NYC to bar surveillance pricing as momentum for bans grows nationwide

The New York City Council has approved a bill barring retailers and other businesses from using surveillance pricing to harness customers’ personal data as a means of charging different people variable amounts for the same product.

The metropolis is the second city in the country to pass legislation banning surveillance pricing, following Seattle, where a similar ban was signed into law last month.

The New York City Council voted 44-5 on Thursday in favor of the bill and Mayor Zohran Mamdani celebrated its passage, telling the media “when corporations use your personal data to decide what you pay, you only stand to lose.”

The bill allows the city’s Department of Consumer and Worker Protection to fine companies deploying surveillance pricing up to $1,000 for each violation, but carves out “bona fide discounts and rewards that are legitimate and transparent, from buy-one-get-one-free deals and loyalty programs to discounts for veterans and students,” according to a council press release.

The bill is a “big deal for a few reasons,” according to Grace Gedye, a Consumer Reports policy analyst who worked on the effort to push it through.

“Once this bill becomes law and goes into effect, it will mean eight million fewer people will have to guess about whether their search history, what they are hovering over online, and more, is shaping the price they see,” Gedye said via email. 

“It also means a lot of businesses may need to change their pricing practices — and if they already have to do it for New York City, they may decide to do it for the rest of the country at the same time.”

Gedye noted that the New York state legislature passed a similar surveillance pricing law in June, but said the bill has been sitting unsigned on Gov. Kathy Hochul’s desk for several months. Advocates worry that even if Hochul signs the state legislation, she could use an unusual New York  statute allowing governors to unilaterally amend passed bills to weaken its language.

New Jersey, Connecticut and Maryland already have similar bans on the books and many more state legislators nationwide are expected to introduce bills when new sessions begin early next year, said George Slover, senior counsel for competition policy at the Center for Democracy and Technology.

‘Viscerally offensive’

“There is a lot of interest around the country in this issue,” Slover said in an interview. “It's viscerally offensive to consumers to think about the fact that they are being basically sized up for their willingness to pay more and eliminate the advantage that they've had all these years, where … the consumer is essentially anonymous when the price is set.” 

The New York City Council called the practice “predatory,” citing a whistleblower from a major rideshare company who revealed his firm’s app charged consumers’ with low phone batteries more for the same ride because “they might not otherwise be able to get home if they do not accept the high offer.” 

With the price of food and other consumer goods increasing and data brokers selling businesses detailed consumer profiles — including about spending habits and demographics — there is widespread suspicion that different consumers are being charged varying amounts based on algorithms.

Grocery stores, ride sharing companies and airlines are thought to be widely using surveillance pricing, but public evidence is limited. Lawmakers and regulators are acting anyway. 

In October, the Federal Trade Commission (FTC) ordered nine food delivery, airline, ride-sharing and retail companies to answer extensive questions about how they exploit personal data to set higher prices for some consumers and less compensation for select employees.

Companies receiving the orders include major airlines, Uber, DoorDash, Walmart and Target.

FTC officials have said they plan to study the “opaque methodology” used to set prices in an era when powerful new technologies, data brokers and algorithms can be easily tapped into to reveal granular information about specific shoppers. 

In 2022, Target paid $5 million to settle a lawsuit brought by several California district attorneys who charged the tech giant showed customers’ standing in the parking lot lower prices than those in store.

Last year, a San Francisco news outlet revealed that by changing a web browser’s location, its reporter found customers in the Midwest and Phoenix were charged less than customers in San Francisco for the same New York City hotel rooms.

Advocates have long charged that the Kroger grocery store chain uses surveillance pricing though the company has steadfastly denied the charges. 

However, the nonprofit Consumer Reports has revealed Kroger deploys advanced technology to track shoppers' purchases and behaviors, selling the data to third-party companies for targeted advertising. Kroger also has confirmed that it uses digital price tags to quickly tweak pricing though it has said changes are not made based on personal data.