OFT investigates online pricing

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The Office of Fair Trading is to run two studies into pricing on the internet. The first will look at the ways in which customers’ online behaviour and personal is monitored and used to create “individually tailored” prices.

The second will look at potentially misleading pricing practices:

  • “drip” pricing, where prices are incremented through the buying process (some airlines should be worried, I think)
  • “baiting” sales, where only a few products are available at an advertised low price; customers lured in by promised low prices are diverted to full-priced items
  • “relatively high reference prices” in comparison to sale price, e.g. “was £50, now £20”. No mention is made of *false* reference prices here, only of a large difference.
  • time-limited offers
  • complex pricing where it’s difficult for the customer to assess an individual price: an example given is “three for two” offers, which doesn’t seem particularly complex – but I have seen much worse, for example retail sites that exclude VAT from their headline prices.

The OFT’s announcement adds that it will investigate price comparison sites that may use some of the practices described above.

The studies are expected to be concluded in spring and summer 2010 respectively. Possible outcomes range from “giving the industry a clean bill of health” to “investigation and enforcement action against companies suspected of breaching consumer law”. Most likely seems something in the middle: internet merchants should probably expect to see at least new guidelines for online pricing, encouraging companies to take voluntary action and probably a new industry code of practice.

OFT press release, via the BBC and the Times.

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