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30 October 2017

CMA issues final report on price comparison websites

The Competition and Markets Authority (CMA) has recently issued its final report following its market study into price comparison websites.[i]

Most of the CMA's recommendations in its final report flow from the CMA's consumer law functions.

However, as part of the market study, the CMA also considered whether any competition law issues were raised by certain types of restrictions in agreements between price comparison websites and suppliers using those websites. This article focusses on these aspects of the CMA's final report.

Most favoured nation clauses (MFNs)

The main competition law issue considered by the CMA was the use of retail MFNs.

"Wide" retail MFNs in online retailing require the supplier of a product to price that product via the online outlet at a price that is as low or lower than the price at which the product is sold at rival outlets, including rival comparison websites. "Narrow" retail MFNs limit this restriction to the provider's own website.

The CMA's final report reiterates its concerns that wide retail MFNs soften competition between price comparison websites and between these websites and competing channels, through reducing their incentives to compete on commissions and to innovate. As a result of these concerns, the CMA has launched a separate competition law enforcement investigation into the use of wide MFN clauses by a price comparison website in relation to home insurance products.

As regards narrow retail MFNs, although the CMA considers that these can give rise to concerns in certain circumstances, in general the CMA's assessment is that they do not significantly restrict competition.

Non-brand bidding and negative matching restrictions

Non-brand bidding restrictions prevent a party (the price comparison website and/or the supplier) from stipulating another advertiser's brand name as a keyword when bidding in a search engine auction process. This is done in order to prevent the bidder's ad appearing in the search results for a query containing the specified brand name.

Negative matching restrictions require a party to add another advertiser's brand name to negative keywords when bidding in a search engine auction process. This is done in order to prevent the bidder's ad appearing in the search results for a query containing the specified negative keyword.

The CMA's view is that some forms of these restrictions, especially those that include negative matching, have the potential to lead to competition concerns and so they will remain an area of interest to the CMA.

Non-resolicitation restrictions

Non-resolicitation restrictions prevent a price comparison website from resoliciting customers who have purchased the supplier's product via that website (in respect of the same product type), typically for a certain period.

The CMA found that, although these restrictions could have some potential adverse effects on competition, the evidence did not suggest that they have a material impact in the sectors the CMA reviewed.

Conclusion

Other than wide retail MFNs, the CMA did not find significant competition law concerns arising from the use of MFNs, paid search advertising restrictions or non-solicitation restrictions in agreements between price comparison websites and suppliers. However, it appears likely that the CMA will keep these issues under review.

[i] Digital comparison tools market study, CMA Final report dated 26 September 2017.


This article was written by Paul Stone. For more information, please contact Paul on +44 (0)20 7203 5110 or at paul.stone@crsblaw.com.

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