ComparetheMarket has been fined £17.9m ($23.7m) by the Competition and Markets Authority (CMA) after an investigation revealed that clauses used in the company’s contracts with home insurers breached competition law.
The CMA found that the price comparison website imposed wide “most favoured nation” clauses on providers of home insurance selling through its platform.
The “most favoured nation” clauses stopped the home insurers from offering lower prices on other comparison websites and protected ComparetheMarket from being undercut elsewhere.
This “limited competitive pressures” on all home insurers selling through price comparison websites as they were unable to offer cheaper deals on other platforms, the CMA said.
The clauses also made it more difficult for other price comparison websites to grow and challenge the company’s already strong market position as they were restricted from beating it on price.
Other price comparison sites were limited in gaining a price advantage, for example, by lowering their commission fees to encourage insurers to quote lower prices on their platforms.
This caused competition between price comparison websites, and between home insurers selling through these platforms, to be impeded — resulting in higher insurance premiums, according to the CMA.
The CMA’s investigation found that the “competitive pressures ComparetheMarket itself was subject to were weakened.” Without the clauses, the site would have been forced to compete harder to obtain lower prices from home insurers, for example by reducing the commission fees it charged.
Michael Grenfell, the CMA’s executive director for enforcement, said: “Price comparison websites are excellent for consumers. They promote competition between providers, offer choice for customers, and make it easier for consumers to find the best bargains.
“It is therefore unacceptable that ComparetheMarket, which has been the largest price comparison site for home insurance for several years, used clauses in its contracts that restricted home insurers from offering bigger discounts on competing websites — so limiting the bargains potentially available to consumers.
“Digital markets can yield great benefits for competition, and therefore for consumers. We are determined to secure those benefits, and to ensure that competition is not illegitimately restricted. Today’s action should come as a warning when we find evidence that the law has been broken, we will not hesitate to step in and protect consumers.”
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