(The Center Square) — A federal judge has tossed out a lawsuit challenging a New York state law requiring retailers to tell customers if their purchasing data is used for so-called “surveillance pricing.” 

The ruling by U.S. District Court Judge Jed S. Rakoff in Manhattan rejected claims by the National Retail Federation that New York’s Algorithmic Pricing Disclosure Act violated companies’ free speech rights. He also granted a motion from New York Attorney General Letitia James to dismiss the lawsuit with prejudice. 

New York Gov. Kathy Hochul signed the Democratic-backed legislation into law earlier this year, criticizing retailers’ practice of charging different prices based on customers’ shopping habits as “opaque” and stating that it prevents the state’s consumers from comparison shopping.

The first-in-the-nation law required retailers to prominently disclose when their prices were set by algorithms using consumers’ data. The law carries civil fines of up to $1,000 per violation. It was set to take effect on July 8, but has been delayed because of the lawsuit. 

But retailers sued to block the law, arguing that it violates the U.S. Constitution by requiring retailers to provide “misleading government-scripted opinion” to consumers without justification. In court filings, retailers claimed the law was based on “speculative fear” of price gouging, noting that they use algorithms to offer lower prices, promotions, and customer loyalty programs. 

“The mandated disclosure will mislead consumers about the type of data NRF members use to set prices and the effect of personal data on prices,” lawyers for retailers wrote in the complaint.

There was no immediate comment from the retail associations or the AG’s office on Thursday in response to the judge’s ruling.  

In January, a divided Federal Trade Commission released a study that found large retailers “target” specific consumers with different prices for the same products based on their scrolling habits, purchase history, and other data.

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Then FTC Chair Lina Khan vowed that the agency would continue to investigate surveillance pricing practices “because Americans deserve to know how their private data is being used to set the prices they pay and whether firms are charging different people different prices for the same good or service.” 

But Khan was replaced by FTC board member Andrew Ferguson, who dissented to the study and was tapped by President Donald Trump to lead the agency. Shortly after taking over the FTC, Ferguson closed the public inquiry into surveillance pricing, saying it wasn’t in the public interest. 

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