CMA won’t look back in anger over dynamic pricing practices
Dynamic pricing can deliver “good outcomes for consumers”, the UK’s competition watchdog has said, after concluding a probe into the practice sparked by a consumer backlash over soaring prices at Oasis concerts.
The strategy, in which the same products are sold to different consumers at different prices based on levels of demand, attracted furore last year after some Oasis fans complained of having to pay as much as £350 for a concert ticket, some £200 more than what had been originally advertised.
But the Competition and Market Authority’s policy paper into the practice, published on Friday, said dynamic pricing “can be consistent with effective competition and good outcomes for consumers.”
“For businesses, dynamic pricing can help them make better use of their capacity, invest in creating new capacity and improve efficiency,” the CMA said.
“For consumers, if they understand how prices might change and can be flexible then they may be able to take advantage of a better deal, such as by taking a flight at a different time when it’s cheaper.
“As technologies, such as AI, develop so too does the potential for pricing practices like dynamic pricing to become increasingly prevalent and complex.”
The CMA cited the examples of purchasing tickets for a flight or booking a hotel room, for which dynamic pricing can ‘smooth’ demand by signalling, through increased prices at times of higher demand, the relative benefits of different, cheaper options.
“Where such alternatives are available and where sufficient numbers of consumers see these as an acceptable substitute, this can lead to benefits for consumers overall,” the CMA said.
Dynamic or egregious?
But the regulator warned that dynamic pricing can lead to “poorer outcomes in certain circumstances” such as when consumers are confused or concerned because prices change rapidly and they are unsure why, adding it would be particularly concerned over situations where consumers feel pressured to make quick decisions because prices may rise suddenly.
The CMA urged businesses who used dynamic pricing to commit to showing consumers:
- a statement that prices can change and are not static
- an explanation of what makes prices change, for example if prices go up the closer to a booking date the purchase is made, so they can understand when they might be able to get the best price for them
- the range of prices (for example minimum and maximum amounts) so that customers understand whether something could end up being too expensive for them if they wait or whether they want to purchase now or at another time.
The regulator added that it was committed to using its powers to penalise businesses who were using dynamic pricing in a way that it considered “egregious conduct”.