Policy paper

Update: dynamic pricing 

Published 20 June 2025

Dynamic pricing

Dynamic pricing - where prices are adjusted rapidly and frequently in response to demand - is commonly used in a range of sectors across the economy including air travel, hotels, and ride hailing apps. As technologies, such as AI, develop so too does the potential for pricing practices like dynamic pricing to become increasingly prevalent and complex.

We launched a project to better understand how and when dynamic pricing is used across the economy. We have found that dynamic pricing can be consistent with effective competition and good outcomes for consumers. For businesses, dynamic pricing can help them make better use of their capacity, invest in creating new capacity and improve efficiency. For consumers, if they understand how prices might change and can be flexible then they may be able to take advantage of a better deal, such as by taking a flight at a different time when it’s cheaper.

But dynamic pricing can lead to poorer outcomes in certain circumstances, such as when consumers are confused or concerned because prices change rapidly and they are unsure why. The CMA is more likely to be concerned when:

• consumers are unaware that dynamic pricing is being used or how it may affect prices so cannot make informed
• consumers feel pressured to make quick decisions because prices may rise suddenly
• vulnerable consumers are particularly disadvantaged such that they pay higher prices than others
• dynamic pricing is used to obtain or maintain market power  or reduce new entry in a market, which results in higher prices, lower output and harm to consumers, businesses and the UK economy

To help businesses use dynamic pricing in a way that secures its benefits but maintains the trust and confidence of customers we have set out practical steps they can follow. These steps will also help businesses stay on the right side of the law.

We will continue to actively review pricing practices and will use our new toolkit – including the ability to make decisions about consumer law and impose fines – to act when we see egregious conduct that could harm consumers, fair dealing businesses and the UK economy.

Clear and accurate pricing information is vital for consumers. Without it they cannot identify the best deals, effectively shop around or have trust and confidence in what they see. Without consumer trust and confidence, markets cannot function effectively. Reflecting this, we have undertaken a range of work over recent years, across a wide range of sectors, to support businesses to comply with consumer law when they are presenting prices to customers, and we have acted when we have seen poor corporate practice across a range of sectors including holidays, wills, online mattresses and IVF.

We launched a project to consider how one pricing practice - dynamic pricing - is being used across different sectors of the economy. This reflected considerable public interest and the increasing potential for it to become more prevalent and sophisticated with the development of AI and other digital tools. The project – the current findings of which are set out in this update – is not an enforcement investigation and has not been taken forward with the objective of identifying breaches of competition or consumer protection law.^{[footnote 1]} Rather, it is intended to:

• support the CMA, government and wider stakeholders’ understanding of dynamic pricing, and how it can affect consumer outcomes 
• help businesses by highlighting how transparency around dynamic pricing can help to support consumer trust, confidence and engagement
• inform wider consideration by policymakers of the issues associated with dynamic pricing

To inform our work, we have spoken to businesses in relevant sectors, academics, regulators, trade groups and consumer bodies to gather information on how and why businesses use dynamic pricing, and its impact on consumers. We have also reviewed the academic literature on dynamic pricing. We are grateful to all stakeholders for their constructive engagement with our work, noting that they did so on a voluntary basis. 

This update summarises our key conclusions.  

What is dynamic pricing, and how is it done? 

The term ‘dynamic pricing’ does not have a commonly-agreed definition. For the purposes of this project, we have taken it to refer to situations where firms adjust prices rapidly and frequently in response to changing demand conditions. We have taken the motivation for adjusting prices, combined with the speed and frequency of adjustment, to be the defining features of dynamic pricing.  

Businesses in sectors such as passenger air travel, passenger rail, ride hailing and hotels frequently adopt pricing practices that are consistent with our definition of dynamic pricing. Some businesses in the live events sector are increasingly using dynamic pricing.^{[footnote 2]} Our engagement with business has therefore focused on these sectors. 

Why and how do businesses use dynamic pricing? 

Dynamic pricing is often seen in markets where supply cannot quickly adjust to meet demand, and where the product itself is ‘perishable’, and loses its value after a certain point in time (for example, a seat on a particular flight). In these circumstances, dynamic pricing can enable businesses to make better use of their capacity, invest in new capacity, improve efficiency and maximise profits. 

