The Invisible Auction: How ‘Black Box’ Algorithmic Pricing Is Changing How Canadians Buy Everything

People pay for their items at a grocery store in Toronto in a file photo. Reuters/Carlos Osorio/File Photo

Analysis

If you’ve ever refreshed a shopping website and seen the price of an item increase, you’ve likely come across a system called “algorithmic pricing.” Not many Canadians have ever heard of algorithmic pricing, and fewer know what it could mean for affordability and fairness in the country.

Your neighbourhood store used to stock its shelves with goods that had a traditional price tag stuck on them, and that price stayed the same for weeks or months. But today, many retailers have started using specialized “black box” computer programs that can easily change prices at a moment’s notice, sometimes every second. Black box computer programs refer to software, systems, or algorithms where the internal workings, code, or decision-making logic are not visible, accessible, or easily understood by the user.

Most of the attention from politicians and regulators has focused on the use of this software to adjust the cost of rental housing. But a new look at the Canadian economy shows that these systems are now everywhere, from the grocery store to the insurance office.

Canada’s Competition Bureau, the government’s market referee, suggests that these automated systems might be making life more expensive for everyone by working together in ways humans can’t easily see. But when it comes to hard data or action, little has been done.

How the ‘Black Box’ Works

Algorithmic pricing is essentially the use of computer programs to determine what consumers pay. These systems analyze vast amounts of data simultaneously—from local pricing trends and demand levels to external factors like weather patterns, and even how users interact with websites, such as cursor movement or browsing behaviour.

In the past, if two stores wanted to raise prices together, their owners would have had to meet in secret—a practice that would clearly amount to illegal price-fixing. Today, no such meeting is necessary. Companies can simply rely on the same pricing software.

If two different computers “learn” that they both make more money when they don’t lower their prices, they could stop competing. To the person buying a gallon of milk, that might feel like a secret agreement, even if no humans ever spoke to each other.

What’s Happening in the US?

In the United States, federal anti-trust enforcers have pushed back against certain algorithmic pricing practices. The Department of Justice filed a lawsuit against RealPage, alleging that its rental pricing software enabled landlords to share non-public, competitively sensitive information and coordinate rents in ways that harm competition and renters.

At the same time, the Federal Trade Commission (FTC) is looking into “surveillance pricing,” which refers to the use of personal data—such as a person’s neighbourhood, browsing behaviour, and other individual characteristics—to charge different prices based on this information. Furthermore, the pooling of non-public data from competitors could effectively allow rivals to act as a single monopolist.

Canada’s Response

In Canada, there have been no such equivalent policies as in the United States. The Competition Bureau has looked into how landlords use this software, but recently discontinued the investigation, saying the practice wasn’t “widespread” enough to harm competition.

However, critics argue that focusing solely on housing ignores the potential for a broader “algorithmic tax” to be levied on Canadians across other sectors. In 2025, when the bureau asked Canadians what they thought about these programs, it received plenty of concerned feedback. The bureau said respondents were concerned about pricing algorithms making it difficult for consumers to understand or question how prices are set and creating barriers to price comparison.

According to the Competition Bureau’s report, these programs are moving into every part of our lives:

• Grocery stores: Many stores are switching to digital price tags that enable them raise the price of goods in real time, such as increasing the price of cold drinks on a hot day, or changing the price of snacks during peak hours.
• Insurance firms: Companies can use algorithms to decide how much a person pays for his or her car or home insurance. The concern is that the software might decide to charge some people more than others after analyzing where they live or how they shop online.
• Online shopping: For consumers who buy electronics or clothes online, the price might change dozens of times a day as the computer program tries to determine the highest price they are willing to pay.

Why Does This Matter?

There are multiple potential dangers to unchecked algorithmic pricing (AP). First, and perhaps most obviously, it could easily erode social trust. One of the major themes in the feedback portion of the Competition Bureau’s report on AP was a public perception of “price-fixing.”

Economically, when firms outsource their pricing to the same third-party algorithm, the “invisible hand” of the market is replaced by a digital thumb on the scale. This artificial stability could, for instance, prevent prices from falling even when supply increases, contributing to the persistent inflation that has frustrated Canadian households.

As the Canadian Anti-Monopoly Project think tank puts it: “These [AP] services can further exert pricing pressure on consumers in markets where they are most vulnerable, like rental housing, grocery retail, and fuel, markets where consumers often have few alternatives.”

Ethically, the move toward personalized pricing threatens the principle of a level playing field, some scholars argue. If an algorithm determines that a consumer is price-inelastic, perhaps because they are shopping in a hurry or from an expensive postal code, it can quietly extract more money from that person compared to the next person.

Divya Chaudhary, an assistant professor at Northeastern University’s Seattle campus, said in a 2025 research article that algorithmic pricing presented “unprecedented ethical complexities that challenge traditional notions of market fairness and consumer protection.”

Industry associations argue these tools drive efficiency and help small businesses compete with giants like Amazon. They warn that heavy-handed regulation could stifle the very innovation that keeps Canada competitive in a digital age.

So far, the Competition Bureau hasn’t indicated if it will shift from mere information gathering to potential enforcement. Regardless of any government action, 2026 is shaping up to be a defining year for digital commerce in Canada.