“Are you sure you’re getting the best deal?” – CMA launches study into Digital Comparison Tools
First published by Admin on November 04, 2016 in the following categories: Latest
The UK’s Competition and Markets Authority (CMA) recently launched a study into Digital Comparison Tools.
Their concerns are centred on how the tools can limit competition through an alleged lack of transparency and lack of information they give to their consumers. The CMA will specifically review the private motor insurance, energy, and banking sectors.
This CMA’s study is set to cover the following four themes:
- 1) What consumers expect from DCTs and their awareness of the tools;
- 2) Impact of DCTs on competition between suppliers listed on them;
- 3) How effectively DCTs compete with each other;
- 4) The effectiveness of existing regulatory approaches to DCTs.
For those who are unaware of what DCTs do, here is brief definition, provided by the CMA:
On face value, you may think that DCTs are the best things since sliced bread as they can play a powerful role in competition and help consumers find better deals, and consequently switch between providers. So, it begs the question: what is the CMA specifically concerned with?
The study seeks to investigate whether:
- The public know how DCTs profit and if they actually benefit the general public. Because, after all, they are a business, which generally means they are out to gain profit.
- Whether arrangements made between DCTs and suppliers that sell through them restrict competition.
- Whether consumer trust and expectations are met, and how they effectively compete.
Concerns raised
The study was initiated by the CMA when it recently emerged that there was a lack of transparency, which can distort competition. Concerns arose when Ofgem, an energy regulator, found that 3.8 million accounts were switched, but two-thirds of households were still found to be paying expensive standard tariffs. The watchdog will have a 12 month deadline to gather all the evidence from consumers and individuals from the industry and publish their findings with any necessary action.
The lack of fair competition could be found on the DCT websites where only deals that would earn the DCT website commission would be shown at the top of the page. Some MPs described this to “undermine consumer trust and disadvantage smaller suppliers, harming competition”. This could be true to the extent that smaller suppliers will not be able to compete with the bigger suppliers, by ‘being shoved to the bottom of the pile’ effectively.
DCTs are the latest to be scrutinised by the regulatory bodies. There seems to be a trend in the ‘regulation world’ as the Financial Conduct Authority looked into how insurers use Big Data.
Call me naive, but DCTs are seen to be the most useful tool when looking for a provider – be it for car insurance or to check out an energy supplier. Let’s face it, no one really wants to be searching for hours trying to hunt for the best price when a DCT website could do the hard work for you!
But, I must admit, I have no clue about how they operate and how they make money, which is part and parcel of the problem the CMA are investigating. As Margot James, the consumer minister, put it:
“…consumers deserve to have access to the best deals and the clear, reliable information they need to make the best decisions.”
As a DCT user, I believe they should strive to achieve this, making their information readily accessible.
I hope that the outcome of the study will enable consumers to be more well-informed with a greater access to information. In turn this will lead to greater transparency in the market and may even encourage businesses to self-regulate.