The Competition and Markets Authority (CMA) is investigating how algorithms can reduce competition in digital markets and harm consumers if they are misused.

The authority is gathering information from academics and industry experts on the potential harms to competition and consumers caused by the deliberate or unintended misuse of algorithms.

The research 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.

The CMA said 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.”

It gave misleading messages which suggest a product is in short supply as an example of one of the ways algorithms are misused.

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

According to the CMA, currently the majority of algorithms used by private firms are subject to little or no regulatory oversight.

It said that more monitoring and action is required by regulators, including itself.

“Algorithms play an important role online but, if not used responsibly, can potentially do a tremendous amount of harm to consumers and businesses. Assessing this harm is the first step towards being able to ensure consumers are protected and complements our wider work in digital markets to promote greater competition and innovation online,” said Kate Brand, director of data science. “We want to receive as much information as possible from stakeholders in academia, the competition community, firms, civil society and third sector organisations in order to understand where the harm is occurring and what the most effective regulatory approach is to protect consumers in the future.”

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