Customers may be being “manipulated or misled” by retailers’ algorithms

Ecommerce

Online retailers’ algorithms are being investigated by the UK competition watchdog over fears customers are being “manipulated or misled” into buying goods.

The Competition and Markets Authority (CMA) has launched a probe into the widespread use of shopping algorithms by online retailers, which it says is almost entirely unregulated.

According to the watchdog, such algorithms “can be manipulated to reduce choice or artificially change consumers’ perceptions” by using tools like “nudges”, “buy” buttons or “personalised pricing”.

It is now asking for evidence from academics and industry experts over how these algorithms could potentially disadvantage consumers, which will be used by its newly formed Digital Markets Unit to better regulate the sector.

READ MORE: Amazon could soon be forced to reveal its closely guarded “source codes and algorithms”

“Algorithms play an important role online but, if not used responsibly, can potentially do a tremendous amount of harm to consumers and businesses,” the CMA’s director of data science Kate Brand said.

“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.

“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 impact of these algorithms can be hard to detect, and while the CMA says they have some benefits for shoppers they can also be used more insidiously.

It added that it was concerned they may be used to influence online review scores, making customers more likely to buy certain items, while more complex algorithms could lead to collusion between businesses without firms directly sharing information.

Consumer watchdog Which?’s director of policy and advocacy added: “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.”

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