Toronto is looking to ban what is known as surveillance pricing in grocery stores, a practice that experts say could allow retailers to use shoppers’ data to charge different prices for the same products.
Also known as algorithmic or personalized pricing, surveillance pricing relies on information collected about individual consumers to see the most they are willing to pay, raising concerns about fairness, privacy, and transparency.
On Tuesday, Mayor Olivia Chow announced she is putting forth a motion to effectively halt the practice that is “gouging” Torontonians.
Emily Osborne, a policy researcher at the Canadian Shield Institute, says surveillance pricing uses personal data points to set individualized prices for consumers.
“For example, with surveillance pricing, an airline could charge you more because they’ve seen your browser history and know that you’ve been searching for funeral arrangements or alternatively, a retailer could charge you a bit more on Wednesday because they know that’s your payday,” Osborne said in an interview with CTV News Toronto on Tuesday.
Though it sounds similar to dynamic pricing, Osborne says the two are different.
Dynamic pricing adjusts the costs on broader, real-time factors like demand, inventory, or weather.
Surveillance pricing, she explains, uses data tied to an individual consumer to determine what that specific person might pay.
‘So little transparency’
Technology analyst Carmi Levy says surveillance pricing is controversial, as consumers don’t know when it’s happening or what information is being used to determine prices.
“It doesn’t necessarily mean higher prices, but the fact that there’s so little transparency means that beleaguered consumers who are already dealing with economic challenges and possibly losing their jobs, they tend to think the worst,” Levy said in an interview with CTV News.
How that information is collected and used is not obvious, tangible, or visible to the consumer, he noted, which creates a lack of control for customers around the costs.
“It’s almost like playing a game you’ve never had a chance to read the rules and your one hand is tied behind your back,” Levy said.
How can algorithmic pricing work at the store?
Some grocery stores use radio frequency identification (RFID) screens on their shelving to display the costs of each item. Levy says those screens can be changed dynamically based on current conditions.
“Retailers are taking inspiration from the aviation and entertainment industries and they’re applying those technologies in their storefronts to allow them to dynamically change prices based on specific and identified conditions,” Levy said.
Osborne, meanwhile, says these electronic labels are the best prediction for how surveillance pricing works at the store, but ultimately there is a lack of evidence for how this practice is working exactly.
Why it’s different from student or senior discounts
Student and senior discounts differ because they’re publicly available to anyone who qualifies.
These particular discounts are transparent, Osborne says, and apply to entire groups who are required to opt-in or prove they qualify.
“You don’t have to disclose to a grocery store that you’re a certain age in order to qualify for a discount,” she said.
How often is surveillance pricing used?
Exactly how common surveillance pricing is remains unclear.
Dan Cohen, an associate professor of economic geography at Queen’s University, says it is hard to gauge just how widespread this pricing practice is.
“It’s really a black box right now. There’s not a lot of regulation, it’s a fast-emerging practice, so we don’t have a lot of information right now about how commonly it’s being used,” Cohen explained to CTV News.
It is also unclear what factors are driving the differences in pricing exactly. In the context of dynamic pricing, he says location has made a difference.
“We’ve seen through pricing models, which aren’t individualized, but do have some level of difference that places where there’s not a lot of competition, the prices for the products will be higher, and those neighbourhoods are traditionally racialized or low income,” Cohen said.
What is being done across Canada
Toronto is not the only one pushing against surveillance pricing at the marketplace.
“We saw Manitoba recently, and then Quebec also has a provision that might apply to surveillance privacy in its own provincial privacy legislation,” Osborne said.
Manitoba banned “predatory pricing” in grocery stores and other retail in March, barring the “unfair” pricing practice both in-store and online. Meanwhile, Quebec has a Price Accuracy Policy that requires retailers to either give shoppers items for free or at a discount if the price at the till is higher than what is advertised.
Osborne also pointed to Canada’s latest legislation, Bill C-36, or Protecting Privacy and Consumer Data Act. Under it, the act would ensure that the personal information of Canadians is being used responsibly and transparently and would address its unfair uses like in the case of surveillance pricing.
“It’s really not clear how exactly it’s going to accomplish that,” Osborne said.
“I think that could be achieved much more explicitly in privacy legislation.”
