The competition watchdog set its sights on the internet yesterday, announcing an investigation into the murky practice of targeted pricing and advertising and embarking on a separate inquiry into price comparison websites and buy-one-get-one-free offers.

The Office of Fair Trading is examining whether internet retailers are charging customers different prices for the same goods, by gleaning information on search and purchasing histories that allow them to estimate what a shopper will be willing to pay.

Internet experts say that the practice of “price discrimination” is unseen but commonplace. Amazon, the world’s biggest internet retailer, end-ured a storm of customer criticism in 2000 when it was revealed that if shoppers deleted their cookies — the computer files that store information on a user’s internet use — they could obtain a different price.

The OFT will also look at how online retailers vary their advertising and marketing according to a customer’s previous searches and purchases.

Greg Taylor, a research fellow at Oxford University’s Internet Institute, said that companies could extract higher prices from customers by asking them to register for a website — if a customer returns after registration, they have demonstrated “loyalty” that suggests they will pay a premium for the convenience or security.

Dr Taylor added: “When it emerged Amazon was doing this there was a customer backlash, but I don’t know if anything can be done to stop it.”

Joseph Turow, of the University of Pennsylvania, said: “Loyalty may mean higher prices, not lower.”

Professor Turow added that commonly accepted forms of targeted pricing existed outside the internet, such as with OAP concessions and loyalty cards, but could prove more controversial with online shoppers.

Amazon was unavailable for comment.

Separately, the OFT said that it would also begin a market study into price comparison websites and supermarket offers, such as buy-one-get-one-frees — bogofs — and three-for-two offers.

It said that this inquiry would concentrate on the internet but would also investigate pricing practices in traditional stores.

Tactics such as “drip” pricing, whereby consumers are given an initial price only for further costs to be added during the purchasing process, will be scrutinised.

The review, which could result in comparison sites being referred to the Competition Commission or the launch of an industry code of practice, has been prompted by the internet boom and the resulting change in shopping habits, as well as by a recent change in consumer protection laws.

Price comparison sites have been criticised for failing to provide accurate and unbiased comparisons.

Consumer Focus, the lobby group, has suggested the introduction of a confidence code for price comparison sites, similar to the one used for energy price comparison sites that was created when it emerged they were not using comparable information.

Bogofs and “two-for” offers have been attacked by consumer groups, such as Which?, for obscuring underlying prices.

The OFT will also look at the use of “high-low” pricing, where shops inflate the price of goods so they can offer eye-catching discounts from an artificially high reference price.

A recent investigation by Which? found that supermarkets were routinely flouting the existing Trading Standards rules that govern how long a product must be on sale at its higher price before a discount can be advertised.

The OFT may decide, after its investigations, to fine companies if the law has been breached. The OFT studies are expected to take a year.

Caught in a web

What the OFT is looking into

*Targeted pricing. A shopper has registered on a website selling DVDs. Files on the shoppers’ computer tells the website what he has looked at previously, allowing the retailer to tailor its advertising to him. It may charge a higher price because it knows that, once the shopper has registered, he is less price-sensitive.

*Price comparison websites. A shopper is looking for car insurance, but the comparison website may not be comparing similar levels of cover. It may also be sponsored by one of the companies.

*Drip pricing. A shopper buys a DVD for £5. But once posting and packaging, a transaction fee and a handling fee have been taken into account, it costs £10.

*Baiting sales. Customers are attracted by an offer that turns out to be unavailable.

*Complex pricing. Three-for-two or two-for-one offers that can make individual prices difficult to determine.

*High-low pricing. Eye-catching discounts offered from artificially high original prices. For example, a 50 per cent discount on an item for £5 when it had not been widely available for £10 originally.