European Commission Will Tackle Differential Web Pricing

The European Commission will investigate and take action to stop online traders from charging consumers different prices based on an analysis of their web surfing habits or location. It said it would produce guidelines for retailers by the end of the year.

Some online retailers engage in user profiling and charge consumers different prices depending on their location or other information they glean from the user's web activity, such as the last website they visited.

The Commission has said that this practice undermines e-commerce and said that it will investigate the issue.

"To boost confidence in online trading, the problems regarding the collection of commercial data and its use to profile and target consumers will be analyzed in a stakeholders forum," said a Commission statement.

The Commission carried out 11,000 test purchases to help it assess the state of cross border e-commerce. It found that 60% of cross border internet shopping orders are refused by retailers.

A major barrier for some people is that retailers will refuse to sell to them or will charge higher prices based on their assessment of a web user's details, surfing history or location.

The Commission's report on its findings said that they tallied with those of the European Consumer Centres (ECC).

"ECC-Net reports ‘numerous reported instances of apparent discrimination based on the country of residence of the consumer. This can relate to the refusal to sell products to consumers based in a particular country, or the trader offering the same product for sale in different Member States at different prices’," said the Commission's report.

"Cases of refusal to sell, where the internet is the selling method, represent between 1% and 2% of cross-border complaints cases handled by the European Consumer Centres," it said. "However, this problem may be largely unreported in terms of official consumer complaints."

The Commission said that its Services Directive, which must become law in EU countries by the end of this year, will help to solve the problem.

"Consumers are still discriminated against on the grounds of their nationality or place of residence when trying to buy online," said the Commission. "This problem is specifically tackled by the Services Directive. Under the Directive, Member States must end such discrimination (but allowing traders to account for 'differences in the conditions of access when those differences are directly justified by objective criteria)."

"The Commission is providing guidance to Member States to ensure that the provision is implemented into national laws by the end of 2009, so that it can be effectively enforced by national authorities and courts. The Commission will closely monitor the correct and full implementation, given its impact on cross-border e-commerce," it said.

The Commission also said that it will publish rules for traders to follow so that details gathered about online shoppers are not used against their interests.

"The Unfair Commercial Practices Directive sets out a single set of rules on legitimate and prohibited commercial practices across the EU," said a Commission statement. "One of its aims is to ensure that consumers can trust the online offers which they see, and that online retailers can market and advertise in a clear and predictable regulatory environment, thanks to a clear set of EU-wide rules as to which sales and marketing techniques are illegal in any circumstances."

"To achieve this goal it is now important to ensure uniform implementation of the Directive across the EU," it said. "The Commission will therefore publish guidelines by the end of 2009, to promote uniform interpretation and application. This will make it easier for serious traders to engage in cross-border practices, in particular online."

The Commission's research indicated that the potential of online trading to deliver efficiencies and market transparency is not being fulfilled.

"We now have concrete facts and figures showing the extent to which the European single market for consumers is just not happening in online retail," said Meglena Kuneva, the EU's Consumer Commissioner. "Online shoppers are still largely confined within national borders. Europe's consumers are being denied better choice and value for money. They deserve better. We must simplify the legal maze that is preventing online traders from offering their goods in other countries."

The UK's consumer regulator the Office of Fair Trading (OFT) last week announced that it would investigate discriminatory pricing and behavioural advertising to see if those practices are cheating consumers.

Struan Robertson, a technology lawyer with Pinsent Masons, said customised pricing could fall foul of the Consumer Protection from Unfair Trading Regulations.

These Regulations have been in force since May 2008. They say that commercial practices will be unfair and illegal if they contravene "the requirements of professional diligence" and are likely to "materially distort the economic behaviour of the average consumer with regard to the product".

"There has never been a case in the UK over customised pricing on the web," said Robertson, "but a view from the OFT on whether or when it falls foul of the Consumer Protection rules will be influential in any future proceedings."