OFT to investigate firms' use of consumer data

Office of Fair Trading to look into legality of personalised prices

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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OFT to investigate firms' use of consumer data

Office of Fair Trading to look into legality of personalised prices

For example, on Twitter, a disgruntled Ryanair customer claimed that he looked up a fare on a particular day, which was £123. The next day he checked the fare again and it had risen to £237. Once he had "flushed cookies" (essentially causing the website to forget his previous visits) the fare returned to £123, he said.

An ICO spokesperson told Computing that just like the rules regarding loyalty cards, if an organisation was using cookies to track a user's online activity with a view to targeting them with a price for a product based on their browsing habits, then it would need to provide sufficient information about how cookies are used in that process.

The OFT will look at how businesses use such consumer information, including whether they change the prices they offer individual shoppers as a result

It said that it would consider business and technological developments in the online shopping market, consumers' understanding of how their information is used and whether they are being treated unfairly in law as a result of any new data analytics practices.

The OFT said it will consult with a number of its international counterparts including the US Federal Trade Commission on commercial uses of consumer data.

Over the next six months the OFT will try to gather as much information on the issue as possible and is encouraging interested parties including online retailers and software providers to come forward. It will publish its findings in spring 2013.

"Innovation online is an important driver of economic growth. Our call for information forms part of our ongoing commitment to build trust in online shopping so that consumers can be confident that businesses are treating them fairly," Maxwell added.