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Personalised Pricing Online Investigated by OFT

Thursday, 9 May 2013

In today's marketplace, the internet offers both consumers and traders a wealth of opportunities for buying and selling. The expansion of this global market is especially valuable for businesses, providing endless ways in which firms can target potential customers.

Personalised pricing is one way that businesses are using targeted advertising and marketing to maximise margins on goods or services sold online. However, the information required to implement such strategies means they have started to attract close scrutiny from regulators such as the Office of Fair Trading (OFT).

What is Personalised Pricing?

Personalised pricing occurs when businesses offer different prices to different individual consumers depending on the specific information they have collected about that individual. There are a number of ways in which this information can be collected; retailers can collect details of a customer’s previous purchases on a specific website or information relating to a consumer's purchases may be bought from a third party.

Targeted online marketing can be beneficial for a business in terms of saving time, effort and money. However, online trading is increasingly subject to regulation meaning that legal developments must be continually assessed in order to ensure best practice is met.

Personalised pricing is just the latest online tactic to attract close attention from regulators.

Balancing Business Efficacy with On-going Regulation Compliance

Ensuring that an online trading business is compliant with relevant consumer protection laws such as the Consumer Protection from Unfair Trading Regulations (CPRs) is now vital to business integrity as bad news travels fast. Furthermore, failure to comply with consumer regulations or data misuse issues under the Data Protection Act is highly likely to attract legal action from authorities on behalf of consumers.

Compliance is an on-going process. Take cookies as a poignant and relevant example; cookies are frequently used by websites to record consumer information. To comply with the Cookie Regulations, the Information Commissioner Office requires consumers to be informed when a system tracks and collects information in this way and to be given the opportunity to refuse this information. This requirement has meant that online businesses have needed to create specific cookie policies for their websites which have continuously evolved since their introduction in 2011.

Regulation and Personal Pricing

The OFT’s latest steps go even further than the regulations designed to raise awareness of cookies. On the 15th November 2012, the OFT launched an investigation into personalised online marketing which is due to report its results within the next couple of weeks.

The investigation is expected to look into how consumer information such as their browsing history, purchases, hardware and operating systems is gathered by traders and the extent to which this information is used to target marketing, especially personalised pricing. The aim is to see how the information gathered is actually used and exploited and whether this impacts consumers in a negative manner. As part of this investigation, targeted marketing, including personalised pricing is set to come under the spotlight to see if there are any breaches of consumer protection rights.

The results of this investigation could have a significant impact on both consumers and businesses alike so it is vital that website policies and procedures are kept up-to-date and regulation compliant. Rollingsons has experienced lawyers who can assist you. For more information please contact James Crichton via e-mail or by telephone on 0207 611 4848.