OFT finds no evidence of personalised pricing hikes online

Online retailers are not using customer data to inflate prices for certain consumers, according to a recent Office of Fair Trading (OFT) report. The report into the use of data collected by online retailers about their customers shopping habits has concluded that they are not using the data collected from their customers to raise prices of products. Businesses are, in fact, using the data to offer personalised discounts to their customers and improve their pricing strategies.

The OFT launched the investigation in November 2012 to see if online retailers were charging different prices for products based on observed, volunteered or collectedpersonal data. Such personalised pricing raises issues of consumer protection, privacy and fairness. In addition, if consumers become aware that retailers are using the history of their online buying habits to set the prices of future purchases, this could affect their use of online and mobile shopping channels.

Retailers use personalised pricing to offer discounts
The OFT concluded that businesses were not raising the prices of products based on a customer’s previous history but were using the data to offer discounted prices. For example, if a customer had not shopped with an online retailer for some time, they would be sent a discount voucher to encourage them to return.

OFT warns retailers over lack of transparency
The OFT was concerned, however, that there was a lack of transparency by online retailers about the data they collect from their customers and what they use it for. The OFT has written to a number of online retailers asking them to be more open about the data they collect. They have also made a number of recommendations to businesses as to how to avoid infringing the law and build trust in their customers.

There are a number of pieces of legislation that govern the use of personalised pricing throughout the three stages of their process: the collection of the data from consumers; the processing and analysis of the data and; when the price or product is presented or advertised to the consumer. Laws cover contract terms, using technology to gather data from website users, gathering and use of personal data, prohibitions against discrimination, and legal and industry rules on advertising and price statements.

Personalised pricing can bring benefits to both consumers and businesses, but as the report found, this can only be achieved if businesses are transparent in the way they use their customers’ data so that consumers have trust in the online shopping channels, as well-informed and confident consumers are necessary to create a healthy online retail environment.

Janine Paterson, Solicitor, DMA