SOURCE: BBC

Algorithms used by online marketplaces could lead to a rise in prices of goods and services, the UK’s competitions watchdog has warned.

The Competition and Markets Authority (CMA) is investigating businesses which use technology on selling platforms.

Shoppers could be "manipulated" into buying specific items, as search results favour certain brands, it said.

Consumers may also be shown misleading messages on these websites, suggesting items are in short supply.

Collusion between businesses on consumer spending and browsing data could lead to “sustained higher prices for products and services”, the CMA said.

Kate Brand, its director of data science, added: “Algorithms play an important role online but, if not used responsibly, can potentially do a tremendous amount of harm to consumers and businesses.

“Assessing this harm is the first step towards being able to ensure consumers are protected, and complements our wider work in digital markets to promote greater competition and innovation online.”

'Personalised pricing'

The effect of algorithms can be difficult for shoppers to detect, the regulator warned, adding that websites could use “nudges” including the location of a “buy” button or generating “personalised pricing”.

Online platforms might also have misleading messages which suggest a product is in short supply, the CMA added.

Another issue it wants to scrutinise is how firms can use algorithms to manipulate online review scores.

But the CMA accepted that this technology can also bring benefits, by suggesting products or services in which consumers are more likely to be interested.

It has now asked for contributions from academics and industry experts to aid the investigation.

“The majority of algorithms used by private firms online are currently subject to little or no regulatory oversight, and the research concludes that more monitoring and action is required by regulators,” the CMA said in a statement.

Rocio Concha, director of policy and advocacy at consumer group Which?, said “pressure-selling tactics” or the use of fake reviews can be harmful to customers.

“Algorithms can help consumers find suitable products and services as well as good deals, but can also be used to track and monitor behaviours in ways they are unaware of, leading to them being manipulated or misled – either accidentally or by design," she added.