Digital comparison tools (DCT) can be very useful and convenient for consumers who want to easily compare the costs of things like insurance, credit cards and travel services, to name a few. For the most part, these services can theoretically increase competition as consumers can directly compare prices for the exact same product.
Whilst these sites are often free for the consumer to use, the companies listed on them usually have to pay for the privilege of their placement. With so many comparison sites out there, some companies may only choose to appear on a specific few sites, or perhaps none at all. On the other hand, some companies might pay more to bump up their ratings or directly put in a sponsored advert.
All of this means that the comparisons are not always clear and can be warped by listed companies’ input, and it is this issue the CMA is looking in to.
The Competition and Markets Authority (CMA) recognised the potential for companies to use seemingly fair and trusted comparison sites to unfairly manipulate how consumers view their products and services. The regulator believes some agreements between DCTs and listed-companies may be limiting competition and could result in higher prices, as apparently found with one home insurance provider.
In a market study, the CMA found that some hotel booking websites may have been manipulating results that could mislead customers. Specifically, this included:
- Bumping up hotels who pay more to the DCT
- Creating false impressions to rush the consumer into rushing decisions (e.g. an alert saying “15 people are looking at this booking” to make the consumer think they’re popular and running out)
- Advertising misleading discounts
- Hidden taxes and booking fees that are not included with the initial advertised price that then appear when ‘checking out’.
After over four years of suspicions into the hotel booking industry and comparison websites specifically, the CMA has announced it will open an investigation into the hotel booking sector at least.
The CMA’s report also refers back to their previous related findings where people may not shop around much when it comes to energy and financial services. This can make comparison results even more important as customers may use the site to choose a provider that they will stick to for the long term.
“If DCTs have to compete hard with each other to attract people to their sites, people using them are more likely to feel the benefits of lower prices and better services.”
The CMA came up with the useful acronym ‘CARE‘ for DCT’s and companies to check to make sure consumers are not disadvantaged.
Clear
Explain their services and how they make money so the consumer can see relationships between the DCT and companies, how the results are ranked and any promoted results are clearly identifiable.
Accurate
Providing information that is complete, correct, relevant, up-to date and not misleading. Assumptions must be explained (e.g. best value product – price divided by net weight).
Responsible
Protect people’s details and be easy to deal with. Any data collected must be collected in accordance with data protection rules. Reviews should show the full picture.
Easy to use
Make information easy to find and understand including contact details for customers who have any queries or complaints.
The CMA has also opened a competition law investigation over one DCT’s agreement with home insurance providers.
The authority suspects the use of most favoured nation clauses, also known as ‘best price’ clauses. These are agreements whereby the provider will always provide its best rates of terms for its goods and/or services. On the face of it, this may seem like a great deal for shoppers, but in fact it can be very damaging for competition as competitors may not see the point in trying to compete.
If this happens, customers may not be able to benefit from new and innovative services the competitors may have otherwise brought to a sector with healthy competition.