The internet and e-commerce offers both traders and consumers a wealth of opportunities for buying and selling in today’s marketplace. Access to this worldwide market is particularly valuable for businesses that can utilise the internet to target their marketing and offer efficient pricing through price discrimination; a practice that has caught the attention of the Office of Fair Trading (OFT).
Personalised pricing is perhaps the ultimate price discrimination strategy. It occurs when businesses offer different prices to individual consumers depending on the specific information they have collected about that individual; a task made increasingly easier by the information available online.
The OFT Investigation
The UK Office of Fair Trade (OFT) has taken steps to investigate businesses that monitor online consumers to review how the information gathered is used and exploited. On the 15th November 2012 it launched a call for information and has now published its findings in a report ‘Personalised Pricing – Increasing Transparency to Improve Trust’.
The aim of the investigation was to improve understanding about how the use of customer's information is affecting online markets – particularly through personalised pricing. The OFT considered how businesses use data to offer personalised pricing, whether it is harmful and whether there is any need for enforcement action.
The OFT Key Findings
A number of key findings emerged from the OFT investigation:
- There are low levels of transparency when it comes to the collection and use of consumers’ information.
- Lack of transparency may harm consumer trust in online traders.
- Online businesses should do more to help consumers understand how their information is collected and how it was used.
- When personalised pricing occurs it is less likely to be harmful to consumers when consumers expect it, understand how it works and have the ability to opt out.
Personalised Pricing and Transparency Can be Positive
Generally the OFT’s findings indicated that personalised pricing strategies aim to offer discounts to consumers based on the information businesses have collected rather than to increase prices.
The watchdog found that using customer data, especially web usage data to offer discounts in this way has potential to benefit both businesses and consumers where the process is transparent.
Comment
The OFT's findings indicate a lack of clarity by businesses and a lack of understanding by consumers about what information is collected and how that information is used by online businesses. The investigation found that consumers have high levels of concern about the collection of information and the effects of this on their privacy. The OFT’s most significant concern is ‘the potential for personalised pricing to harm consumers by leading to a reduction of trust in online markets’.
The overriding message for businesses is that they should be more transparent about the way they gather and use online information in to avoid damaging consumer trust in this area.
If you need assistance to ensure your website policies and procedures meet current regulatory standards, Rollingsons has experienced lawyers who can assist you. For more information please contact James Crichton via e-mail jcrichton@rollingsons.co.uk or by telephone on 0207 611 4848.
