• by Wendy Davis , 4 hours ago

The U.S. Chamber of Commerce is urging a federal appellate court to strike down a New York law requiring companies that use algorithms for personalized pricing to make the following disclosure: “This price was set by an algorithm using your personal data."

The Algorithmic Pricing Disclosure Act, which took effect November 10, applies to companies that use algorithms to set prices based on data that's linkable to consumers or their devices.

That law "creates the false impression that prices set by algorithm deserve suspicion," the Chamber of Commerce argues in a friend-of-the-court brief filed last week with the 2nd Circuit Court of Appeals.

The group adds that the mandated disclosure will "harm all businesses that use algorithmic pricing to offer potential customers a lower price," and will hurt consumers because "many businesses are likely to forgo beneficial algorithmic pricing altogether rather than recite a state-mandated script that wrongly requires them to disparage their own offers."

The Chamber of Commerce's papers come in a lawsuit brought by the National Retail Federation, which argued that the law violates the 1st Amendment.

U.S. District Court Judge Jed Rakoff in New York dismissed the retail organization's complaint last October, ruling that the law merely requires companies to make factual statements about their use of algorithms.

He added that the statute is "reasonably related to government's legitimate interest" in ensuring that consumers are informed about pricing.

The National Retail Federation is now appealing that ruling to the 2nd Circuit. Among other arguments, the group says the disclosure -- which it characterizes as a "warning" -- will give consumers the wrong impression.

"That warning sounds ominous with its reference to 'personal data,' which triggers fears about privacy and surveillance; its implication that the consumer is being charged more or being treated unfairly vis-a-vis other consumers; and its use of the passive voice to suggest machines rather than humans are setting prices," the group argued in papers filed earlier this month.

"It gratuitously causes consumers to feel they are being manipulated for profit, when, in reality, the retailer may simply be offering a small discount," the retail organization continued.

The Chamber of Commerce added in its friend-of-the-court brief that the law unconstitutionally regulates businesses based on viewpoint, arguing that the practical effect of the law is to require businesses "to communicate New York’s view that use of algorithmic pricing is a relevant consideration in a purchasing decision and, further, that this is an objectionable practice worthy of a state-mandated warning."

New York Attorney General Letitia James is expected to respond to the arguments next month.