UK government to investigate the fairness of personalized pricing on web-based shopping forums

The UK government announced today that it’s investigating personalized practices in online retail. Authorities say they are worried that vulnerable customers could be at risk for ‘price discrimination’, when companies use ecommerce tech to modify prices for cars, holidays, or household goods based on personal data points.

The probe will also examine the ways in which advertisers use customer data to utilize “dynamic pricing”, which uses personal characteristics like geographic location and marital status. Dynamic pricing means customers often pay different prices for the same thing.

The Competition Authority (CMA) will be working with the government to research this matter. The research is supposed to investigate how much the extent to which companies are using price discrimination, i.e. how businesses are applying it via different sources like search engines, apps or comparison tools. In addition, the CMA wants to discover the extent to which it prevents shoppers from finding the best deals on the market. Essentially, they want to determine how “fair” these policies are towards customers.

UK Business Secretary Greg Clark, said in a statement:

“UK businesses are leading the way in harnessing the power of new technologies and new ways of doing business, benefitting consumers and helping them save money. But we are clear that companies should not be abusing this technology and customer data to treat customers, particularly vulnerable ones, unfairly.”

CMA’s executives have emphasized the importance of the investigation by citing how online shopping impacts consumer autonomy. The ‘personalised pricing’ research will help the CMA and UK government obtain knowledge of the highest tech out there, so they can properly protect vulnerable consumers if there are any external threats.

“Ensuring markets work fairly and in the interests of consumers is a cornerstone of our modern Industrial Strategy, and I am proud to say that our consumer protection regime is among the strongest in the world,” said business secretary Greg Clark.

A couple months ago, Citizens Advice (UK-based consumer charity) filed a complaint to the CMA, asking it to tackle the loyalty penalty for mortgage and mobile markets. They claim it results in unfairly high prices for ‘disengaged’ customers.

The UK’s Financial Court Authority (FCA) also said that it will be examining personalized car pricing and insurance policies, after it found more hidden discrimination between customers. They claimed last month that their initial work was centered around identifying areas of potential harm to consumers. The FCA even announced market surveys to further look into the outcomes from general insurance pricing practices.

The market study centers around 4 major factors:

1) The consumer outcomes from pricing practices

2) The fairness of outcomes from pricing practices

3) The impact of pricing on competition

4) Possible remedies to address any harm the FCA may/may not find

Based on their findings, they will likely intervene and regulate online shopping  practices.