The US National Retail Federation (NRF) has initiated legal action against a New York state law mandating retailers to disclose the use of “algorithmic” pricing.

The law, known as the New York Algorithmic Pricing Disclosure Act, is scheduled to come into effect on 8 July 2025 and requires retailers to notify customers when prices are set using personal data.

NRF's lawsuit, filed in the US District Court in Manhattan, claims the law unfairly forces its members to “impugn their pro-consumer practices”.

The retail group argues in the complaint that the law, filled with "arbitrary exemptions," infringes on the First and 14th Amendments of the US Constitution. They are seeking both “preliminary and permanent injunctions” to prevent its “enforcement”.

Retailers employ algorithmic pricing to offer lower prices and personalised deals, using non-sensitive customer data such as purchase history and zip codes.

NRF chief administrative officer and general counsel Stephanie Martz stated: “This law interferes with retailers’ ability to provide their customers with the highest value and best shopping experience they can.

“Algorithms are created by humans, not computers, and they are an extension of what retailers have done for decades, if not centuries, to use what they know about their customers to serve them better. It’s just done at the scale of the modern economy. Stigmatising tools that drive prices down turns offering deals into a liability, and consumers will end up paying more."

The impending New York law will compel retailers to attach a "misleading and ominous warning" to any algorithmically set price, which could be linked to a customer.

The lawsuit contends that while New York is entitled to its view that algorithmic pricing may be dangerous, it should not force businesses to endorse this stance against their will.

It emphasises that algorithmic pricing is a sophisticated evolution of traditional retail practices, and allows for more responsive and market-reflective pricing strategies.

The NRF's legal challenge also asserts that the law is not backed by evidence that algorithmic pricing is inherently detrimental. It points out that potential issues such as discrimination or price gouging are already addressed by other state laws.