In today’s competitive e-commerce landscape, automated decision-making technology is becoming more and more important. From personalized product recommendations to targeted advertising and streamlined logistics, these systems help ecommerce businesses adapt and grow. But new regulations are on the horizon, and these changes could reshape the way e-commerce businesses use automation.

The California Privacy Protection Agency (CPPA) has released draft regulations designed to govern automated decision-making technology. While these rules are not final, they highlight the agency’s priorities: transparency, consumer rights, and fairness. If passed, they could significantly impact how e-commerce businesses use algorithms and consumer data.

Transparency Requirements

Under the proposed regulations, businesses that use automated decision-making technology will be required to provide consumers with a “Pre-use Notice” before they interact with the system. This notice must explain the purpose of the technology—for example, whether it’s being used to recommend products, personalize discounts, or set dynamic pricing. It must also inform consumers about their rights to opt out of or access details about the system, and it should provide a clear explanation of how the technology works, including its underlying logic, reliability, and fairness. If you’re using algorithms to determine which customers see certain promotions, you’ll need to make that clear from the start.

Opt-Out Rights

Under the proposed regulations, consumers would have the right to opt out of decisions made by automated systems, particularly those that have legal or significant effects on their lives. This includes automated profiling used for behavioral advertising and the processing of personal information to train algorithms. For e-commerce businesses, this means creating mechanisms that allow consumers to easily opt out of such uses of their data and ensuring that requests are addressed promptly—within 15 business days. Non-compliance could lead to penalties, so it will be vital to have user-friendly and effective systems in place to meet these requirements.

Access Requests

Under the proposed regulations, consumers would also have the right to request detailed information about a business’s use of automated decision-making technology. This includes information about the purpose of the technology, how its outputs influence decisions like product recommendations or pricing, and whether human oversight is involved in the process. Businesses must be ready to provide this information securely and transparently. For e-commerce companies, this means having clear documentation about how algorithms are being used and ensuring that this information is accessible to consumers upon request. If you don’t already have a data privacy officer in place—and you should—now is the time to appoint one.

Even if these proposed regulations do not become law, more and more states are following Europe and California’s lead and creating mandatory access by law to certain privacy-related consumer information.

Special Provisions for Minors

For businesses that cater to younger audiences, the proposed regulations would introduce stricter rules. Profiling for behavioral advertising targeting children under 13 will require parental consent, and teenagers aged 13 to 16 must provide explicit opt-in consent for such practices. If your platform includes products or content aimed at children, these provisions could require significant adjustments to how you market and collect data from younger consumers.

How This Affects E-commerce Businesses

Advertising and marketing strategies, particularly those that rely heavily on behavioral data or personalized profiling, may need to be rethought. Operational processes, such as systems that automate discounts, inventory management, or fraud detection, could require updates to ensure compliance.

Additionally, the introduction of new consumer rights means that legal risk management will become even more critical, as businesses must avoid complaints and potential fines by ensuring they adhere to the rules.

What Can You Do Now?

While these regulations are still in draft form, now is the time to prepare. Start by auditing your systems to understand where and how you’re using automated decision-making technology. Consider whether you’re profiling customers, using algorithms for pricing, or leveraging data for targeted marketing. Updating your privacy policies to align with transparency requirements is another essential step. Make sure your policies clearly outline consumer rights and your approach to compliance. It’s also important to implement easy-to-use tools that allow customers to opt out of certain processes and to train your team to handle requests for information and opt-outs securely and efficiently.

Revision Legal specializes in helping e-commerce businesses navigate complex regulatory landscapes. From understanding your obligations to implementing compliance strategies, we’re here to ensure your business continues to thrive while staying on the right side of the law. If you’d like to learn more about these proposed regulations and how they might impact your business, contact us today.