The UK’s competition watchdog has said the algorithms that underpin online content, including news, shopping, dating and travel, should be carefully monitored by regulators.

The Competition and Markets Authority, which is stepping up its focus on the tech sector, said that algorithms can harm competition in many ways, for example by reducing the choice in search results or allowing companies to promote their own products above those of rivals.

It added that complex algorithms can aid collusion between businesses without companies directly sharing information. The CMA has called for advice from academics and industry experts in the field.

“Algorithms play an important role online but, if not used responsibly, can potentially do a tremendous amount of harm to consumers and businesses,” said Kate Brand, director of data science at the CMA.

Algorithms have long faced criticism from civil society, activists and academics over transparency. There was widespread outcry last year following a scandal surrounding the use of an algorithm to determine examination grades in the UK when students were prevented from sitting exams because of the coronavirus pandemic.

“The majority of algorithms used by private firms online are currently subject to little or no regulatory oversight and the research concludes that more monitoring and action is required by regulators,” the CMA said.

In its research, the CMA said that there was limited empirical evidence that focused on harm to consumers and competition. It concluded there were particular gaps around the effects of automated pricing, personalisation and “manipulative choice architecture” — so-called behavioural nudging.

It also warned that algorithmic systems can interact with existing sources of competition problems, such as market power, and make them worse.

The watchdog said it anticipated potential roles for regulators, including crafting clear standards on ethical algorithms to businesses, testing algorithms in “regulatory sandboxes” under supervised conditions, and performing “ongoing algorithmic monitoring” of systems.

The announcement comes ahead of the launch of the CMA’s Digital Markets Unit, which is due in April. The new unit will focus on holding Big Tech platforms to the same standards as smaller businesses.

The CMA said that it also intended to work closely with the Information Commissioner’s Office and Ofcom, which will become Britain’s first internet watchdog when online harms legislation comes into effect.