Personalised pricing involves online customers being charged different prices for items such as holidays, cars and household goods based on the information supplied and the journey they’ve taken to land on a particular page.

As a result, the government, along with the Competition and Markets Authority (CMA) will look at the extent retailers use customers’ personal data, such as their address, marital status, birthday and travel history to tailor prices.

The research will also look at how businesses apply personalised pricing to search engines, apps or comparison tools and whether this practice is preventing customers from getting the best deals.

Business Secretary Greg Clark, said: “Ensuring markets work fairly and in the interests of consumers is a cornerstone of our modern Industrial Strategy, and I am proud to say that our consumer protection regime is among the strongest in the world.

“UK businesses are leading the way in harnessing the power of new technologies and new ways of doing business, benefiting consumers and helping them save money. But we are clear that companies should not be abusing this technology and customer data to treat consumers, particularly vulnerable ones, unfairly.

“The research we are undertaking will help us better understand how we can ensure businesses work in a way that is fair to consumers.”

‘This is unacceptable’

Gillian Guy, chief executive of Citizens Advice, said:”The explosion in the amount of available personal data gives companies the temptation to tailor prices and charge customers more based on their personal details and behaviour.

“Our evidence points to the fact that most people wouldn’t trust their essential service provider if they were setting prices differently for certain people.

“We launched our super-complaint in September because companies already target people for their loyalty – and personalised pricing could make this easier to do.

“This inquiry gives the government the chance to make clear this is unacceptable and protect vulnerable people in particular from companies who use personal data to exploit customers.”