Like it or not, dynamic ticket pricing is here to stay - Melanie Martin

The mere mention of dynamic pricing is enough to engage fierce debate and outrage among consumers. The frustration many people experienced recently when trying to get certain concert tickets means everyone now has an opinion – nearly universally negative. But is dynamic pricing really the problem?

Dynamic pricing means online retailers can quickly adapt prices to changes in response to external factors, such as changes in demand, availability of the good or service, and what competitors are doing with their pricing. The volume of real-time data available to companies selling online is unprecedented and pricing algorithms can process this with very little human intervention.

Contrary to general perception, dynamic pricing strategies can benefit consumers. They can mean lower prices at times of low demand to fill capacity. We wouldn’t have low-cost airlines without dynamic pricing. From an economic perspective, they allow companies to price more efficiently. This is, of course, only helpful from a consumer perspective if they have the option of buying at a different time, taking a different route or buying from a different supplier, and feel they have some control of the purchasing process.

Melanie Martin is a Partner, Dentons (picture: Graham Clark)

So, why did one concert tour unite the nation against the practice?

If a supplier has a fixed quantity of tickets for a one-off event and very high demand, prices will only go in one direction as availability reduces. To the consumer, this seems unfair, as they have limited alternative options. They are unable (or it is made very difficult) to switch to another seller (if there is one). It seems to have been the final straw for fed-up consumers.

Should regulators be doing more to curb the practice and protect consumers?

There is nothing inherently illegal about using dynamic pricing, even in the concert ticket scenario described above. However, consumer protection law does impose some obligations on how it is used. Based on these rules, the Competition and Markets Authority is investigating whether Ticketmaster was sufficiently transparent about how dynamic pricing would be deployed in the consumer journey. However, the CMA has outdated powers in this area and, in practice, relies on companies voluntarily agreeing to change their behaviour (otherwise it needs to apply to a court to take action). In April 2025, the CMA will be given wide-ranging new enforcement powers to investigate consumer law breaches, impose orders and fine companies up to 10 per cent of turnover, bringing it into line with competition law.

An investigation under competition law would have been another option for the CMA, but it is not a surprise it has opted to look at this case under consumer law instead. A competition law case against dynamic pricing strategy would be challenging. It would be necessary to show that a company using dynamic pricing was in a position of market power and was abusing that power (or dominance). This would likely mean showing that pricing was excessive (an argument very difficult to prove) as well as being able to attribute pricing decisions to the ticketing platform.

The recent backlash does not mean companies need to stop using dynamic pricing, but the potential for reputational damage and investigation by the CMA should make management stop and think about whether improvements can be made to the way consumers are informed about how it is used. Companies should improve transparency around dynamic pricing now, as the CMA is likely to request demonstrations of the consumer journey once the new powers take effect. Waiting until then could result in serious penalties.

Melanie Martin is a Partner, Dentons