US states take aim at data-driven pricing to ease consumer pain

By Jody Godoy

(Reuters) -Even as the White House seeks to roll back state laws on artificial intelligence, states are pursuing an increasing number of bills to ban tech-driven pricing practices in an effort to bring consumers relief from high costs.

By taking on these practices, states are building on the work of former FTC Chair Lina Khan, and others, who sought to use regulation and lawsuits to curb practices they called unfair to shoppers, workers and renters.

"Even as the federal government backslides, states are stepping up," said Khan, now a co-chair of New York City Mayor-elect Zohran Mamdani's transition team.

In that role, Khan is exploring how the city can use state laws to go after high costs, a source familiar with her thinking said.

States are acting as U.S. President Donald Trump considers an executive order that would seek to preempt state laws on artificial intelligence through lawsuits and by withholding federal funding, according to a draft of the order seen by Reuters on Wednesday.

New York passed a law in October to keep landlords from colluding on rental prices using algorithms, and California passed an even broader ban on algorithmic collusion.

Nineteen states are now considering bills that would limit how businesses use third-party software that relies on competitor data to set rental housing prices, according to a new analysis by the American Economic Liberties Project, a nonpartisan antimonopoly think tank.

"You can't talk about affordability without understanding how prices are set. And how prices are set is evolving in real time with the advent of new tools," said Lee Hepner, senior legal counsel at AELP.

The effort crosses party lines. Tyler Clancy, a Republican state representative in Utah, is for example planning to introduce legislation to give consumers more power over the data companies collect on individuals and use to set prices.

Harvesting and monetizing such data, which can include granular detail about shoppers' identities, locations, and behaviors – such as past purchases, browsing history and media consumption – has become a core part of the retail business.

Retailers use the information to target advertising and discounts. But critics are concerned that companies are using personal information to effectively raise prices to what a customer is perceived as willing to pay. For example, travel sites offer shoppers in San Francisco higher prices for the same hotels than those in Phoenix or Kansas City, according to an investigative report by SFGate earlier this year. And Delta Air Lines triggered congressional scrutiny of its plan to use AI to help set ticket prices, though the airline has said it would not be used to set individual prices.

"Ultimately what we are concerned about is different people paying different prices based on who a company thinks they are," said Grace Gedye, a policy analyst at Consumer Reports, a nonprofit consumer advocacy group.

(Reporting by Jody Godoy in Washington; Editing by Stephen Coates)

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