HB 280 — A prohibition on the use of certain personalized dynamic

90R3162 MLH-D By: Lalani H.B. No. 280 relating to a prohibition on the use of certain personalized dynamic pricing models by a business in this state.

SECTION 1. Subtitle C, Title 5, Business & Commerce Code, is amended by adding Chapter 125 to read as follows: CHAPTER 125. PERSONALIZED DYNAMIC PRICING SUBCHAPTER A. GENERAL PROVISIONS Sec. 125.001. DEFINITIONS. In this chapter: (1) "Dynamic pricing model" means a pricing model that uses an algorithm or other metric to determine the price of a good or service based on variables related to the market or a consumer. (2) "Personal identifying information" means any information, including sensitive information, that is linked or reasonably linkable to an identified or identifiable individual. The term includes publicly available information. Sec. 125.002. APPLICABILITY. This chapter applies to: (1) a retailer that conducts business in this state on a physical premises; and (2) an online retailer that conducts business in this state resulting in not less than $10 million in annual revenue. SUBCHAPTER B. PROHIBITION ON PERSONALIZED PRICING Sec. 125.021. PROHIBITION ON CERTAIN DYNAMIC PRICING MODELS. (a) A person may not use a dynamic pricing model to determine the price of a good if the model: (1) uses personal identifying information or other unique qualities of the customer as an input; and (2) results in a price that is: (A) unique to the customer; and (B) greater than the price that would be expected in the absence of the model. (b) For purposes of this section, a dynamic pricing model uses personal identifying information or other unique qualities of a customer if it uses any public or private information, whether collected directly from the customer or obtained from another source, that could provide insight into the customer's purchasing practices or proclivities, including: (1) the customer's purchase or transaction history; (2) the customer's Internet browsing or search history; (3) the personal behavior of the customer when using an electronic device or the Internet; (4) the customer's precise geolocation data, as that term is defined by Section 541.001; (5) information about the customer or the unique qualities of the customer that is obtained from a data broker, as that term is defined by Section 510.001, or another third party; (6) publicly available information that can be used to infer the unique qualities of the customer; and (7) any other information that could be used to infer: (A) the customer's ability or willingness to purchase a good or service at a certain price; (B) the customer's sensitivity to price fluctuations for a good or service; (C) the urgency of the customer to purchase a certain good or service in a timely manner; or (D) the likelihood of the customer to engage in certain shopping practices or techniques, including by comparing the price of a good or service at multiple retailers. (c) For purposes of this section, a dynamic pricing model results in a price that is greater than the price that would be expected in the absence of the model if the model makes any change that leads to an increased final retail price for a customer when compared to the price the customer would pay without the model, including by: (1) increasing the base price of a good or service; (2) adding or increasing a fee or surcharge; (3) withholding or reducing the amount of a discount that is or should be available under reasonably comparable circumstances; or (4) otherwise influencing the final retail price for the customer. (d) This section may not be construed to prevent the use of a dynamic pricing model otherwise permitted by this chapter solely on the basis of the method or technological manner in which the model is operated, including on the basis that the model: (1) uses machine learning, a software algorithm, or an artificial intelligence system, as that term is defined by Section 551.001, to determine the price of a good or service; (2) uses or includes a specific type of predictive or statistical modeling; (3) changes the price of a good or service often or quickly, whether automatically or because of a manual change; or (4) displays prices in an electronic or other easy-to-change format. Sec. 125.022. DYNAMIC PRICING MODEL PROVIDED BY THIRD PARTY. (a) Except as provided by Subsection (b), a person is considered responsible for the use of a dynamic pricing model even if the model is provided or administered by a third party. (b) A person who uses a dynamic pricing model prohibited under Section 125.021 that is provided or administered by a third party is not responsible for a violation of this chapter if the person: (1) reasonably evaluated the model and the model's provider before beginning use; (2) received written assurance from the third party that the model did not violate this chapter; and (3) reasonably believed in good faith that the model did not violate this chapter. Sec. 125.023. RETENTION OF RECORDS RELATING TO MODEL. A person who makes use of a dynamic pricing model not prohibited by Section 125.021 shall: (1) keep records relating to the model, including: (A) a list of any algorithms or related software, including artificial intelligence systems, as that term is defined by Section 551.001, that play a role in the operation of the model; (B) the operational structure or code related to any algorithm or related software listed under Paragraph (A); (C) any metrics or categories of personal identifying information used by the model; and (D) any material factors that affect the determination of the price of a good or service; and (2) retain the records described by Subdivision (1) for a period of not less than two years. SUBCHAPTER C. PERMITTED DYNAMIC PRICING MODELS Sec. 125.041. MARKET-BASED DYNAMIC PRICING MODELS. (a) This chapter may not be construed to prohibit: (1) price variation related to identifiable costs attributable to providing retail services; or (2) price fluctuations applicable to all customers at a retail location. (b) This chapter does not prohibit a person from using a dynamic pricing model intended to adjust the price of a good or service to reflect legitimate and identifiable market-based or transaction-influenced factors, including: (1) changes in the supply of or demand for the good or service; (2) differences in the nature, characteristics, or quality of similar goods or services; (3) changes in the cost to acquire inventory or other inputs for the good or service; (4) changes in the cost of labor, energy, transportation, or other expenses involved in providing retail services; (5) differences in the time or place of a transaction, including the: (A) time of day; (B) date or day of the week; (C) season, including weather or climatic considerations; (D) distance from the source of or shipping constraints for the good or service or a component of the good or service; or (E) manner in which the purchase is transacted or will be fulfilled; (6) changes to the local geographic market conditions; (7) the capacity of the person to accept additional customer traffic, including due to occupancy limits on a physical premises; (8) differences in the imposition of taxes or fees based on the location or nature of the market; (9) differences in the cost of shipping a good to a different location; or (10) other objective, determinable factors that could reasonably affect the price of the good or service. Sec. 125.042. REWARD OR CUSTOMER LOYALTY DYNAMIC PRICING MODELS. (a) This chapter may not be construed to prohibit promotional pricing, loyalty benefits, clearance sales, or other temporary discounts that are: (1) available to multiple customers on the same terms; (2) optional and selected into by each participating customer; and (3) intended to attract or retain customers. (b) This chapter does not prohibit a person from using a dynamic pricing model intended to adjust the price of a good or service to reward or incentivize new or loyal customers, including: (1) sales, rebates, or promotional discounts; (2) coupons, including personalized coupons; (3) loyalty or rewards programs, including memberships or club pricing; (4) discounts provided as part of a customer service or customer retention effort; (5) discounts for customers who are students, members of the armed forces, veterans, seniors, educators, first responders, government employees, or similar classes of customers known to receive similar discounts; (6) discounts or price cuts associated with or provided through public or private financial assistance programs; or (7) other customer benefits that meet the description in Subsection (a). Sec. 125.043. DYNAMIC PRICING MODELS FOR NEGOTIATED TRANSACTION. (a) This chapter may not be construed to prohibit changes in price inherent to a negotiated transaction. (b) This chapter does not prohibit a person from using a dynamic pricing model to help the person respond to various factors of a bona fide individualized negotiation with a customer, including: (1) the amount of the customer's offer or counteroffer; (2) the nature of any contractual terms sought or offered by the customer; (3) personal identifying information provided or introduced by the customer as part of the negotiation; (4) the value of any nonmonetary consideration offered by the customer, including a trade-in or return; (5) the proposed or anticipated financing structure, if applicable; or (6) other information, including market-based information described by Section 125.041, that could reasonably affect the price of a good or service under negotiation. (c) A person may not use a dynamic pricing model to help the person respond to various factors of a bona fide individualized negotiation with a customer if the model uses personal identifying information or other unique qualities of the customer that were not provided by, introduced by, or consented to by the customer. Sec. 125.044. DYNAMIC PRICING MODEL FOR RANDOMIZED PRICING TEST. This chapter does not prohibit a person from using a dynamic pricing model as part of a randomized pricing test if the model: (1) assigns or determines the price of a good or service for a customer in a manner that is genuinely random; (2) does not use personal identifying information or other unique qualities of the customer as an input; (3) uses personal identifying information or other unique qualities only for the purpose of evaluating the randomized pricing test and determining appropriate pricing for future transactions; and (4) does not use, generate, or retain any personal identifying information or other unique qualities for use in any dynamic pricing model that violates Section 125.021. Sec. 125.045. DYNAMIC PRICING MODELS FOR CERTAIN REGULATED ACTIVITY. This chapter does not prohibit a person from using a dynamic pricing model as part of an industry or practice that is regulated in a manner that requires the type of individualized pricing prohibited by this chapter, including: (1) insurance underwriting or rating; (2) credit and lending decisions; (3) rates of taxes, utilities, or tariffs; (4) health care reimbursement or cost-sharing arrangements; (5) government pricing or benefit programs; or (6) pricing conduct preempted by federal law. SUBCHAPTER D. ENFORCEMENT Sec. 125.061. (a) A violation of this chapter is a deceptive trade practice under Subchapter E, Chapter 17, and is actionable under that subchapter. (b) For purposes of this chapter, each day in which a person uses a dynamic pricing model in violation of this chapter constitutes a separate violation.

SECTION 2. Chapter 125, Business & Commerce Code, as added by this Act, applies only to a dynamic pricing model in use on or after September 1, 2028. A dynamic pricing model in use before that date is not governed by Chapter 125, Business & Commerce Code, as added by this Act, for purposes of determining whether a violation has occurred.

SECTION 3. This Act takes effect September 1, 2027.