| Link(s): https://www.gov.uk/government/news/cma-fines-comparethemarket-17-9m-for-competition-law-breach |
Context
The CMA has fined ComparetheMarket £17.9 million after it found that clauses used in the company’s contracts with home insurers breached competition law.
Key points to note
- The CMA investigation found that between December 2015 and December 2017, the price comparison website, ComparetheMarket, breached competition law by imposing wide ‘most favoured nation’ clauses on providers of home insurance selling through its platform.
- The clauses prohibited the home insurers from offering lower prices on other comparison websites and protected ComparetheMarket from being undercut elsewhere.
- They made it harder for competitors to expand and challenge the company’s already strong market position as other price comparison websites were restricted from beating it on price.
- This meant that competition between price comparison websites, and between home insurers selling through these platforms, was restricted.
- The CMA found that this is likely to have resulted in higher insurance premiums.
ComparetheMarket’s clauses meant:
- The insurers bound by the contracts were prohibited from offering cheaper deals on other price comparison websites. In turn, this limited competitive pressures on all home insurers competing on price comparison websites.
- Rival comparison sites were restricted in gaining a price advantage over ComparetheMarket, for example, by lowering their commission fees to encourage those insurers to quote lower prices on their platforms.
- The competitive pressures ComparetheMarket itself was subject to were weakened. Without the clauses, it would have had to compete harder to get lower prices from the home insurers, for example by reducing the commission fees it charged.
Michael Grenfell, the CMA’s Executive Director for Enforcement, said:
“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.
“Digital markets can yield great benefits for competition, and therefore for consumers. We are determined to secure those benefits, and to ensure that competition is not illegitimately restricted. Today’s action should come as a warning – when we find evidence that the law has been broken, we will not hesitate to step in and protect consumers.”
The full details of the investigation can be found here: https://www.gov.uk/cma-cases/price-comparison-website-use-of-most-favoured-nation-clauses