In a significant blow for CompareTheMarket, the Competitions and Market Authority (CMA) has ruled that the leading price comparison website's restrictive contract terms were responsible for inflating home insurance premiums over two years. CompareTheMarket has been ordered to pay a fine of £17.9 million by the market regulator.
The CMA found that CompareTheMarket included specific clauses in its contracts, dated between December 2015 – 2017, with home insurance providers. These clauses prevented providers from advertising their services more cheaply on other price comparison websites. Effectively, this limited the ability of customers to access better deals on home insurance premiums, and also prevented other price comparison platforms from expanding their offering.
Price comparison websites are a popular channel for customers to find good bargains on insurance, mobile deals, broadband, and energy, among other products. By listing a wide variety of services and offers from various providers, price comparison websites ensure customers can access the best deals.
There is often tight competition between price comparison websites like CompareTheMarket to ensure that they get the best deal from providers to list on their site. Since these agreements are usually commission-based, they provide a certain level of bargaining power to providers as well. This is why experts typically recommend comparing offers from several price comparison websites to ensure that you are receiving the best deal.
However, by including these restrictive clauses on advertising, CompareTheMarket not only eliminated the possibility of rival comparison sites obtaining better offers from providers, but also reduced the bargaining power of providers, limiting their ability to negotiate with CompareTheMarket on better commissions.
Michael Grenfell, executive director of enforcement at the CMA, said of the ruling - "Price comparison websites are excellent for consumers. They promote competition between providers, offer choice for customers, and make it easier for consumers to find the best bargains.”
“It is therefore unacceptable that ComparetheMarket, which has been the largest price comparison site for home insurance for several years, used clauses in its contracts that restricted home insurers from offering bigger discounts on competing websites - so limiting the bargains potentially available to consumers."
The verdict, which comes at the end of a three-year ruling, will be challenged by CompareTheMarket, which has expressed disappointment with the CMA’s decision. A spokesman for the company has said, "We fundamentally disagree with the conclusions the CMA has drawn and will be carefully examining the detailed rationale behind the decision and considering all of our options."