The way in which dynamic pricing is implemented varies between businesses and sectors. For example, it may involve: 

• a greater or lesser degree of automation, although most businesses we spoke to had at least some element of manual oversight
• smaller or larger adjustments between different price points
• the ‘reservation’ or ‘locking-in’ of initially-advertised prices during the purchasing process, or alternatively the potential for prices to change up to the time of checkout
• the presence or otherwise of checks and balances to prevent prices rising very steeply and/or to very high levels (for example price ‘caps’, or triggers for manual oversight)

Most of the businesses we engaged with do not expressly tell consumers that they use dynamic pricing or how they set their prices. The price a consumer faces under dynamic pricing generally reflects actual demand (for example based on live/current bookings), remaining capacity, and the time until the date of an intended booking or purchase (in relevant sectors). In some sectors (for example air travel), dynamic pricing often forms part of a broader ‘revenue management’ strategy, where prices can also reflect factors beyond demand and supply conditions, such as competitors’ prices. 

How does dynamic pricing affect competition and consumer outcomes? 

The effects of dynamic pricing on competition and consumers depend on the features of the market in which it is used, and the way in which it is implemented. 

Markets work well when consumers have the trust, confidence and the information necessary to identify and select deals that best meet their needs, and when businesses compete vigorously to meet those needs. If dynamic pricing influences those conditions, it can affect competition and consumer outcomes.  

Dynamic pricing can be consistent with effective competition and good consumer outcomes. But it can also lead to poorer customer outcomes in certain circumstances.  We have identified the following features which affect likely consumer outcomes: 

• whether a significant proportion of consumers are able and willing to ‘flex’ their demand. Dynamic pricing can ‘smooth’ demand by signalling, through increased prices at times of higher demand, the relative benefits of different, cheaper options. Where such alternatives are available (for example, a hotel room or a flight at a different point in time), and where sufficient numbers of consumers see these as an acceptable substitute, this can lead to benefits for consumers overall. These circumstances often arise in, for example, passenger transport markets. Conversely, in other contexts – such as a one-off live event – most consumers will see few viable alternatives; and so, relative to a uniform price, dynamic pricing is more likely to lead to higher revenue for sellers, with little corresponding benefit for consumers
• whether consumers understand that dynamic pricing is in operation, and how prices might vary according to the time of purchase. Awareness about the use of dynamic pricing, the rationale for price fluctuations, and how prices might change over time helps consumers plan their expenditure. This enables those that are willing to ‘flex’ their demand to take advantage of better deals and gives those that are unwilling or unable to ‘flex’ their demand a higher chance of being able to purchase the product (because others have flexed away to secure a better deal)  
• whether consumers are prevented from being able to make good choices by complexity or pressure that might arise from dynamic pricing practices. To make good choices, consumers need to be able to identify the available options, evaluate how well each would meet their needs, and select the one which best suits them. In certain situations consumers might struggle to do this, even where they are aware that dynamic pricing is being used. This might be because the different ways businesses in a market use dynamic pricing makes it difficult to compare different offers; or because consumers feel pressured into making snap decisions by concerns that prices will rise quickly, including during the booking process. Complexity and pressure can be aggravated or mitigated by the use of online choice architecture  
• whether dynamic pricing takes place in a competitive market. Businesses generally benefit from dynamic pricing because it allows them to set prices closer to consumers’ willingness to pay, and make more efficient use of their supply capacity (for example reducing the number of empty seats or hotel rooms). These benefits are more likely to be passed on to consumers (in the form of lower prices and investment in, for example, new capacity) where there is effective competition. In a competitive market, the ability to price dynamically also, in principle, increases opportunities for price competition between firms and may facilitate new entry
• whether particular groups (for example vulnerable consumers) are (systematically) disadvantaged by the operation of dynamic pricing. By its nature, dynamic pricing means that some consumers (for example, those who need to travel at short notice) pay more for essentially the same good or service than others (for example, those who can plan ahead). Where people with certain characteristics – for example, those on low incomes, or those with lower digital literacy – tend to pay higher prices than others under dynamic pricing, this may generate consumer policy or broader public policy concerns
• whether dynamic pricing stimulates additional supply during high-demand periods. Although many sectors use dynamic pricing to manage demand because their supply is inflexible in the short run, this is not always the case. In circumstances where supply can be more flexible, the signals sent by dynamic prices can lead to additional supply that would not otherwise be available under a uniform pricing model, which benefits consumers. For example, in the ride hailing sector, fare increases at times of high demand may encourage more drivers onto the road

The CMA is therefore more likely to be concerned about the use of dynamic pricing when: 

• consumers are unaware that dynamic pricing is being used or how it may affect prices so cannot make informed choices 
• consumers feel pressured to make quick decisions because prices may rise suddenly 
• vulnerable consumers are particularly disadvantaged such that they pay higher prices than others 
• dynamic pricing is used to obtain or maintain market power or reduce new entry in a market, which results in higher prices, lower output and harm to consumers, businesses and the UK economy 

Considerations for businesses

We have set out some tips for businesses that use dynamic pricing that can help them stay on the right side of the law and do the right thing by their customers.  

