By Claire West

The OFT is writing to over 60 leading online businesses to ensure they are transparent with consumers about how they collect and use their data.

The letters coincide with publication of the OFT's Personalised Pricing report which looks at how consumers' information, stored in places such as internet cookies, is used by online firms to influence prices.

The report found no evidence that retailers use information collected about individuals to offer higher prices to specific customers - a concern that had been raised. However, many retailers do use consumers' information to shape their pricing or place advertisements relevant to their interests. For example, retailers may offer discounts to those who came to a product via a price comparison website. Overall, such targeted pricing can offer benefits to customers, according to the report.

Despite this, the OFT has found that many consumers are uneasy with the range of personal information collected about them and the selling of this information to third parties - and also have little understanding of how online businesses get or use their information or of the steps they can take to protect their privacy.

Many of the websites examined by the OFT during the research did not make it clear what information they collected about consumers, how it would be used or how users of their websites could opt out of data collection. Others did not allow access to their pages without forcing users to accept their privacy policy - providing no option to opt-out.

The OFT is concerned this could lead to a loss of trust in traders and their business practices. To address this, the OFT is reminding businesses to:

give consumers accurate, honest and clear details about how they, and third parties, collect and use their information
give consumers a genuine chance to opt-out of non-essential collection and use of their data
make sure their privacy terms and conditions are fair.
In certain cases the OFT or others could take enforcement action against online businesses, where there was evidence of misleading or unfair practices - for example if a website claimed a price was the best available when it was not, or if consumers were misled about the reason information was being collected from them.

The OFT is sharing its findings with the Information Commissioner's Office (ICO). It will work with the ICO to further explore consumer protection and data protection issues related to the collection and use of consumer information.

Clive Maxwell, OFT Chief Executive, said:

'Online retailers have changed forever the way in which we shop, bringing many positive benefits. Our report found no evidence to indicate firms are using personal information to target individuals with higher prices and, indeed, in some cases we found that groups of customers are benefiting from discounts.

'However our study has shown that there is clearly public concern about how personal information, a valuable commodity in online markets, is being collected and used. We are therefore calling on businesses to make sure they are being fully transparent and giving consumers appropriate control.

'Maintaining consumer trust online is important to growth and innovation, and we will consider enforcement action if we see evidence of misleading or unfair practices.'

Simon Entwisle, Director of Operations at the Information Commissioner's Office, said:

'Businesses need to be open about how they're using customers' information. It's clear that using that information in the right way can benefit both parties, but businesses that use data inappropriately risk alienating customers and put themselves in line for enforcement action by the ICO.

'The OFT's work reminds businesses how to get this relationship right, and informs our own guidance on this issue.'

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