HomeInsightsCompetition and Markets Authority publishes research on algorithms and how they can reduce competition in digital markets and harm consumers if misused

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The CMA notes that many online activities and the markets that underpin them could not exist without algorithms, often in the form of artificial intelligence. These have enabled considerable gains in efficiency and effectiveness, it says, but they can also negatively impact consumers in various ways. The CMA research finds that algorithms can be used to personalise services in ways that are difficult to detect, leading to search results that can be manipulated to reduce choice or artificially change consumers’ perceptions. An example of this is misleading messages which suggest a product is in short supply.

Companies can also use algorithms to change the way they rank products on websites, preferencing their own products and excluding competitors. More complex algorithms could aid collusion between businesses without firms directly sharing information. This could lead to sustained higher prices for products and services.

The majority of algorithms used by private firms online are currently subject to little or no regulatory oversight and the research concludes that more monitoring and action is required by regulators, including the CMA.

The CMA is also now seeking evidence from academics and industry experts on the potential harms to competition and consumers caused by the deliberate or unintended misuse of algorithms (see item below). It is also looking for intelligence on specific issues with particular firms that the CMA could examine and consider for future action. The research and feedback will inform the CMA’s future work in digital markets, including its programme on analysing algorithms and the operation of the new Digital Markets Unit (DMU), and the brand-new regulatory regime that the DMU will oversee.

This work is being led by the CMA’s Data, Technology and Analytics (DaTA) unit. As well as informing the work of the DMU, the CMA says that DaTA will also play a key role in supporting the Digital Markets Strategy to protect consumers in dynamic markets online. The CMA says that it intends to work closely with the ICO and Ofcom, through the Digital Regulation Cooperation Forum, in taking this work forward. To read the CMA’s press release in full and for a link to the research paper, click here.