Dynamic Pricing: The CMA takes a closer look

On 13 November 2024, the Competition and Markets Authority (CMA) opened a project to consider the use of dynamic pricing across different sectors of the UK economy. Gathering views from businesses and stakeholders such as regulators and consumer groups, the project will consider:

• the different scenarios where dynamic pricing strategies are being used;
• the commercial and consumer benefits of dynamic pricing strategies; and
• whether dynamic pricing strategies create challenges for consumers and competition.

Note that the project is not a formal investigation, under the CMA's competition or consumer enforcement powers, and it is not a market study or market investigation either. Rather, it is being carried out under the CMA's general review function, in accordance with section 5 of the Enterprise Act 2002.

 

What is dynamic pricing?

Dynamic pricing exists where a business flexes prices according to current market conditions, typically meaning that prices are increased at times of higher demand (but also in principle vice versa).

This is not unlawful. However, businesses wishing to deploy (or which currently deploy) dynamic pricing should bear in mind certain considerations under UK competition and consumer protection laws.

 

What seem to be the CMA's main concerns?

Should a business with substantial market power deploy dynamic pricing in an abusive fashion, for example, in a way that amounted to excessively high pricings, this could constitute an abuse of dominance and so a breach of competition law.

Equally, dynamic pricing could involve some form of anti-competitive agreement, for example if it were to be used to facilitate price-fixing or other anti-competitive coordination between competitors.

There are also consumer protection issues surrounding the use of dynamic pricing. Broadly, the use of dynamic pricing by businesses should be done in a way that is transparent and does not put consumers under undue pressure in short time frames to make purchasing decisions.

 

What can we expect?

The CMA has noted that the project will gather views from various industries, specifically noting the involvement of the travel and leisure sector. It may also extend to other industries where dynamic pricing is used, for example, the sports and entertainment sectors, including its use in ticketing (such as notably the Oasis ticketing saga). Other sectors where dynamic pricing is used include ride sharing services and retail and e-commerce.

There is no formal deadline for the project and possible outcomes include: no further action; a formal investigation such as a market study; or enforcement action using either competition or consumer law powers, were the CMA to consider that it had a basis for suspecting that unlawful conduct had occurred. The CMA may also consider using its new powers under the Digital Markets, Competition and Consumers Act 2024, when in force (likely April 2025).

If you have any questions, or would like to discuss how this may impact your business, please contact one of the authors, who would be happy to assist.