New York Attorney General Letitia James is putting up a fight against the National Retail Federation (NRF).
James filed a motion to dismiss the NRF’s algorithmic pricing lawsuit against her and the state on Monday, alongside a 21-page memorandum in support of the motion. Early this month, the NRF alleged in a complaint that New York’s Algorithmic Pricing Disclosure Act, which was set to be enforced as of July 8, was unconstitutional because it violated the First Amendment and the Fourteenth Amendment.
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That’s because the law would require brands and retailers selling to New York residents to add a disclosure reading, “This price was set by an algorithm using your personal data” to products that leverage information like location or browser history.
The NRF asked a judge to issue a preliminary and permanent injunction against the law in its complaint. The judge has not acted on the request for a preliminary injunction, but In mid-July, James filed a stay of enforcement, agreeing not to enforce—or retroactively enforce—the law until 30 days after the court has ruled on that request.
The attorney general has now asked a judge to toss the case, alleging that the NRF did not go far enough to back up its claims about unconstitutionality.
James relies on what’s called the Zauderer precedent throughout her argument. That case effectively set the precedent that the government can mandate that companies include “purely factual and uncontroversial” disclosures about products without violating the First Amendment, if the requirement is directly of interest to the state in its work to protect consumers.
In its initial complaint, the NRF alleges that Zauderer “does not apply” to the algorithmic pricing law because it “is neither purely factual nor uncontroversial.” It also notes that, to pass the Zauderer review, required disclosures must be “justified” and not “unduly burdensome,” which it alleges New York’s algorithmic disclosures are not.
James said that the NRF’s “threadbare allegations” don’t go nearly far enough to prove that the law would be “unduly burdensome” to affected retailers.
“Plaintiff…merely alleges that [the law] does not align with its members’ preferred ‘brand identity’ and ‘corporate messaging.’ But this self-serving complaint is wholly immaterial under Zauderer,” James writes in the memorandum.
In its complaint, the NRF alleged that the law could mislead consumers, who would “naturally but falsely conclude” that retailers are using customer information to increase prices. James said in the memorandum supporting the motion to dismiss that the trade group didn’t provide factual evidence to support that claim, instead relying on speculation about what a consumer might do.
“[The NRF] cannot utilize the First Amendment to wield a veto over [the law] on the basis that the disclosure ‘contradicts corporate messaging,’” James wrote, later adding her belief that the NRF’s “conclusory assertion regarding what it believes consumers will ‘naturally’ infer from [the law] is devoid of ‘sufficient factual matter’” required by case law precedent.
What’s more, she argued, the trade group’s members still “retain the ability to convey additional information to customers regarding their use of algorithmic pricing.” That is to say that, while brands and retailers may be required to add the disclosure, it’s at their discretion how they otherwise explain algorithmic pricing to consumers.
That brands and retailers reserve that right, James said, makes the NRF’s complaint “all the more baseless.”
The NRF in its complaint said that because the disclosure—and any supplemental explanation of it—would require them to “surrender a significant amount” of their members’ on-site “pixel space,” which provides a level of burden to those required to execute on the law’s provisions.
James said the obligation brands and retailers would be subject to under the new law don’t infringe on NRF members’ First Amendment rights.
“The act’s definition of ‘clear and conspicuous disclosure’ requires that entities ‘use lettering and wording that is easily visible and understandable to the average consumer,’” James wrote. “The complaint fails to allege any facts plausibly showing that this modest requirement would somehow ‘displace’ retailers’ online content.”
Since the Zauderer precedent also relies on the regulations in question being relevant to states’ interest in protecting consumers, James also stated that the law satisfies the Zauderer review because the legislature that passed it relied on a Federal Trade Commission report that they said “emphasized that algorithmic pricing can lead to consumers being charged different prices for the same products and services and potentially being subjected to discriminatory pricing.”
These considerations, James contended, mean that the law is squarely related to New York’s interest in protecting its consumers.
James’ memorandum is rife with other examples in which states have been allowed to require companies to provide disclosures about products or services in varying industries—including labeling mandates for mercury lamps in Vermont and a New York City regulation that required calories to be displayed to diners at certain establishments.
James’ new motion asks that the judge dismiss the NRF’s complaint with prejudice—which means that the trade group could not refile because the court’s decision would be final.
A spokesperson for the NRF declined to comment.
