Government to probe 'personal pricing' with help from the CMA

The Government has announced the launch of an inquiry into how personal data is used for 'personal pricing'.

The Competition and Market Authority (CMA) will be leading the research to explore how shoppers are offered difference prices for products, depending on the data companies hold on them.

This investigation is targeting how items like household goods, cars and holidays can be priced differently according to factors such as marital status, geographic location and date of birth.

A cornerstone of our Industrial Strategy

The investigation has come as an action resulting from the first meeting of the Consumer Forum. The forum is made up of Ministers and CEOs from regulators and met for the first time this week to discuss protections for vulnerable customers.

Under discussion at this meeting was a super-complaint issued by Citizen's Advice in regard to customers paying a 'loyalty penalty', as well as more recent research concerning the use of personalised pricing.

Business secretary, Greg Clark, said that making sure markets were fair for consumers was a 'cornerstone' of the governments Industrial Strategy. He claims that the UK's consumer protection regime is 'among the strongest in the world'.

He said that overall, companies use of technology to power new business was a positive thing, but that they should not be 'abusing' this in order to treat people unfairly.

What is personal pricing?

Also known as 'dynamic pricing', personal pricing sees the prices for products fluctuate depending on what companies think the customer is willing to spend.

Citizen's Advice raised this as a consumer issue in August, following an investigation into the issue.
Although their research concluded it's unlikely personalised pricing is widespread, they also warned that in energy and telecoms markets, it would be more likely to occur.

The CMA has been aware of personal pricing for some time, having published an economic research paper last month on a related topic.

The paper focused on how algorithms could be used by commercial companies to segment their customers, potentially allowing them to offer products at different prices.

Although personal pricing has only recently come under the regulatory spotlight, it's been around for some time. As long ago as 2000, Amazon was criticised for altering the price of a Stephen King DVD.

Allegedly prices changed depending on location, and older shoppers were charged more.

What will the inquiry consider?

As part of this investigation, the CMA will be looking at three key areas. These are:

• How widespread the practice of personal pricing is
• How business are using it to influence results on search engines, apps or price comparison tools
• How much personalised pricing is stopping consumers from finding the best deals

The Chief Executive of the CMA, Andrea Coscelli, said that with the rise in online shopping in the UK, it was increasingly important people understand how technology can impact them.

He said that the research will help the CMA 'stay at the forefront of emerging technology' so they can continue to protect people from unfair practices.

Personal pricing also under scrutiny from the FCA

This is not the only investigation regarding personal pricing which is being undertaken at the moment.

Earlier this week, the Financial Conduct Authority (FCA) announced it will be investigating a similar issue in relation to the way home and car insurance products are priced. They have stated that their research will:

• Consider the consumer outcomes from pricing practices
• Evaluate the fairness of these practices
• Establish the impact personal pricing is having on competition
• Take steps to address any harm identified as a result

The FCA research is in a period of information gathering, and the regulator has invited input from stakeholders up until 3rd December 2018. They plan to publish an interim report by summer 2019, with a final report by the end of next year.