The Competition and Markets Authority (CMA) is looking into the way price comparison websites operate and whether consumers can trust them. This isn’t the first time that they’ve done this, and the last time raised a few questions, but I’d like to look at two fundamental points.
Should price comparison sites be more transparent with consumers?
Questions have been raised over consumers not necessarily being aware that price comparison sites - such as those comparing broadband, energy and insurance - make their money from commissions when they refer a customer.
This strikes me as a similar scenario to that of ad blocking; the consumer is getting a service but does not neccessarily know, or care, how it's funded.
The main issue is that consumers assume they are being shown the deals with the cheapest prices, which is not always the case. The rise in the amount of choice available to consumers spurred the growth of price comparison sites, but it is unclear why this success hasn’t been replicated in more sectors – something the CMA’s investigation will look into.
Interestingly, a 2012 YouGov survey found that 30% of people don’t realise that price comparison sites are paid by providers when a switch occurs.
Many people don’t realise these websites are commercial organisations that spend millions of pounds on branding activities, such as TV advertising, which they have to make money to fund.
The latest ruling means that sites don’t have to give a full market overview, but if the consumer isn’t able to find the best price in the market, can we really call them price comparison sites? This ruling means those that don’t provide a full market review are “aggregators” that pull together selected offers, rather than “price comparison” sites.
As a result of the CMA’s decision that they don’t need to give a full market review, I think price comparison websites need to become more transparent, either telling consumers upfront that they are not showing deals from the entire market, or provide a full market review that includes the deals they don’t make a commission on.
A consumer or business review?
This investigation comes just months after the CMA made the controversial decision that price comparison sites do not have to show the cheapest deals and can just show the deals that they make a commission on. This is a reverse on an earlier decision by the Energy Select Committee that sites should show a full market overview.
If it’s not the best price, price comparison sites need to make it clear what they are offering. These websites should bear in mind that Tradedoubler’s Digital Connections study found that 68% of European consumers feel their privacy is compromised when information is collected without their knowledge. Consumers don’t necessarily understand the commercial business model of comparison websites and this needs to be made clearer and more transparent to avoid misleading customers.
Trust is essential to secure the future of price comparison websites, which came about because consumers did not trust the service providers, and trust is based on transparency. At first glance the CMA’s ruling earlier this year doesn’t appear to be in consumers’ interest, but perhaps this latest investigation will bring about transparency and standardisation.