Dynamic Pricing: What’s the Story?

Angelique Bret, Partner and specialist in competition law and consumer protection at Pinsent Masons

Businesses across all sectors have been urged to rethink their approach to dynamic pricing after the practice attracted scrutiny amid Oasis’ reunion tour.

A UK and Ireland tour next summer will mark the first time the band’s two most prominent members, brothers Noel and Liam Gallagher, have performed together since 2009.

Millions of people reportedly tried to buy tickets, with many queuing for hours online to do so. When some fans reached the front of the queue, some of the remaining tickets were being advertised at more than double the price they had been available at earlier in the day.

Some Oasis fans have complained to the Advertising Standards Authority and the UK government has promised to address “issues around transparency and the use of dynamic pricing, including the technology around queuing systems that encourage it” as part of a wider regulatory review.

Dynamic pricing is a practice in which the price of goods or services increases or decreases depending on demand. The Oasis case is an example of how commercial practices can attract public attention and shows how the implementation of dynamic pricing structures can raise competition or consumer law compliance issues.

For some businesses, implementing a flexible pricing strategy that reflects peaks and troughs in demand for their goods and services makes good economic sense. This is a practice often implemented by service providers in the transportation sector, for example.

This option is increasingly being explored by companies that could be described as operating in the entertainment sector – Spanish football club Valencia, for example, recently announced plans to roll out dynamic pricing for tickets to its home matches.

In the UK, implementing a dynamic pricing model is not illegal in itself, but there are legal considerations for businesses that want to implement one. Implementing dynamic pricing structures may result in a risk of non-compliance with competition rules if a business can be considered dominant in its market.

If systems allowing dynamic pricing of a dominant undertaking’s goods or services lead the latter to set prices which could constitute excessive prices, these undertakings could be accused of abusing their dominant position on the market and, consequently, of violating competition law.

There are also UK consumer protection law issues that all businesses deploying dynamic pricing structures need to consider, with rules in place that protect consumers from misleading or unfair commercial practices.

A business practice may be deceptive when it contains false information or presents information in a manner that deceives the average consumer, and the practice causes the average consumer to make a transactional decision that he or she would not otherwise have made.

A business practice may also be misleading if important information is omitted or concealed. The particular circumstances and design of a dynamic pricing practice must be considered in this context.

In the UK, a new law has come into force, but is not yet in force, which will give the Competition and Markets Authority the ability to take enforcement action against companies that breach UK consumer law without having to go to court to do so.