The Office of Fair Trading (OFT) is contacting over 60 leading online firms to stress the importance of being transparent with consumers about how and why they collect their personal data.
The news coincides with the release of its Personalised Pricing report, which examines how consumer data is stored and used by online businesses to inform their pricing strategies.
Personalised Pricing refers to when a business may charge different prices to different consumers, based on what that business decides they would be willing to pay.
In the report the OFT states: “It is technologically possible, and consumers are concerned about businesses setting higher prices to individuals based on information which companies collect on them – for example, information about their browsing or purchasing history or the device they use.
The report’s findings quashed previous concerns that retailers were using information collected about individuals to offer higher prices to particular customers.
However, many retailers use consumer information to shape their pricing or serve individually relevant advertising and therefore may offer discounts to people who came to a product via an affiliate site for example.
Although the report stated that such targeted pricing “can offer benefits” to customers, the OFT has noted an increasing unease among consumers regarding the range of personal information collected about them as well as the selling of that information to third parties.
“They also have little understanding of how online businesses get or use their information or of the steps they can take to protect their privacy,” the report stated.
Many of the websites examined by the OFT during the research were unclear about what information they collected, how it would be used or how people could opt-out on their websites.
The OFT is concerned this could lead to a loss of trust in traders and their business practices.
The trade body will work with the Information Commissioner's Office (ICO) to further explore consumer protection and data protection issues related to the collection and use of consumer information.
OFT chief executive Clive Maxwell said online retailers have “changed forever” the way we shop, bringing many positive benefits, but that more must be done to ensure they are communicating to consumers how and why they are using their data.
“Our report found no evidence to indicate firms are using personal information to target individuals with higher prices and, indeed, in some cases we found that groups of customers are benefiting from discounts.
However our study has shown that there is clearly public concern about how personal information, a valuable commodity in online markets, is being collected and used. We are therefore calling on businesses to make sure they are being fully transparent and giving consumers appropriate control.
“Maintaining consumer trust online is important to growth and innovation, and we will consider enforcement action if we see evidence of misleading or unfair practices, he said.
Simon Entwisle, director of operations at the Information Commissioner's Office, said: “Businesses need to be open about how they're using customers' information. It's clear that using that information in the right way can benefit both parties, but businesses that use data inappropriately risk alienating customers and put themselves in line for enforcement action by the ICO.”
In its letter to the 60 online businesses the OFT is reminding them to:
• Give consumers accurate, honest and clear details about how they, and third parties, collect and use their information
• Give consumers a genuine chance to opt-out of non-essential collection and use of their data
• Make sure their privacy terms and conditions are fair.