The government is launching research into the way online retailers are using personal data to target consumers through personalised pricing.

The joint project with the Competition and Markets Authority (CMA) is in response to concerns about use of customer data such as geography and marital status to determine dynamic pricing, which some consumer groups have warned could lead to shoppers being ripped off.

Online retailers have been quick to adopt algorithm and artificial intelligence (AI) driven methods that use customer data to set prices for goods and services including holidays, cars and household goods.

The data sets are often combined with real time information on demand, timing and offers to produce a ‘personalised’ price for consumers on digital platforms, which may be higher than ‘non-dynamic’ standard pricing models.

It often results in customers spending different amounts on the same products, dependent on their data and the specific customer journey they have taken.

The research project will explore how widespread this practice is, how businesses are applying it through different mediums like search engines, apps or comparison tools, and the extent to which personalised pricing is preventing shoppers getting the best deals.

The announcement comes as the government held the first meeting of the Consumer Forum with policy makers and regulators this week, to discuss action the government and regulators can take to protect vulnerable consumers.

This week the Financial Conduct Authority (FCA) also announced it will be investigating the issue of personalised pricing for car and home insurance policies after finding evidence of hidden discrimination between customers.

Announcing the initiative, the business secretary Greg Clark said: “Ensuring markets work fairly and in the interests of consumers is a cornerstone of our modern Industrial Strategy.

“UK businesses are leading the way in harnessing the power of new technologies and new ways of doing business, benefitting consumers and helping them save money. But we are clear that companies should not be abusing this technology and customer data to treat consumers, particularly vulnerable ones, unfairly.”

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