What: NRF files lawsuit against New York State over new legislation requiring retailers to disclose when personal data is used in algorithmic pricing decisions, claiming it could mislead consumers.

Why it is important: The case highlights the growing tension between retail innovation and consumer protection, as regulators worldwide seek to increase transparency in AI-driven pricing while retailers argue for flexibility in implementing new technologies.

The National Retail Federation has initiated legal action against New York Attorney General Letitia James, challenging the constitutionality of the New York Algorithmic Pricing Disclosure Act. The legislation, set to take effect immediately, requires retailers to inform consumers when algorithmic pricing using personal data influences product prices. The NRF argues that the mandatory label stating "This price was set by an algorithm using your personal data" could mislead consumers and negatively impact sales. The trade group contends that the law violates First Amendment rights by compelling companies to endorse government opinions that misrepresent their practices. The NRF maintains that algorithmic pricing mechanisms actually lower overall consumer prices by enabling personalised offers and deals. The organisation also criticises the law's "sparse" history and arbitrary exemptions for certain sectors, including insurance companies and subscription-based retail items, while seeking both preliminary and permanent injunctions to prevent the law's implementation.

IADS Notes: The NRF's legal challenge to New York's Algorithmic Pricing Disclosure Act reflects broader tensions in retail technology regulation. In March 2025, research demonstrated that transparency in AI usage could increase consumer adoption by up to 63%, yet only 41% of retailers have fully integrated their pricing systems with complementary business functions. This integration challenge has become more pressing following regulatory actions across multiple jurisdictions, including France's EUR 40 million fine against Shein in July 2025 for deceptive pricing practices and Germany's warning to Amazon about algorithmic price controls in June 2025. The retail industry's response has been significant, with the pricing optimization software market reaching USD 1.6 billion in 2024 and 92% of retailers adopting AI-based solutions. However, as highlighted in May 2025 studies, while these technologies offer substantial benefits, retailers must balance innovation with transparency, as 75% of consumers now expect clear disclosure when interacting with AI-driven pricing tools.

NRF sues New York State over algorithmic pricing legislation