Online Shopping Prices May Be Manipulated
Mysterious algorithms could harm online shoppers by aiding collusion according to a newly-published paper. Because the effects are personalized, it could be tricky to prove wrongdoing.
The claims come in a researched paper published by the United Kingdom's Competition & Markets Authority, which has a similar role to the Federal Trade Commission. It's now launched a consultation to see if and how competition laws need to change to keep up with modern technology. (Source: gov.uk)
The paper notes that one of the biggest problems with assessing such algorithms is that they affect individuals in a personalized way. That makes it difficult to spot patterns of behavior or detect the specific harm caused to individual customers.
Users May Get Unique Price
According to the paper, algorithms could have two main harmful effects: misleading or unduly influencing individuals, and reducing competition to the detriment of consumers.
The effects on individuals can vary from manipulative to outright deceitful. For example, an online shopping site might claim to show results in order of relevance to a search but actually favor its own brands over those which it sells on behalf of other businesses.
Other algorithms could create and display a specific price designed to maximize revenue from a particular customer (for example: as high as possible without deterring a purchase) while giving the impression this was a standard price. At the most extreme, sites could manipulate emotions by making false claims about an offer being time-limited or stock being limited. (Source: bbc.co.uk)
Collusion Could Be Automated
More widely, the paper suggests algorithms could make collusion between companies easier but detection harder. This could be explicit with businesses harnessing data from "rivals" to match prices rather than engage in a price war.
It could also be unintentional with algorithms from competing firms each being set to find the most profitable price and influencing one another in a way that means prices get "locked in" at an artificially high rate.
What's Your Opinion?
Do you worry about algorithms in online shopping? Should this be a matter for competition regulators? Does it matter if pricing or stock information is misleading or manipulative so long as the customer is happy to pay a particular amount?
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Comments
online shopping
As everywhere else Buyer beware, search for the exact item in different places before buying. Maybe cheaper....
how to screw the consumer
I'm not surprised.
What's next? Reading the
What's next? Reading the cookies to determine sites you visit, evaluate the 'class' of those sites, then give you price based on what they think you can afford?
How does that work for other discriminating factors? Political affiliations?
Isn't this what already happens in brick-and-mortar?
Isn't this what happens in the brick-and-mortar stores? the high-priced items are placed on the lower shelves because it has been proven to be easier to pick from the close-to-the-floor shelf for the consumer. The corner gas station sees his/her competitor selling at $2.25 and lowers his price to $2.24 with a very small "cash only" sign.
It is called marketing because that is its purpose - to drive the market. There is no advantage to the seller to attempt to sell at the lowest possible price other than goodwill, which only lasts until the customer finds an even LOWER price. Brand loyalty very often makes way for price loyalty.
As for adjusting pricing for the customer's income level(or spending level if you prefer), THAT also has been going on in the brick-and-mortar world for quite a long time. If you shop on Rodeo Drive, you WILL pay a higher price. That doen't mean you purchased a "better" product, just a higher-priced product.