Not Quite So “Simples”: CompareTheMarket fined £17.9m over a breach of competition law
November 24, 2020
3 min read
What's going on here?
The comparison website CompareTheMarket has been fined £17.9m for breaching competition law. It has done so by imposing wide “most favoured nation” clauses on insurers, preventing them from advertising cheaper rates elsewhere, and protecting its own site from being undercut by competitors.
What does this mean?
“Most favoured nation” clauses limit the price at which a supplier can offer a product through alternative sales channels. The Competition and Markets Authority (CMA) investigated such clauses on the price comparison’s website, and found that between December 2015 and December 2017, these clauses had breached competition law under Chapter I of the Competition Act 1998, and Article 101(1) of the European Union’s TFEU. The CMA, in its investigation, concluded that:
- The insurers bound by the contracts were prohibited from offering cheaper deals on other price comparison sites
- Rival comparison sites were unable to offer lower prices
- Without the clauses, CompareTheMarket itself would have had to compete harder to get lower prices from the home insurers.
Following the launch of the CMA’s investigation in 2017, CompareTheMarket immediately scrapped these contractual clauses. The competition watchdog has now fined the BGL Group, owners of the site, £17.9m.
Being a complex case, it is unclear just how many customers may have been impacted, and how much extra they might have paid. In addition, consumer refunds are not being offered by the site. It is looking unlikely that consumers will be able to claim anything back from the brawl. It appears that CompareTheMarket stands firmly in objection to the CMA’s claims, arguing that it “fundamentally” disagrees with its conclusions.
What's the big picture effect?
Price comparison websites such as CompareTheMarket are “excellent for consumers” states Michael Grenfell, executive director of enforcement at the CMA, also saying “they promote competition between providers, offer choice for consumers, and make it easier for consumers to find the best bargains”.
CompareTheMarket claims to be “the UK’s most loved price comparison site”. Having launched in 2006, it has grown rapidly to become one of the UK’s leading price comparison websites with customers at the heart of its business. More than just a financial blow to this company, this ongoing dispute could taint its reputation, and possibly have a knock-on effect on the reputation of other price comparison sites. Some experts have stated that the only solution to such an issue will be that consumers should search on more than one site when buying services, utilities and financial products. This would ironically lead to customers comparing comparison sites.
Upholding competition law is vital as it forces businesses to keep prices low and look for innovative ways of operating. Most importantly for us as consumers, it ensures that we benefit from the best deals, cheapest prices and most efficient services. The sad reality of cases such as this is that the losers are the customers; being denied the chance to secure the best possible deal. However Cathryn Culverhouse, an associate at City firm DMH Stallard, looks at the glass half full: the fine imposed, she states, will be a “great win for both consumers and insurers alike”.
Could this fine therefore act as a warning to companies to remain alert to competition laws and therefore avoid fines as high as 10% of annual turnover?
Report written by Hannah Parker
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