OFT to investigate firms' use of consumer data

The Office of Fair Trading (OFT) has launched an investigation into the extent to which businesses are using customer data to target consumers with personalised prices.

In July, Computing looked into the proposition of companies such as Tesco overstepping the mark and exploiting their customers' trust by using their data for reasons other than those they disclose. We asked whether the likes of Tesco and Marks & Spencer could gather data from shopping choices to increase the price of services like life insurance, for example.

The OFT is now looking into the matter to determine whether it needs to take any action.

"We know that businesses use information about individual consumers for marketing purposes. This has some important potential benefits to consumers and firms. But the ways in which data is collected and used is evolving rapidly," OFT chief executive Clive Maxwell said.

"It is important we understand what control shoppers have over their profile and whether firms are using shoppers' profiles to charge different prices for goods or services. This call for information will help us understand these practices better and to decide whether or not this is an issue on which the OFT needs to take any action," he added.

Businesses collect customer data from several sources such as their own websites and loyalty cards. Ruth Spencer, Boots' director of customer loyalty, told delegates at IBM's Smarter Commerce Global Summit in May that customers now expect retailers to use their data to target them.

"Customers now believe [the company] uses its insight. They think ‘you've got my data, I expect you to use it'," she said.

Earlier this year, Tesco chief Philip Clarke admitted that the retailer uses Clubcard data to target consumers according to their wealth, with initial tests showing an increase in sales of 10 per cent.

"We're now making changes to our UK website to highlight promotions that are relevant to the customer who is browsing the site. Using Clubcard data, we would show, for example, offers of our Everyday Value range to price-sensitive customers, and offers of our ‘Finest' range to more upmarket customers," Clarke said.

But retailers could also be using cookies to track users' interactions with an organisation, often across multiple services.

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