Big Brother snooping likely to be outlawed under a new Consumer Bill of Rights, expected 2013

The OFT will take a closer look at so-called 'personal pricing' activities by on-line retailers

The credit crunch combined with weakness in high street sales has accelerated and energised the growth of on-line retail activities to record levels. By 2020, around 40 per cent of all consumer purchases are likely to be made on-line. As a result, many brand owners are now focusing the bulk of their sales and marketing efforts on customer acquisition and retention through the use of sophisticated tools that track on-line consumer behaviour.

According to research conducted by TRUSTe, although 76 per cent of UK consumers expect websites to get their permission before tracking behaviour on-line, just 12 per cent of the top 50 UK web sites have taken steps to comply with the EU Cookie Directive that came into force in May 2011.

Danilo Labovic, EU managing director for TRUSTe observes: “Our research shows there’s a significant gap between consumer expectations and the experience provided by most companies. The majority of EU consumers are highly knowledgeable about internet cookies and are aware of the pay-off between online targeting from advertisers and receiving free online services, content and games. However, they have high levels of privacy concerns and across the UK, Germany, France and the Netherlands an average 83 per cent of consumers think companies should get their permission before tracking them online.”

A new problem is emerging in that having got the consumer’s permission to use such cookies on their web sites, some brand owners may be using behaviour data to offer more expensive results; effectively inflating prices based on the consumer data they’re collecting.

For example, Orbitz, the travel web site, recently owned up to producing more expensive results for browsers using an Apple product, justifying the tactic on the spurious ground that such consumers prefer more expensive hotels to cheaper ones.

Embarrassingly for TRUSTe, Orbitz proudly displays the TRUSTe logo on its web site as a sign of abiding by the highest ethical standards of conduct – which clearly is questionable given that when the browser history of the user is cleared, the original lower price of the air fare or other product is offered.

Such behaviour hasn’t escaped the attention of the Office of Fair Trading (OFT) which has just launched its own investigation into the extent to which companies are monitoring online shoppers and using data to target them with personalised prices that may not always be in the consumer’s best interests.

Part of the OFT inquiry will examine whether consumers are being treated unfairly in law as a result of the gathering of their data.

The OFT will work with the US Federal Trade Commission (FTC) which has done extensive research in this area and after completing its inquiry will decide whether there are grounds for a more formal review.

Clive Maxwell, CEO, OFT accepts that online innovation is “an important driver of economic growth” but also wants to know how consumer’s data is being used for sales and marketing purposes.

“Our call for information forms part of our on-going commitment to build trust in online shopping so that consumers can be confident that businesses are treating them fairly. We know that businesses use information about individual consumers for marketing purposes. This has some important potential benefits to consumers and firms. But the ways in which data is collected and used is evolving rapidly. It’s important we understand what control shoppers have over their profile and whether firms are using shoppers’ profiles to charge different prices for goods or services. This call for information will help us understand these practices better and to decide whether or not this is an issue on which the OFT needs to take any action,” he said.

It’s highly likely that the Government will want to ban such activity under the forthcoming Consumer Rights Bill that will implement the EU Consumer Rights Directive, which at its heart intends to provide confidence to consumers about making purchases within Europe, particularly online, and from businesses in other European countries outside of the UK.

Further, the Government has signalled its intention to merge all existing UK consumer protection laws and regulations together with the requirements of the finalised EU Consumer Rights Directive under a single new Consumer Bill of Rights, expected in 2013.

As a consequence, such changes will require a radical readjustment to the many ways that brand owners like Orbitz and others, such as airlines, operate.

Meanwhile, the OFT will be gathering information over the next six months and is expected to publish its findings in Spring 2013, ahead of any reform of the existing patchwork of consumer protection laws.

Ardi Kolah is author of Essential Law for Marketers 2nd edition (£19.99) published by Kogan Page in January 2013. Order your copy today on Amazon by clicking on the image.