s nothing in the statute that bars any dealer from saying, ‘We are not using your Social Security number.’”According to Gossett, that’s hardly the point. The government can’t compel speech, he said, other than in extremely limited circumstances. Gossett said this required warning “doesn’t fit anywhere close” to those exceptions.The federation filed the federal lawsuit in Manhattan in 2025, which was eventually dismissed by a judge who found that the required disclosure “serves to meliorate consumer confusion or deception by ensuring that consumers are better informed about how a merchant has set the displayed price.”Gossett argued this dismissal was premature, defending the controversial practice of the demand-based pricing as one that, in concept, has been around for the entire history of the United States.“Differential pricing goes back centuries,” he told the court. “Adams Smith in 1776 said pricing is set based on the desire of the person; it’s a negotiation.”Chin pushed back. “In some contexts, perhaps,” he said. “But in other contexts one would expect that you’re being charged the same amount as everybody else.”To the federation, however, the point of contention isn’t with the practice itself. It claims being forced to display the “ominous” warning message to reflect the state’s own distrust for surveillance pricing is the issue.Gossett told the panel if the state has a problem with the practice, then the state should regulate it.“They’ve instead tried to co-opt us as the messenger of their view about algorithmic pricing being bad rather than saying it themselves or regulating it,” he argued.U.S. Circuit Judges Steven Menashi, a Donald Trump appointee, and Amalya Kearse, a Jimmy Carter appointee, rounded out the panel, which didn’t immediately rule following the hearing.In its initial complaint, the federation claims retailers “use algorithmic pricing to help customers save money.” The group, the world’s largest retail trade association, says the practice isn’t merely used to hike prices on in-demand goods, but can also offer consumers discounts for their loyalty and purchase history based on information they voluntarily share.The group claims New York’s Algorithmic Pricing Disclosure Act is based on a “speculative fear that retailers use sensitive data to discriminate and price gouge — practices the law already prohibits.”Public polling consistently shows Americans oppose the practice, however, and detractors point to concerns of privacy and exploitation when criticizing it.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads