Digital Disruption

CMA publishes study into pricing algorithms

CMA publishes study into pricing algorithms

The CMA today published a study into pricing algorithms and whether they could be used to support illegal practices.

Pricing algorithms are commonplace online and used regularly by businesses. The research posed key questions, including:

  • can algorithms aid ‘personalised pricing’, where customers are shown different prices for the same products, based on factors like their browsing history?
  • can they aid price fixing, where two or more companies collude together to raise their prices to customers?

Whilst there was little evidence of companies using algorithms to show personalised prices, the study did find that they were sometimes used to change the order in which products are shown to shoppers. It also examined the circumstances where that algorithms might be used to help implement illegal price fixing and, under certain circumstances, could support tacit collusion between firms. Once key factor highlighted by the CMA report is the risks that arise when multiple firms implement very similar pricing algorithms – drawing in part on work by David Foster, Director at Frontier, in his recently published an article “Algorithms and price collusion – Learning to love artificial intelligence” in Competition Law Insight. The full article is available here.

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