As part of an investigation into the way organisations collect and use personal data, the Office of Fair Trading (OFT) has written to more than 60 online companies. The OFT said it would now conduct further work in conjunction with the Information Commissioner’s Office (ICO), the government body which oversees organisations’ use of personal data, on issues regarding consumer protection and data protection.

The OFT acted after it identified concerns with the websites of a number of retail businesses that operate online. Issues identified include:

  • Not clearly      explaining what data will be gathered from the customer
  • Not explaining how      the data will be used
  • Not clearly      setting out how customers can opt out of data collection requirements
  • Forcing      individuals to accept their privacy policy in order to view the site

The OFT has warned that it could take enforcement action against businesses who do not meet its data privacy requirements.

The OFT announced that it had sent these letters at the same time as it released its Personalised Pricing report, which looks at how organisations use customer data in setting prices for goods and services. Personalised pricing involves charging different prices for the same goods or services to different customers, and positive examples of this include discounts for students/senior citizens, online discounts and reduced prices for those booking train tickets early.

This report found no evidence that businesses were using customer data in order to raise prices. The concern was that customers who had indicated they were better off would be charged higher prices – even if a company does not explicitly gather information on income or assets, indications of wealth can still be obtained from postcodes or surveys into personal tastes and hobbies. However, the report did warn businesses to be transparent about their use of personalised pricing, and not to use terms such as ‘best price’ if an individual customer is in fact paying more than others.

Clive Maxwell, OFT Chief Executive, said: “Online retailers have changed forever the way in which we shop, bringing many positive benefits. 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.”

Simon Entwisle, Director of Operations at the ICO, 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.”