Data Driven Futures
Why do we cut corners

CMA finds algorithms used for price fixing

Written by Peter Walker

The Competition and Markets Authority (CMA) has published the results of a study into pricing algorithms and whether they could be used to support illegal practices.

Whilst there was little evidence of companies using algorithms to show personalised prices, it did find that they were sometimes used to change the order in which products are shown to shoppers.

It also found that algorithms can be used to help implement illegal price fixing and, under certain circumstances, could encourage the formation of cartels. However, the risk of algorithms colluding without human involvement is currently less clear.

In compiling the research, the CMA examined a wide range of literature and gathered information from firms offering legal price setting services. It also conducted online mystery shopping tests across various websites.

The research increases the regulator’s expertise at a time of widespread scrutiny of pricing algorithms and how they interact with competition law. It 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?

The findings will now be used to inform work across the CMA’s portfolio, as it continues to expand its expertise in the digital sector.