The TTC was established more than a century ago, and the government still can’t get it right. Do we really want to copy this model for grocery stores? Photo by Ernest Doroszuk/Postmedia

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Toronto city council, a body not known for competent delivery of basic services, efficacious management of taxpayers’ money or common sense in decision-making, is at it again. By a 21-3 vote back in March — with councillors Brad Bradford, Jon Burnside, and Stephen Holyday opposed — council approved the establishment of four municipally-operated grocery stores. The idea is that government grocery stores could deliver food more cheaply than private-sector stores, which is so nutty even former NDP leader Thomas Mulcair declared just weeks earlier that “the very idea of having the government involved in something like groceries is mind-boggling.” (He was reacting to Avi Lewis, then leadership candidate, now NDP leader, proposing just that mind-boggle.)

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Now, evidently discontent with government merely running its own stores, Mayor Olivia Chow also wants to tell private grocers how to set their prices. She proposes to ban algorithmic pricing, which is when stores use data to adjust prices when people shop online. “We need to absolutely identify all possible mechanisms to ban this surveillance pricing,” she said.

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Chow complained that “by analyzing our personal data, retailers can charge more for milk from a busy mother of three whose kids go through multiple cartons a week.” Chow and other anti-business politicians and activists may think grocery stores can raise prices with impunity to price-gouge everyone, but the reality is just the opposite. Stores compete fiercely for customers, especially online, where shoppers can more easily compare prices and switch suppliers. Stores that use algorithmic pricing to charge different prices to different customers would do far better to target lower prices to price-sensitive customers and charge more to customers who prioritize other things, such as convenience, over price.

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A budget-conscious mother whose three kids consume lots of milk would be turned off by any retailer that overcharged her for it. A smart grocery algorithm operating in a competitive landscape would offer lower milk prices to budget-conscious households in hopes of encouraging them to do more of their other shopping with it. Contrary to Chow’s justification for heavy-handed government control over pricing, fierce competition in the grocery sector means consumers instead of producers ultimately benefit from innovation, with the most price-sensitive customers standing to gain most from innovations in pricing strategies.

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In any case, whether through bans on algorithmic pricing or other meddlesome regulations, there is simply no room for government to regulate grocery prices lower: profit margins in the sector are consistently in the low single digits already. Expanded government regulation would simply regulate some grocery stores away, hurting competition, destroying jobs and reducing consumer choice.

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Widespread competition and razor-thin profit margins also show why government grocery stores will be a disaster. Even assuming — with an unrealistic degree of optimism — that government stores could operate as efficiently as the most efficient private stores, they might save grocery shoppers something like three per cent by earning zero profits. But in order to fund this three per cent “savings” on their groceries, Torontonians would have to pay tens of millions of dollars in higher taxes to fund the establishment of these stores, whose goal would be to earn zero financial return on this money while taking enormous risk.