The Office of Fair Trading (OFT) is exploring the extent to which online retailers are monitoring online shoppers and using the data they collect to target consumers with personalised prices for goods and services. 

The OFT is concerned that traders are using data, such as browsing history, information on previous purchases, demographic information and even data on a consumer's hardware to change the prices offered to individual consumers and is looking to investigate whether this is leading to consumers being treated unfairly.

Personalised pricing is a form of targeted advertising based on a consumer's behaviour which works using small 'cookie' files which are placed on a consumer's computer and are used to track the pages a user visits on the site or on sites which are members of the same advertising network.

The OFT is particularly concerned that the practice of personalised pricing is in breach of consumer protection and data law. The OFT and Information Commissioner's Office (ICO) believe that the consumer data being monitored is personal data, so the Data Protection Act 1998 (DPA) will apply. Under the DPA, all personal data must be processed fairly and be processed only for specified and lawful purposes. Businesses must inform consumers about such data collection, keep data secure, and must only use the data in a way that is fair and lawful.

The ICO is already reviewing the use of personalised pricing cookies in the context of the Privacy and Electronic Communications (EC Directive) Regulations 2002. Guidance from the ICO currently recommends that where a website is using its customers' personal data to offer targeted pricing, this must be explained to customers in the website's privacy policy.

The OFT will publish its report setting out the outcomes of their call for information in spring 2013. If it is found that the use of customer data to personalise prices is having a detrimental affect, the OFT will consider enforcement action against those businesses found to be breaching the law.