Research and analysis

Consumer vulnerability in digital markets: summary of stakeholder roundtable

Updated 13 November 2018

On 23 May 2018 the Competition and Markets Authority (CMA) and Citizens Advice jointly hosted a roundtable discussion focused on the challenges and opportunities for vulnerable consumers in relation to data and digital market developments. This roundtable was part of the CMA’s work on consumer vulnerability.

The roundtable comprised presentations from Citizens Advice and the CMA. Representatives of government departments, regulators, consumer bodies, charities, think tanks and business attended (full list of organisations). The roundtable was held under Chatham House rules.

The remainder of this summary sets out key points from the presentations and some of the issues raised by attendees during plenary and group discussions.

Understanding the challenges

Speakers’ presentations

Representatives from Citizens Advice presented on findings from their research into personalised pricing, as set out in the report ‘A Price of One’s Own? An investigation into personalised pricing in essential markets.’

Citizens Advice’s research concluded that personalised pricing is not yet widespread in essential services markets, with many firms yet to collect and invest in the level of data analysis required to personalise pricing. This could quickly change, particularly in markets where there is considerable access to consumer data and relative freedom to set prices, such as the energy and telecoms sectors. The research identified certain consumer protections that should be retained, such as price controls, as well as calling for regulators to better monitor pricing strategies and consumer outcomes in markets where personalised pricing is most likely to emerge.

The CMA presented its relevant work and analysis in this area. It highlighted how the Office of Fair Trading had previously found limited evidence of personalised pricing in 2013. These past findings were consistent with the Citizens Advice research and other recent evidence gathering exercises.

The CMA highlighted how digital markets present both opportunities for helping consumers overcome vulnerability and risks of creating new forms of vulnerability. In so doing, the CMA focused on three specific areas: engagement and exclusion; new practices in digital markets; and consumer data.

Recent CMA market investigations have identified a lack of consumer engagement in markets as a significant problem. In the energy market, low levels of engagement were correlated with markers of vulnerability, such as low income, low levels of education, disability, being a single parent and living in social housing.

The CMA’s banking and energy market investigations came up with a wide range of remedies but a subset focused on using digital tools to help customers engage. For the energy market, the CMA introduced measures to enhance the role of third party intermediaries (including price comparison websites and intermediaries that help with switching such as Flipper).

In the retail banking sector, the CMA has introduced Open Banking, enabling consumers to share financial transaction data with third parties to help them find better deals. Open Banking also has the potential to help vulnerable consumers, including offering opportunities for users to grant permission to family members for support in managing their finances.

Those who are offline without access to the internet are more likely to have difficulty engaging in markets and more likely to be in vulnerable circumstances. Such consumers can still be helped through the use of digital tools. The effective use of consumer data by trusted intermediaries was recently demonstrated by the CMA’s remedy of an Ofgem-controlled database to target disengaged energy customers via use of letters. Trials of this remedy had resulted in many customers switching supplier.

In relation to new practices in digital markets and data, the CMA reflected on recent cases where action had been taken to tackle specific digital practices that had exacerbated and/or caused new forms of vulnerability. The CMA said the use of consumer data is a ‘live’ policy question, particularly given the power of data to help overcome consumer vulnerability and the recent implementation of the General Data Protection Regulation (GDPR). In this context, there remain questions and broader debate around whether additional regulatory intervention may be required alongside existing consumer enforcement powers.

Group and plenary discussions

During group and plenary discussions, the following points were raised about the challenges facing consumers in digital markets.

• Price discrimination is not new but more sophisticated use of consumer data has potential to take it further as a pricing strategy.

• While a lot of price discrimination may be taking place across markets (including in the broadest sense via ‘loyalty penalties’ (consumers not switching supplier are paying higher prices)), there is little evidence of first degree personalised pricing based on the use of consumer data to assess variations in customers’ willingness to pay.

• There are concerns about an increasing asymmetry of power in some digital markets and a need to understand consumer behaviour as part of any attempts to rebalance power.

