Digital comparison tools under review

The CMA launches a market study into digital comparison tools

Introduction

On 29 September 2016, the UK's Competition and Markets Authority (the "CMA") announced the launch of a market study into digital comparison tools ("DCTs"), including price comparison websites as well as smartphone apps and other digital intermediary services which UK consumers can use to compare products and services. This had been highlighted as an area of focus in the CMA's 2016/7 Annual Plan. A market study enables the CMA to examine why a particular market may not be working well.

The market study

As a result of its investigations into private motor insurance, energy and banking, the CMA has acknowledged that DCTs "can play a powerful role in increasing competition and helping consumers to find better deals and switch". Part of the CMA's objective is to understand why DCTs have been more successful in some sectors rather than others and to establish whether anything further can be done "to ensure consumers and businesses can benefit from them more widely". In addition, the CMA is looking into concerns raised about the extent to which consumers can trust the information provided and about potential restrictions on competition.

The CMA is proposing to address four main areas:

• consumers' expectations, use and experience of DCTs;
• the impact of DCTs on competition between suppliers listed on them;
• the extent to which DCTs compete effectively with each other; and
• the extent to which existing regulation is effective.

In its study, the CMA is proposing to draw on its experiences of DCTs in those sectors which have been the subject of its recent market investigations, in particular private motor insurance, energy and personal current accounts. To a lesser extent, the CMA will also focus on home credit, payday lending, extended warranties, hotel online booking and legal services. The CMA is also proposing to focus on four new sectors, namely: home insurance, broadband, credit cards and flights. Although the CMA is directing its attention to these sectors, it is expecting to draw conclusions which will apply across a wider range of sectors. The CMA will also work with the UK Regulators Network and draw on their September 2016 Report into price comparison websites.

Consequences of a market study

There are a number of possible outcomes (sometimes in combination) following a market study as the CMA may:

• give the market a clean bill of health;
• identify action to improve the quality and accessibility of information to consumers;
• encourage businesses in the market to self-regulate;
• make recommendations to government to change regulation and/or public policy;
• take competition or consumer law enforcement action;
• decide to launch an in-depth market investigation; or
• decide to accept undertakings in lieu of such a market investigation.

Next steps

The CMA has set a deadline of 24 October 2016 for comments from interested parties on the scope of this study. It then has until 28 March 2017 to confirm whether or not it proposes to launch an in-depth market investigation. Its final market study report, setting out its findings and any proposed action, will be published by 28 September 2017.