From the frying pan into the fire: CMA completes study into digital comparison tools, only to launch investigation into comparison site conduct
On 26 September 2017, the UK Competition and Markets Authority ("CMA") published its final report on its market study into Digital Comparison Tools ("DCTs"). The final report finds that the use of and attitudes towards DCTs are largely positive. However, the CMA identified a number of concerns. The CMA has therefore made a number of recommendations for DCTs as well as to enforcement agencies in their policing of the tools. As a result of its market study, the CMA has also launched an investigation into the use of certain clauses relating to price comparison websites for home insurance.
DCTs are web-based, app-based or other digital intermediary services used by consumers to compare and/or switch between a range of products or services from a range of businesses. The CMA's report focused a number of sectors in which the CMA considered DCTs could play a bigger role, namely: car insurance, home insurance, energy, broadband, flights and credit cards.
The CMA's final report largely notes that DCTs offer benefits to consumers:
- They save time and effort for people by making searching and comparing easier and more appealing, particularly for household services that are often complex and not of interest to consumers.
- They make suppliers compete harder to offer lower prices and better choices.
- DCTs offer an easy consumer experience but appear to work better in some sectors than others. For example, they work well for car insurance where DCTs are well established. However, they work less well in broadband where DCTs are not in a position to obtain information that would support better comparison, such as actual broadband speeds.
The CMA also heard concerns in relation to DCTs' transparency, accessibility and clarity about their use of personal information.
A further, and recurring, concern was the inclusion of so-called Most Favoured Nation or wide price parity clauses in contracts between suppliers and DCTs, which prevent suppliers from offering better prices on one DCT than on another. The main concern is that this reduces competition between DCTs and may prevent consumers from receiving lower prices.
The CMA has also raised concerns about other clauses, which it has said it will keep under review:
- non brand-bidding: in relation to the auction process which determines DCT search results, where one advertiser (ie the 'restricted advertiser') agrees not to bid on another advertiser's brand name when the search term includes that brand name (or other non-brand related words (eg ‘broadband’, ‘insurance’, ‘compare’, ‘prices’, etc));
- negative matching: where the restricted advertiser agrees to add another advertiser's brand name to its 'negative keywords', which prevents its advertisement appearing when the search term includes that brand name alone or with other (non-brand related) words (eg 'broadband', 'insurance', 'compare', 'prices', etc); and
- non-resolicitation: clauses in contracts between DCTs and suppliers whereby a DCT agrees not to contact customers who have purchased a supplier's product from that DCT (in respect to the same product type) for a certain period.
Given its concerns in relation to the use of Most Favoured Nation clauses, the CMA has also opened an investigation under the Competition Act 1998 into the use of these clauses on price comparison websites for home insurance. Unlike the market study, the Competition Act investigation may lead to a prohibition decision and fines. This case forms part of the CMA's ongoing programme of consumer enforcement work in digital markets more generally. It follows other recent cases in which the CMA has considered Most Favoured Nation clauses, including: in the private motor insurance market investigation, taking part in a joint monitoring project with the European Commission and with national competition authorities in the EU concerning the hotel online booking sector, and in the CMA's investigation into the supply of live online auction platform services.
More information on the results of the CMA's market study and further details on the recommendations made can be found on the CMA's case page here.
The CMA's final report demonstrates its continued focus on the role of digital comparison tools in assisting consumer choice and that it does not plan to switch off its spotlight just yet, having launched an investigation into Most Favoured Nation clauses and warning the market that it intends to keep certain other practices under review. This illustrates how a market study can lead to further investigations where breaches of competition law are suspected. Companies which operate or supply services via comparison tools should take note and review their contracts.
With thanks to Antonia Bussey of Ashurst for her contribution.
All articles in the October edition of the Competition Newsletter
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