• There was recognition that consumer vulnerability can fluctuate over time with the challenges and risks arising from digital markets depending on the nature of the vulnerability in question. People in vulnerable situations or with vulnerable characteristics may not consider themselves vulnerable and/or be reluctant to self-identify and register for priority services.

• There are concerns about the growing levels of digital exclusion and the proliferation of data exchange or data sale between companies for use in targeting offers and auxiliary services to certain customers.

• It was suggested that the growing ‘algorithmic world’ poses transparency challenges. Relying on increased consumer engagement is likely to be insufficient. It may not be enough simply to give consumers more data and expect them to be active, given that many consumers are time poor. It is important to consider consumers’ incentives to engage.

• Some broader challenges were raised around ‘loyalty penalties’. There are likely to be challenges in targeting both consumer inertia and their ‘loyalty’ to certain providers, especially in relation to certain vulnerable groups.

Developing solutions and remedies

Group and plenary discussions

During group and plenary discussions, the following points were raised about developing solutions to address the challenges for consumers in digital markets.

• Developing solutions in this area was at an early stage in the policy cycle because there was little evidence of personalised pricing in digital markets and little public concern about it. There was a need to consider consumer journeys in granular detail to understand where detriment could arise.

• Attempts to develop good solutions in digital markets should not necessarily target vulnerable consumers specifically but should aim to help all consumers, and help vulnerable consumers even more. There should also be greater awareness raising of existing innovative solutions in markets.

• There is a key role for government and regulators in joining up to help share data on vulnerable consumers. There was support for recent developments in energy and retail banking markets, including for the CMA remedy for an Ofgem-controlled database of disengaged customers who could be targeted to switch to cheaper tariffs.

• There were some calls for a state-sponsored price comparison website (PCW). This could be linked to other state services for vulnerable people, including for those people in receipt of Universal Credit.

• There is a role for regulators in helping incentivise firms to improve the quality of their data. There were calls for greater transparency by firms when using consumer data, with firms having to meaningfully disclose what prices are based on in real time and ensuring that data is used in consumer interests.

• The onus should be placed on businesses to measure and justify market outcomes, keeping in mind protected characteristics as set out in existing equalities legislation.

• There should be requirements on firms around transparency to explain in clear ways how information is used to generate pricing for customers. There should also be analysis of algorithmic outcomes to ensure that groups of customers with protected characteristics are not worse off as a result.

• Digital developments have potential to help vulnerable consumers. For example, they can facilitate third party support/access e.g. apps that grant permission to allow a family member/carer to act on someone’s behalf. Trusted intermediaries will also be important in developing solutions. They could make things easier for customers in digital markets e.g. in Northern Ireland, there is the Prompt/Protect initiative. Alongside these developments, there is scope for more collective switching mechanisms. These are another example of ‘concierge services’ that can act on the behalf of consumers.

It is timely to be considering the nature and workings of the data economy to build trust and drive better outcomes for consumers. The infrastructure around data sharing and tools that enable trusted data sharing are likely to be important issues, as well as considering whether further legislation and/or changes to the regulatory architecture are needed. There may be a need to extend the remit of the Information Commissioner’s Office (ICO) or develop new regulatory bodies relating to consumer data.

Organisations which attended the roundtable

• Advertising Standards Authority (ASA)
• Department for Digital, Culture, Media and Sport (DCMS)
• Department for Business, Energy and Industrial Strategy (BEIS)
• Which?
• Ofgem
• Citizens Advice
• Financial Conduct Authority (FCA)
• Financial Services Consumer Panel
• Dot Everyone
• Essential Services Access Network
• Ofcom
• Money and Mental Health Policy Institute
• Money Saving Expert
• No.10
• Nuffield Foundation
• Behavioural Insights Team
• Frontier Economics
• Social Market Foundation
• HM Treasury
• Department for Environment, Food & Rural Affairs (DEFRA)
• Starling Bank
• CreditKudos
• Open Banking Working Group
• Age UK
• Tech UK
• Utility Regulator Northern Ireland (Uregni)