What does consumer law say about dynamic pricing? And what does that mean for businesses? 

Consumer law does not generally prohibit particular pricing or commercial strategies and dynamic pricing is no exception. However, it is relevant to how businesses implement a dynamic pricing strategy, and how they communicate with consumers about prices.   

Businesses are required by consumer law to provide consumers with all the material information they need to make informed transactional decisions. Misleading consumers whether through giving them false or misleading information about a pricing strategy or failing to give them information they need to take an informed decision is prohibited under the provisions in the Digital Markets, Competition and Consumer Act 2024 (DMCC Act). Sanctions include the possibility of fines of up to 10% of global turnover. By helping to support an environment where consumers can make good decisions, including in markets where dynamic pricing is being used, consumer law contributes to the conditions set out in paragraphs above. 

This project has not sought to provide exhaustive guidance on how consumer law might apply to all possible forms of dynamic pricing. Businesses must consider in the context of their own pricing model and interactions with consumers what information consumers need to take an informed transactional decision.  

Information about how a pricing model works will be material information if the average consumer needs it to take an informed transactional decision. In other words, if a consumer cannot make an informed decision about whether to buy a product or use a service without knowing how the pricing model works, then the businesses should give people that information.   

Whilst the exact information a consumer will need will depend on the circumstances and the pricing model being used, we think the following types of information could be material information that consumers need:  

• a statement that prices can change and are not static
• an explanation of what makes prices change, for example if prices go up the closer to a booking date the purchase is made, so they can understand when they might be able to get the best price for them
• the range of prices (for example minimum and maximum amounts) so that customers understand whether something could end up being too expensive for them if they wait or whether they want to purchase now or at another time

Not all of this information will be needed in every instance of dynamic pricing and this is not an exhaustive list of information that consumers might need.  

In addition to the rules that prohibit misleading consumers by what you do or don’t say, consumer law requires that where a business makes an ‘Invitation to Purchase’ it must provide consumers with the ‘total price’ that they will pay. If the price in the ‘Invitation to Purchase’ is different to the price the consumer actually has to pay, then this may infringe the law, for example, changing the price of a product after it has been added to an online shopping basket and the consumer has clicked through to the checkout page to pay. This could also be a misleading action. 

The CMA has set out that where it identifies egregious conduct which represents clear infringements of consumer law – for example providing objectively false pricing information to consumers or aggressive sales practices that prey on consumers in vulnerable positions – it is committed to using its enforcement powers under the Digital Markets, Competition and Consumers Act to bring any ongoing harm to an end, and to secure redress for consumers where appropriate. 

Of course, as well as ensuring legal compliance, it is also in the interests of fair dealing businesses to build trust and confidence in their pricing practices, and help consumers make good decisions. We have identified good practice through which businesses can help support customers to make good decisions, help support their trust and confidence and lead to better outcomes for people, businesses and the UK economy.

Is change needed to law or policy in response to dynamic pricing? 

The government has recently introduced a new enforcement regime under the DMCC Act which gives the CMA the ability to decide when consumer law has been infringed and impose fines for poor corporate practice of up to 10% of worldwide turnover. Clear and accurate pricing is crucial for consumers’ trust and confidence, so we will continue to actively review pricing practices and use our new toolkit to act when we see egregious conduct. We will also advise the government if we think there are any gaps in current consumer protection law that do not provide adequate protection for consumers and fair dealing businesses. 

Whilst consumer protection law can be used to tackle harms arising from dynamic pricing wherever they occur in the economy, there are instances where the impact of dynamic pricing on consumers and businesses is dependent on the features of particular sectors. That may mean that sector-specific interventions may be the most proportionate and effective way to tackle problems that may arise, rather than changes to wider consumer law. Policymakers considering whether to change the legal framework or policy approach may wish to evaluate how far the circumstances set out above apply in the sectors under consideration. 

1. This work has been carried out under CMA’s general review function in section 5 of the Enterprise Act 2002. ↩

2. The particular pricing practices used by Ticketmaster during the sale of Oasis tickets do not fall into the scope of this definition. This is because Ticketmaster’s prices did not adjust in response to demand conditions; rather, a number of standing tickets were released at one price and, once they had quickly sold out, the remaining standing tickets were released at a much higher price. ↩