When Algorithms Set the Price: The Future of Consumer Deception

Many of us see supposed discounts every day – products in flyers or on websites where the “regular” price is crossed out and replaced by a supposed sale price: a vacuum that is normally $599 is now $499, or a pair of pants that usually sells for $99, now only $49!Sometimes the deals are legitimate, but often they’re fake discounts meant to mislead consumers into thinking they’re getting a bargain.These fake discounts aren’t just marketing gimmicks, they’re illegal – running afoul of Canada’s “ordinary selling price” laws, which require listed regular prices to be legitimate. Products must genuinely be sold at the regular price for either a certain length of time or a specified volume of overall sales.The laws are meant to protect consumers from deceptive advertising and to keep merchants honest, but they’re routinely violated because the practice works. Psychological studies show that the promise of a bargain, real or not, makes people more likely to buy what’s being offered.The practice is already difficult enough for enforcers to detect and stop, so what happens when algorithms and artificial intelligence are added to the equation? What constitutes an “ordinary selling price” and a discount when dynamic pricing means costs for products and services can change every few seconds?These are questions raised in a new paper by Matthew Chiasson, a senior policy advisor for the Competition Bureau, who believes it’s the first attempt to address the issue in an academic context.Chiasson previously appeared on the Do Not Pass Go podcast to discuss how large companies were weaponizing regulations to stifle competition. He joins us again to talk about what’s a real discount in a world where the price of everything is increasingly fluid.Check out his paper here.Do Not Pass Go is a reader-supported publication. To receive new posts and support my work, consider becoming paid subscriber. Get full access to Do Not Pass Go at www.donotpassgo.ca/subscribe