AI-Supported Pricing Is Helping Small Businesses Compete: Lawmakers Should Not Mess with That Advantage

By SBE Council at 18 March, 2026, 7:15 pm

By Karen Kerrigan-

Setting prices has long challenged startups and small business owners. Setting the “right” price and decisions related to raising or lowering prices is a balancing act influenced by many factors. The complex exercise – that sometimes requires a bit of guesswork – has become more efficient and time-critical thanks to innovative technology. AI-supported – or “algorithmic”- pricing is helping entrepreneurs and their teams more effectively do this job, which in the past put many small businesses at a competitive disadvantage.

Algorithmic pricing involves using software or automated systems to help small business owners determine prices based on relevant data. Such data may include inventory, supplier costs, demand patterns, or competitor pricing. For small businesses operating on tight margins, pricing tools can improve efficiency and competitive outcomes in the marketplace where larger firms have more scale, access to more data, and greater internal capacity.

SBE Council’s new Small Business Tech Use Survey reveals that these pricing solutions are being rapidly adopted by small businesses. Six in ten small businesses either use or plan to use pricing tools. For the 35% of business owners that have already adopted them, 94% report these tools have improved their competitive position. Moreover, 97% of users report revenue gains. The positive ROI from these tools is fueling future investment and expanded use: 90% of pricing-tool users say they are likely to increase usage in the next 12 months.

Survey respondents say these tools are a game-changer for small businesses. For example, one business owner reported that AI-supported pricing “has made business much more stable by keeping us up-to-date with changes happening in the market.” Another noted that the tools help him “make sure we’re not overcharging customers in these high-cost times.”

The findings convey a positive story about small business competitiveness, which is why efforts in states such as New York and California aimed at restricting or banning algorithmic pricing are so troublesome. Moreover, the number of state and local governments proposing new restrictions or bans is growing, which means possible changes for small businesses that could result in higher costs and lost productivity and efficiency gains. The current legislative state-of-play is not an abstract policy debate about technology. It’s about whether small businesses will continue to have affordable access to cutting-edge tools that help them compete.

Misconceptions Abound

In a world where consumers can compare prices instantly, small businesses do not win by charging unfair prices. Unfortunately, much of the debate surrounding AI-enabled pricing has been driven by rhetoric and speculation, not facts.

Naysayers often imply that these tools are designed to raise prices or take advantage of consumers. Quite simply, this is not how small businesses use pricing tools. In fact, automated pricing tools often help smaller merchants identify opportunities to offer discounts and better match competitive market conditions, allowing them to respond more quickly and accurately than they could through manual checks or guesswork alone. As one small business owner noted (and repeated many times by others) in SBE Council’s tech-use survey, pricing tools “have reduced the man hours that it takes to research competitor pricing on various items.”

There is also a misconception that AI-supported pricing is somehow secretive and inherently unfair. In most cases, these tools are built around standard business considerations. For example, a small retailer may use them to clear excess inventory or move perishable goods. A ripening avocado on a store shelf is the opposite of secretive: the store wants to draw customers’ attention to the item by cutting the price as much as possible before it goes bad.

Software can analyze variables such as produce inventory turnover much faster than a human can, and the underlying purpose remains straightforward: to set attractive prices that draw customers.

In practical terms, algorithmic pricing helps small business owners answer common questions: Should a slow-moving item be discounted? Should a promotion be extended? Is there room to lower a price to stay competitive while still protecting already thin margins?

Another common misconception is that algorithmic pricing falls outside existing consumer safeguards. In reality, small businesses already operate under a robust framework of consumer protection, antitrust, anti-discrimination, and price-gouging laws. Those laws apply regardless of whether prices are set manually or with the help of software or automated systems. Suggesting that algorithmic pricing is inherently suspect ignores that reality and wrongly casts legitimate business practices as harmful without evidence.

Regulatory Headwinds Threaten Small Businesses

There’s a growing risk that impulsive legislative action will produce a fragmented state-by-state mess. A patchwork of conflicting rules or outright bans would increase compliance costs, make it harder for small businesses to compete, undercut the many benefits of AI, and harm U.S. competitiveness across industry sectors and in the global “AI race.”

Lawmakers and regulators need to be thinking about the downstream consequences of their possible actions. They should not create barriers to tech-tools that help small businesses serve customers more effectively and compete in the marketplace. Efforts should focus on preserving and strengthening the policy environment – an ecosystem that encourages entrepreneurship, investment, and technological progress.

AI-supported pricing is not a departure from traditional commerce. It’s an updated and more efficient way for entrepreneurs to complete a complex task that has long challenged small businesses. Lawmakers must reject fear-based narratives and avoid creating a fragmented regulatory landscape that punishes innovation and progress. They should be celebrating the fact that small business owners and their employees have affordable access to modern tools that help them compete and succeed in a challenging global marketplace.

Karen Kerrigan is President & CEO of the Small Business & Entrepreneurship Council