by Jeremy Kirk

UK investigates online advertising

Oct 15, 2009
GovernmentIT LeadershipIT Strategy

The UK’s competition authority launched two studies on Thursday that will probe behavioural advertising pricing strategies, and if some pricing practices could potentially mislead consumers.

The aim of the studies is to give the Office of Fair Trading (OFT) a view of how pricing strategies and techniques are changing in e-commerce, the agency said.

The first study, due to be completed next spring, will look at behavioral advertising and customised pricing, where the prices fluctuate depending on information about a person’s internet use.

Behavioral advertising has proved controversial. It can involve observing what websites a person visits, keywords they use in search engines, as well as how long they stay on certain websites or approximately where the consumer is located. Privacy advocates have roundly criticised the systems, even if the data is anonymised.

The other study will investigate deceptive pricing practices. It includes practices such as “baiting,” where some products are discounted but there are too few quantities. Consumers may then end up buying a more expensive product or are pushed into upgrading a product at a higher cost. The OFT said “potential representatives” of the practice include travel websites and airlines, consumer electronics retailers and clothes websites.

It will also look at “drip” pricing, where a consumer only sees an element of the price initially but then is forced to buy more options, a sort of drip effect. OFT said potential representatives of this practice include insurers, airlines and car rental businesses. The study should be done by next summer.

The OFT could take several actions following the studies, including taking enforcement action against companies violating consumer law or making recommendations to regulators.

In August, the OFT said it needed to keep up to date on internet advertising practices and if there’s a potential that certain types of advertising are bad for consumers. At the time, it launched a consultation on what areas of online advertising it should study, leading to Thursday’s announcement.