Digital comparison tools: the CMA decides against a market investigation reference

Six months after the CMA launched its market study into digital comparison tools, it has decided not to make a market investigation reference, but will focus on four areas of possible concern in a second phase of its market study.

The CMA has just confirmed (on 28 March 2017) its decision not to make a market investigation reference following its six-month market study into digital comparison tools ("DCTs"), including digital comparison websites and smartphone apps. The CMA has not formally concluded whether the reference test criteria were met, but has taken the view that any consumer detriment could be better addressed through other measures. During its market study, the CMA had not received any representations suggesting that it should make a market reference.

The CMA's Acting Chief Executive has commented on the CMA's findings:

"Our work so far suggests that digital tools like price comparison websites generally work well for consumers, who really value the service they provide. However, our report suggests that improvements may be necessary to help more people get even better deals."

Areas of Possible Concern

Thus, DCTs have not been given a completely clean bill of health. The CMA is proposing a "second phase" of its market study before it publishes its final report.

In general terms, the CMA intends to develop its analysis further and refine its understanding. It will consider the impact of possible future developments in relation to DCT models and the effect of DCTs on consumers who do not use them (particularly more vulnerable groups).

In addition, during its market study, the CMA has identified four areas of possible concern, on which it will focus during the second phase. These are:

1. in order to maximise consumer confidence and trust, improving the transparency of digital comparison sites in relation to: 

• market coverage, business models and ranking methods
• the use of personal data (and offering control over how personal data is shared
• their redress policies

2. improving DCTs' access to necessary inputs and, thereby improving the benefits which they can offer:

• the CMA's particular concern relates to the availability of inputs from suppliers (e.g. pricing information for insurance and flights, eligibility in relation to credit cards and broadband speed information)
• the CMA has learnt from certain regulators that there are developments in some sectors which may resolve barriers to effective comparisons (e.g. the FCA is working with insurers and DCTs to improve the availability of information on general insurance add-on pricing)

3. making competition more effective and in particular:

• considering the competitive landscape and negotiations between DCTs and suppliers (the CMA is looking to understand why, with the exception of flights, in the different case study sectors reviewed, there was one DCT, but not always the same one, which accounted for a significantly larger proportion of sales)
• the use of most favoured nation, i.e. MFN, or parity agreements
• unbundling and also the hollowing out of features with an undue focus on price
• non-brand bidding and negative matching agreements
• non-solicitation agreements whereby DCTs agree not to contact users again for a period of time (often over a year) to offer a comparison for the same service for which the DCT had previously facilitated a sale

4. the way in which DCTs are regulated

• as the nature, and extent, of regulation varies across different sectors, the CMA will consider the possibility of cross-sector principles for all DCTs and, if this approach is appropriate, the CMA will also consider how to ensure compliance. 

Consumer Survey

As part of the CMA's market study, a survey of over 4,000 consumers was undertaken to gather information on consumers' use and perception of DCTs.  The results of the survey showed that overall levels of user trust and satisfaction were high and that DCT users think that "these tools work well, making it easier to make informed choices and save money". Some of the main findings were:

• 97% of internet users were aware of DCTs
• 85% of internet users had used a DCT at some point
• 90% of recent DCT users were "very or fairly" satisfied with the DCTs they used
• 64% of recent DCT users used more than one DCT to shop around
• 11% of DCT users thought that the DCT had shown "the whole of the market" 

Next Steps

The CMA's consultation on its published update paper, including its proposed areas of focus during its second phase of the market study, is now open until 24 April 2017. It has published a response form setting out twenty-five questions as part of this consultation process. The CMA's final report is due to be published by 28 September 2017.

The CMA has confirmed that future steps may involve a combination of competition and enforcement cases, recommendations to regulators and/or working with businesses in the sector.