Canadians aren’t buying ‘algorithmic pricing,’ even if they don’t know what it is

A shopper at a produce counter in St. Lawrence Market in Toronto. Photo by Cole Burston/Bloomberg files

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So-called algorithmic pricing may be a new concept for many Canadians, but the idea of prices fluctuating based on a computer program is one most are against.

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More than half of Canadians view algorithmic pricing as unfair and 52 per cent say it should be banned, while 31 per cent believe it should be allowed but strictly regulated, according to a new survey by Abacus Data.

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Simply put, algorithmic pricing involves companies using an algorithm to adjust pricing based on factors such as demand, inventory levels and competitor pricing.

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But just 13 per cent have ever heard of the term “algorithmic pricing,” although 30 per cent said they believe it’s often used to determine prices.

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“Canadians appear instinctively uncomfortable with systems that personalize prices in ways they cannot see or understand,” the report said. “Even before they know the technical term, many already suspect these systems exist. And once the practice is described explicitly, the reaction is immediate and overwhelmingly skeptical.”

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Algorithmic pricing has become increasingly popular in entertainment, retail and travel, but Abacus said businesses using it run a serious reputational risk given Canadians’ opinions on this kind of pricing.

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“In behavioural terms, that perception matters enormously,” it said. “Consumers are far more tolerant of price changes driven by market conditions than they are of price differences that feel personalized or discriminatory.”

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The Competition Bureau of Canada last year said the methods “limit consumer choices and reduce helpful information for making decisions,” but can also help a company enter a new market.

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“While this innovation brings some benefits, it also poses challenges for competition,” the bureau said. “As we navigate this evolving landscape, it is important to balance the advantages of algorithmic pricing with the need to ensure the benefits of a competitive marketplace for Canadians.”

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In November, the bureau ended its investigation into RealPage Canada Inc. and Yardi Canada Ltd. using these tools in the rental housing market because they are not used widespread enough, but said it “remains concerned.”

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