Transparency Can't Fix Data-Driven Exploitation

This week, the Canadian Shield Institute published Chapter 4 of Foundations of Digital Sovereignty. This piece of the project is focused on data commercialization and regulation to protect Canadians from exploitation. Surveillance pricing is a perfect example of where the rubber meets the road, and the practical impacts of regulation.

It can be tempting to treat dynamic pricing as a transparency issue. Right now consumers do not know when they are receiving different prices than other shoppers, nor what data influenced the price they are seeing.

If somebody knows that they are being subjected to surveillance pricing, they are then empowered to make purchasing decisions based on that information—or so the logic would go. New York State’s Algorithmic Pricing Disclosure Act is the best example of regulating surveillance pricing as a transparency issue, requiring that retailers prominently disclose when a price has been set by an algorithm that uses personal data.

But fundamentally, surveillance pricing is problematic for more reasons than the information asymmetry.

In fact, solving for the lack of transparency obscures the real problem at the heart of surveillance pricing: the truly massive amounts of personal information that firms can collect about their consumers and the inferences that can be made based on that data. It is effectively corporate surveillance. Anything from past purchasing history or how you interact with a browser page to inferences about your purchasing intent or emotional state can be leveraged by algorithmic pricing tools to determine the price you see.

These tools are not theoretical either; they are here and increasingly being used. The U.S. FTC investigated the providers of algorithmic pricing tools and found that they were working with at least 250 clients, including both online marketplaces and physical stores like grocery stores. Canada’s Competition Bureau found over 60 companies making these tools available in Canada.

Surveillance pricing is only one example of the kinds of predatory practices that the exploitation of personal data at scale can enable.

While transparency can ultimately be helpful in empowering consumers, it is a completely inadequate protection against such exploitation. Instead, we need robust and comprehensive data protection legislation that treats surveillance pricing like the privacy issue it is. There must be restrictions on what personal information firms collect and how they can use it in the first place.

Theoretically, Canada’s national privacy law requires informed consent for corporations to use our personal information, but practically speaking that consent can hardly be meaningful when handing over data is the price of participating in the digital economy.

We are overdue for a modernization of our privacy law that acknowledges this reality—a core argument made in Chapter 4 of Foundations of Digital Sovereignty.

In fact, we go beyond just privacy to sketch out what a truly meaningful data governance law would look like:

• Egress tools
• Knowledge about how their data is being collected and used
• Meaningful opt-out rights
• The ability to effectively use third-party software or tools
• Rights to have their information deleted or rectified.

You can think about how these kinds of consumer empowerment tools would impact surveillance pricing and meaningfully shift the balance of power to ensure that consumers are not exploited.

Canada has so far simultaneously failed to adequately protect our data and to ensure it is leveraged to deliver benefits to society. Instead, our data is exploited in a largely unchecked manner, often by private American firms, and underutilized in the ways that matter. Surveillance pricing is just one example of this exploitation.