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Grocers must be mindful of price-setting software | The Grocer

The use of price optimisation software, often relied on by online retailers to make sure their prices are not being undercut by competitors, is coming under more scrutiny than ever.

In a report released this month, an independent panel that advises the German government on competition law and policy-making called for stricter surveillance of online markets (such as the grocery and convenience sector) that make use of algorithm-based pricing. Its concern is that consumers could be exposed to higher prices as a result. The UK competition authority has also established a digital team to keep pace with the use of algorithms and big data.

Price-setting software works by analysing market data, and enables companies to see changes in competitors’ pricing instantly, allowing them to react by altering their own strategies.

A European Commission investigation found that two thirds of retailers who track their competitors’ prices use automatic systems, and some also use such tools to automatically adjust their prices. Logically, if a tool is initiating price changes in a fast-moving market, it may be possible for it to be providing the same pricing instructions to multiple firms.

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Grocers must be mindful of price-setting software.