COMMONS

Changes to price comparison websites will undermine trust and competition

21 July 2016

The Energy and Climate Change Committee has written to the new Business, Energy and Industrial Strategy Secretary Greg Clark MP to raise concerns that the CMA’s remedy to reverse changes to the Confidence Code on Price Comparison Websites could undermine consumer trust and disadvantage smaller suppliers harming competition. The Committee is urging the Government not to implement the recommendation.

Energy and Climate Change Committee Chair Angus MacNeil MP said:

"Price comparison websites must do what they say on the tin. Consumers expect price comparison sites to shine a light on the whole market, not keep them in the dark and push them into commission earning deals."

Background

The previous Energy and Climate Change Committee published a report on Price Comparison Websites in 2015 warning that consumers were being misled into switching to deals that were not the cheapest available on the market. Following this, the energy regulator Ofgem published a revised Code for Price Comparison Websites (PCWs) in March 2015. The revised code stated that the Price Comparison service provider must include price comparisons for all available domestic tariffs as a default.
 
The Competition and Market Authority (CMA) has recommended that Ofgem remove the 'Whole of the Market Requirement' in the 'Confidence Code'—in effect reversing the change made by Ofgem following the previous Committee’s report.  This will allow PCWs to show a smaller range of tariffs. The CMA argues "any adverse unintended consequences arising from the removal of the Whole of the Market Requirement will be mitigated by Citizens Advice’s market-wide nontransactional price comparison tool".

The CMA's reasoning is as follows:

  • "The Whole of the Market Requirement risks reducing the effectiveness of our remedy to remove the relevant aspects of the simpler choices component of the RMR rules, by reducing the ability and incentive on the part of suppliers and accredited PCWs to negotiate exclusive deals available via particular PCWs"
  • "Without [removing the Whole of the Market Requirement] suppliers could 'game' the removal of aspects of the simpler choices component of the RMR rules by releasing many similar-priced tariffs to crowd out competitors on PCW results pages (which could also be confusing for customers"
  • "There is a risk that customers will believe they are seeing the whole of the market when this may not actually be the case and that with the removal of the 'four-tariff rule' the potential for the Whole of the Market Requirement to be misleading will be greater."

Further information

Image: iStockphoto

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