What Banning Dynamic Pricing Could Mean to Your eCommerce Business

We’re treating two very different things as if they’re the same

The term “dynamic pricing” has become a catch-all, and that’s where the trouble starts. When lawmakers say they want to ban dynamic pricing, they’re usually reacting to stories like the Instacart case, where personal data was used to calculate what a specific customer would be willing to pay. The industry calls this surveillance pricing, and I agree – there are some ethical and legal questions.

But the vast majority of what eCommerce retailers actually do is something fundamentally different. When Amazon adjusts a price because a competitor just dropped theirs, when Walmart marks down slow-moving stock to free up warehouse space, when a fashion brand discounts last season’s inventory, those are market-responsive decisions. They’re based on supply, demand, competition, and inventory levels, not on tracking individual shoppers.

Our Dynamic Pricing Index data makes this point clear. Across the 120+ retailers we tracked, roughly half of all price changes were decreases. At Amazon, the average markdown was 35.3%. At Walmart, 53% of all price movements were downward. Target skewed even further toward discounts at 53.5%.

These numbers tell a story that the public debate almost completely ignores. The same technology that critics want to ban is the technology that delivers the markdowns, flash sales, and competitive pricing that consumers have come to expect. Remove it, and prices don’t become fair. They become rigid. And rigid prices tend to be higher prices.

The legislative pace should alarm every eCommerce operator

To appreciate how fast this is moving, consider the numbers. In all of 2024, US state legislators introduced just 10 bills related to algorithmic pricing. In the first half of 2025, that jumped to 51. And in the first few months of 2026 alone, the count has already exceeded 40.

New York’s Algorithmic Pricing Disclosure Act, effective since November 2025, was the first domino. It requires any business using algorithms that set prices based on personal data to display a disclosure notice, with violations carrying $1K penalties per instance. Then, California came in with two laws banning shared algorithmic pricing tools in trade restraint conspiracies, effective January 2026. California’s attorney general also launched a separate investigation into how companies use personal data for pricing decisions under the CCPA.

The proposals get more aggressive from there. Georgia and New Jersey want to ban surveillance pricing in grocery stores entirely. Oklahoma and Tennessee have paired pricing bans with technology bans, proposing to outlaw electronic shelf labels in food retail. Vermont and Rhode Island have introduced bills that would ban personalized algorithmic pricing across the board, with Rhode Island’s H 7849 taking the unusual approach of prohibiting algorithmic price increases while exempting price decreases.

At the federal level, the FTC’s Rule on Unfair or Deceptive Fees has been in force since May 2025, targeting bait-and-switch pricing. Senators Merkley and Luján have gone further with a bill that would ban dynamic pricing outright.

And this isn’t just an American phenomenon. The EU’s Digital Fairness Act consultation closed in October 2025, with draft legislation expected by Q3 2026. The existing Omnibus Directive already requires retailers to show the lowest price from the past 30 days when running promotions, and to disclose when prices are personalized based on a customer's browsing history, purchase behavior, or other profiling metrics. The Socialists and Democrats group in the European Parliament has publicly called dynamic pricing a potential smokescreen for exploitation.

For eCommerce businesses operating across multiple states or internationally, this patchwork of different rules, different definitions, and different enforcement mechanisms is becoming a compliance nightmare.

The real cost of getting this wrong

Let me walk through what a blanket ban on dynamic pricing would actually look like inside an eCommerce operation, because I don’t think most lawmakers have considered the downstream effects.

Start with margins. McKinsey research has shown that eCommerce companies see a 5–15% increase in conversion rates from dynamic pricing, and a Harvard Business Review study reported an average 25% boost in profit margins. Now, for a mid-size online retailer doing $50 million in annual revenue, losing dynamic pricing capability could translate to millions in lost margin, particularly during peak shopping periods when demand-responsive pricing delivers its greatest returns.

Then there’s inventory. The emerging “Barbell Effect” in retail pricing, where products are either held at full price or moved to deep clearance with nothing in between, depends entirely on dynamic markdown tools. Remove those tools, and businesses are stuck holding excess stock at high warehousing costs, or applying crude, one-size-fits-all discounts that either destroy margins or fail to move the product.

The compliance burden is perhaps the most underappreciated cost. A national eCommerce business would now need to maintain separate pricing logic for New York (disclosure), California (no shared algorithms, potential personal data restrictions), Tennessee (no personal data in pricing), and whichever other states pass their own versions. That’s not just a legal challenge. That’s a fundamental technology architecture problem.

