Toronto may be out of its depth on proposed surveillance pricing ban, experts say

As the mayor of Toronto looks to rein in surveillance pricing on groceries, experts say the municipal government may be out of its depth in attempting to end the controversial practice.

Surveillance pricing, also referred to as personalized pricing, is the use of consumers’ individualized data, such as their gender, location, purchase history, or socioeconomic status, to set prices.

Mayor Olivia Chow called the practice “unfair” and a form of price gouging at a meeting of city council’s executive committee meeting Tuesday. The committee went on to pass a motion asking the city’s legal team to look at all avenues to regulate, limit or outright ban surveillance pricing in Toronto.

The motion calls for a minimum of plain-language disclosure of the use of algorithmic pricing for consumers, “up to the full prohibition” of the practice. It will move on to debate at city council next week.

Chow noted the city has increased price transparency in some businesses under the City of Toronto Act, which gives the country’s largest city special powers to introduce consumer protection bylaws.

Alberto Salazar, an associate professor researching consumer protection law at Carleton University, says while he believes the committee has “good intentions and fair concerns,” Toronto is poorly positioned to enact a ban.

“Regulation of the market is generally considered a federal and provincial matter, not a city matter,” Salazar said. “The city, legally speaking, is not in a position to regulate or to ban algorithmic pricing or surveillance pricing.”

The city has a narrow set of options because of its special powers, such as exploring the mandatory disclosure of algorithmic pricing by licensed businesses, Salazar said.

“Otherwise, it’s very controversial because it will really collide or conflict with federal law and provincial laws,” the researcher said, adding the Ontario government could override the city’s attempts to regulate the market.

Dan Cohen, an associate professor studying economic and financial geography at Queen’s University, said that municipalities are often “creatures of the province.”

Toronto’s proposed ban is part of a larger “regulatory cat-and-mouse game” playing out across jurisdictions, Cohen said, adding he has seen a hodgepodge of regulation proposals across the continent.

“We haven’t really gotten to a point where we’ve seen a kind of convergence around what works, or how this is going to be approached,” he said.

If city council adopts the motion, it will also ask the provincial government to ban surveillance pricing.

Ontario Premier Doug Ford nixed the idea of a ban in April, saying that curtailing the practice would run contrary to a free market.

He made the comments after Manitoba announced it would attempt to ban “predatory pricing” on groceries.

“There’s no better way of letting people get lower costs … no matter if it’s cars or homes or groceries, than competition,” Ford said.

“If there’s collusion on pricing, I’ll go after them and tear them to shreds, but nothing beats a free market,” the premier added.

NDP Leader Marit Stiles and interim Liberal Leader John Fraser have condemned the practice, calling for guardrails against what they deem predatory algorithmic pricing.

Prime Minister Mark Carney’s artificial intelligence strategy released last month also said it would modernize legislation to protect Canadians’ personal information from surveillance pricing.

Some economists argue surveillance pricing charges consumers an appropriate individualized cost, increasing economic growth, said Cohen, the associate professor at Queen’s.

Toronto’s interest in a ban is a step in the right direction because the algorithms setting individualized prices are largely a mystery to consumers, he said.

He added regulators should be aware that surveillance pricing can crop up in unexpected ways, such as companies targeting consumers with individualized discounts.

“There’s such a black box around how surveillance pricing is working — it’s kind of hard to know the best way to address it,” Cohen said.

“We don’t know what’s going on, and we don’t know the effects on different consumers — who’s benefiting, who’s being left behind.”

Salazar, the associate professor at Carleton, said although Toronto does not appear to be in a position to enact a ban, he believes surveillance pricing should not be ignored by other levels of government.

“I think it’s real, it’s concerning, and it should at least be debated and hopefully revisited by Parliament,” he said.

Elissa Mendes, The Canadian Press