Who will wean us from the bosom of big business?
Despite the defeat of their motion to ban surveillance pricing, the NDP has kicked over a dormant hornet’s nest of affordability issues.
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CALGARY—Last week, NDP MP Don Davies sought unanimous consent“asking MPs to agree that ‘the government should ban surveillance pricing, where personal data is used by corporations to increase the prices consumers pay both in-store and online.’” Global News went on to note that this was the first piece of policy introduced into Parliament by the NDP since Avi Lewis was elected as its leader on March 29. Despite the motion’s defeat, the NDP has kicked over a dormant hornet’s nest of affordability issues.
Another byproduct of this motion was to introduce real opposition to Prime Minister Mark Carney’s artificial intelligence agenda, which Carney plans to ram through without many regulations. As reported by the Canadian Press, AI Minister Evan Solomon has indicated that “he’ll put less emphasis on AI regulation and more on finding ways to harness the technology’s economic benefits.” In essence, this government has put us on notice that it is all about profits over people.
This issue should’ve been on the radar of the Conservatives who swear up and down they’re here for working people, but they, too, are in the bosom of big business.
Dynamic pricing is the practice of maximizing revenue by aligning your willingness to pay with the price of the goods and services on offer. This practice requires the use of data analytics and AI algorithms to automatically shift prices in real time based on data gleaned from online behaviours that are tracked by various tools like loyalty programs. This is a free-market failure; symmetric information is necessary for the perfectly competitive markets these politicians love to quote.
There are a few common strategies that companies use to engage in dynamic pricing. The first is time-based pricing. This is when prices rise during peak times to take advantage of increased demand. This is Uber’s business model, in a nutshell. The second is segment-based pricing, which charges different prices for the same product to different consumer factions. This sounds routine, given that we’ve had seniors’ discounts and student pricing for a while; however, as a strategy of dynamic pricing, the difference is these prices are adjusted instantaneously and are based on factors designed to maximize your willingness to pay. Demand-based pricing is similar to time-based, only it bases its surge on high demand itself, instead of basing pricing on the time period when demand is high.
Surveillance pricing can be thought of as a subcategory of dynamic pricing that specifically targets individuals based on the data obtained through things like loyalty programs, which are data-harvesting tools. Every time you use a loyalty card, it collects what you buy, the time, frequency, and demographic characteristics, and will adjust the prices and promotions accordingly. Vanderbilt University and UC Berkeley released a report on how loyalty programs have inverted the concept of “loyalty”: “They track not just what consumers buy, but who we are, what we search for, and even how we move our cursors across a screen. Companies then monetize this data—selling it to brokers, building profiles on each of us, and most importantly, learning how much each of us is willing to pay.”
With each of these models, the consumer is getting screwed. Although prices can theoretically lower during slower periods, the price itself is based on the consumer’s willingness to pay, which is determined by analyzing your personalized data. Willingness to pay can be translated into the following question: how much financial pain are you willing to tolerate?
This past November, the Competition Bureau concluded its investigation into the use of pricing algorithms in the rental market. One of their targets, RealPage, has also been investigated by the United States Department of Justice. Unlike the Competition Bureau, which “did not find a contravention of the civil provisions of the Act at this time” since it’s not widely used in Canada, the DOJ took action against the company for anti-competitive practices. RealPage allowed landlords to share information to inflate rent prices for unsuspecting housing-seekers. “This software then generates recommendations, including on apartment rental pricing and other terms, for participating landlords based on their and their rivals’ competitively sensitive information. The complaint further alleges that in a free market, these landlords would otherwise be competing independently to attract renters based on pricing, discounts, concessions, lease terms, and other dimensions of apartment leasing.” This is not the free market; rather it is greed and corruption only meant to squeeze people out of their last dollar.
To be fair, it is not clear as to how widespread the use of surveillance pricing is in Canadian marketplaces, but what is clear is that we don’t have the institutional oversight to protect us like we think we have. Don’t look to the Liberals or Conservatives to fight for consumers, given that before the NDP brought it up, the inherent unfairness and avariciousness of algorithmic-based pricing was not even an issue. And given the Carney government intends to push AI down our throats with little oversight, he is already giving businesses a green light to rob us.
Erica Ifill is host of the Bad+Bitchy podcast.
The Hill Times
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