And here’s the outcome I keep coming back to – higher prices for consumers. If retailers lose the ability to drop prices in response to falling demand, surplus inventory, or competitive pressure, they’ll set higher static prices to protect their margins. The flexibility that lets a retailer cut a price 35% when demand softens goes away, and the resulting rigidity pushes average prices upward. The exact opposite of what these bills intend.

What I’d tell every eCommerce leader right now

I’ve had a lot of conversations with eCommerce teams over the past few months, and I notice a pattern. Most are either ignoring the regulatory wave entirely, assuming it won’t affect them, or panicking about worst-case scenarios. Neither response is productive. Here’s what I think actually matters.

First, audit your pricing stack honestly. Understand exactly what data inputs your algorithms use. If any individual consumer data feeds into pricing decisions, including browsing history, purchase patterns, demographic profiles, or location-based targeting, you are in the direct regulatory spotlight. If your pricing is purely market-responsive, meaning it adjusts based on competitor data, inventory levels, and seasonal demand, document that distinction thoroughly. The difference between those two approaches is the difference between being a target and being in the clear.

Second, build a defensible pricing narrative before you need one. Legal experts tracking this space recommend that companies prepare to explain their pricing logic to regulators. That means audit trails for every price change, documented business justification for algorithmic decisions, and an honest assessment of whether your models could produce disparate outcomes for certain consumer groups. The time to build this narrative is now, not when an investigation lands on your desk.

Third, invest in market intelligence rather than consumer surveillance. The safest and most effective pricing strategy in a regulated environment is one built on external market data: competitor pricing, category trends, supply-demand signals, and seasonal patterns. You don’t need to track individual shoppers to price intelligently. You need real-time visibility into what the market is doing. That’s exactly the kind of intelligence that Decodo’s Web Scraping API provides at scale, giving businesses structured pricing data across thousands of products and hundreds of retailers without touching personal consumer information.

Fourth, take transparency seriously. A Clutch survey found that 98% of consumers consider data transparency important to brand trust. The best online retailers don’t hide how pricing works. They update at consistent times, they make patterns predictable, and they communicate openly when changes happen. Proactive trust-building is far more effective than mandated disclosures, and it’s also far cheaper than fighting regulatory battles after the fact.

Lastly, monitor the regulatory landscape as an ongoing operational function. This is not a one-time review. Legislation is evolving on a weekly basis across dozens of states and multiple international jurisdictions. Engage legal counsel who specializes in consumer protection and data privacy. Establish internal processes for tracking which bills advance and how enforcement develops in states where you operate.

There’s actually an opportunity here

I realize this article has been heavy on warnings, so let me end with something I genuinely believe – this regulatory moment is also an opportunity for eCommerce businesses that are willing to lead.

The public has a trust problem with dynamic pricing. Our data shows that roughly half of all price changes are decreases, but if you ask shoppers, most assume algorithmic pricing only means one thing: higher prices when retailers think they can get away with it. That perception gap is the real problem, and regulation alone won’t fix it.

Closing that gap is where the real opportunity lies. Businesses need to show consumers exactly how their pricing works, demonstrate that algorithms serve shoppers rather than exploit them, and build transparent systems that regulators can actually audit. Those who do will come out of this period stronger than they went in.

Thoughtful regulation can actually increase consumer trust in dynamic pricing. The eCommerce industry has a chance to shape that conversation rather than simply react to it. Investing in transparent pricing systems, built on market intelligence rather than personal data collection, will be a genuine competitive advantage as this regulatory environment matures.

The landscape will keep shifting. Your pricing strategy should be built to shift with it. Decodo’s Dynamic Pricing Index tracks how global retailers are navigating this transition in real time, and publicly available data collection solutions help businesses build the kind of market-responsive pricing strategies that will thrive regardless of where regulation lands.

Bottom line

The jump from 10 bills in 2024 to over 40 in early 2026 alone tells the story.

But the outcome is still being written. Lawmakers drafting these bills are responding to real consumer frustration, and that frustration is legitimate. The answer isn't to fight regulation. It's to make sure the regulations that pass actually solve the problem, by drawing a clear line between surveillance pricing and market-responsive optimization.

That starts with your own operations. Audit your pricing stack. Document your rationale. Invest in ethical market intelligence. Communicate transparently with customers. Do that groundwork now, and you'll be in a strong position regardless of what regulatory framework takes shape.

The insights in this article are informed by Decodo's Dynamic Pricing Index, which continuously tracks over 1.5M price changes across 120+ global retailers. The legislative overview reflects the author's interpretation of an evolving regulatory landscape based on sources believed to be reliable at the time of writing. However, laws and regulatory guidance may change, and some details may become outdated or incomplete. This content is for informational purposes only and doesn’t constitute legal advice. Readers should consult qualified legal professionals for up-to-date, jurisdiction-specific guidance.