Guidance

Digital comparison tools: summary of final report

Published 26 September 2017

Introduction

Digital comparison tools (DCTs) aim to help consumers by bringing together a number of products or services, offering a variety of ways to help them choose between options, and sometimes to make purchases or change providers. We define DCTs as ‘digital intermediary services used by consumers to compare and potentially to switch or purchase products or services from a range of businesses’.

They offer 2 types of benefit: first, they save time and effort for people by making searching around and comparing easier and more appealing, particularly for household services that are often complicated and not immediately interesting to people. Second, they make suppliers compete harder to provide lower prices and better choices to consumers. Overall DCTs should result in lower prices and better choices, particularly where we know from past work that people often do not shop around – such as in energy and financial services.

DCTs offer these benefits in a variety of ways, from the most basic ‘best buy’ tables, to the traditional ‘price comparison website’ (PCW) and increasingly to more automated services enabled by newer technology. DCTs typically provide their services free of charge to consumers and make money by charging a commission to suppliers.

Realising the benefits for consumers depends on a number of things being in place:

• Consumers need sufficient trust and confidence to use DCTs in the first place, and enough understanding to choose and use them effectively.
• DCTs need to be able to offer a relevant and accurate service and a smooth consumer journey, including information both about consumers and their requirements, and about the products being compared.
• Competition between DCTs needs to be effective, so that people can benefit from the competitive pressure DCTs bring to bear on the suppliers whose services they compare, and suppliers pay competitive prices for the services DCTs offer.
• Regulation should support all these factors in a proportionate way, if the market does not deliver them on its own.

We have looked at the extent to which these conditions hold. We have gathered a wide range of evidence through consumer surveys, information from companies, consumer bodies and others.

We provide our conclusions from this work in our full final report and the 5 supporting papers. Our final report builds on our initial findings set out in our update paper at the 6-month point.

We have focused on particular sectors where DCTs play, or could play a big role: car insurance, home insurance, energy, broadband, flights, and credit cards. Much of our analysis applies more broadly, and through talking to a wide range of suppliers and DCTs we have also touched upon other sectors including mobile phones, travel insurance, mortgages, hotels, foreign exchange transfer, car hire, event tickets and legal services.

Benefits from DCTs and where they can improve

We have found a mostly positive picture of people’s use of and attitudes to DCTs, and the ways DCTs treat people; but also concerns, especially on DCTs’ transparency, accessibility and clarity about their use of personal information.

Our research has found that people mainly have positive views and experiences of DCTs. But many have concerns about what DCTs might do with their personal data – and this is an area where DCTs could do more to explain how they protect consumers and give them control.

Although some vulnerable consumers cannot access DCTs, we heard that those who are able to do so can find them helpful. However, some DCTs appear not to be doing all they could or should to make their sites user-friendly for some vulnerable people and some may not be meeting the requirements of relevant equality law.

We have heard concerns that DCTs might result in poorer outcomes for people who are less engaged in markets, for example by helping suppliers offer worse deals to inactive consumers. We recognise the risk that there are situations where consumers who do not use DCTs, or who shop around in other ways, get worse offers than those who do. However, we have seen no evidence that DCTs make it easier for suppliers to discriminate between active and inactive consumers.

While most sites we looked at appeared to explain their role and provide useful results, we found some examples where they could be clearer about what they do and a few instances where they appeared to be inaccurate, unclear or possibly misleading.

Where DCTs work well, they can offer a very easy consumer experience and useful comparisons. Among the sectors we studied, this seems to work best in car insurance, where DCTs are well established. It works least well in broadband, where DCTs are not in a position to obtain information that would support better comparisons, such as actual broadband speeds.

We have heard concerns that DCTs have led to the hollowing out of products, that is, a decrease in quality (eg worse insurance cover) because of an undue focus on price. In general, the evidence we have gathered does not suggest harmful hollowing out, but we did find potential issues with the presentation of excesses in insurance. Also, more could be done with quality metrics, both in terms of their content and the ways in which they are presented on DCTs, to support effective comparisons.

DCTs are a good way of increasing competitive pressure on energy, telecoms, financial services and other suppliers; but if competition between DCTs themselves does not work well, people may not feel the benefits. For the most part we have found competition to be effective in our focus sectors; there are a number of DCTs competing hard with each other for people’s attention, particularly through advertising. They charge commission to suppliers, but their scale means commissions are lower than many suppliers’ own costs of attracting new consumers directly.

However, we have strong concerns about some types of contract between suppliers and DCTs, which prevent suppliers from offering better prices on one DCT than on another (so-called wide price parity/Most Favoured Nation clauses) and can reduce competition between DCTs. As explained below, we are opening an investigation into this. There are several other practices which we are keeping under review (such as non brand-bidding, negative matching and non-resolicitation agreements), because they might either limit competition between DCTs or make it more difficult for DCTs to operate effectively.

How to improve DCTs: steps for companies, government and regulators

There are opportunities to add to the already considerable benefits that consumers get from DCTs. Our study provides an opportunity to coordinate across sectors between different agencies and government. We are putting forward a range of recommendations to other bodies, as well as taking various steps ourselves, to achieve this.

We have identified 4 high-level principles for how DCTs should behave, in order to support consumer trust and informed choice between DCTs and between suppliers. DCTs should treat people fairly, by being Clear, Accurate, Responsible and Easy to use (CARE). We set out what these mean in practice in Chapter 5 of the full final report.

DCTs should treat people fairly

Clear

Explain their services and how they make money

1. Prominently provide a general explanation of how they make money.
2. Clearly explain how much of the market they cover.
3. Explain any ownership links with the suppliers they show.
4. Clearly explain how they have ranked the results presented.
5. Clearly state when and how commercial relationships have affected the results presented.
6. Make the total costs, including any compulsory charges, clear to consumers.
7. Clearly explain promotional offers.
8. Ensure all advertising is clearly identifiable.

Accurate

Provide information that is complete, correct, relevant, up to date and not misleading

1. Include in each result all the information consumers need, including price and main characteristics.
2. Ensure information is correct, up-to-date and not misleading.
3. Address inaccuracies promptly.
4. Ensure results presented are relevant to the search criteria.
5. Clearly set out assumptions made in generating the results presented.
6. Explain limitations in the availability of the results presented.

Responsible

Protect people’s details and be easy to deal with

1. Comply with all obligations under data protection and privacy law.
2. Explain their collection and use of consumers’ data and what controls consumers can exercise.
3. When showing reviews, have processes in place to ensure users see the full picture and be clear about how reviews are collected and checked.
4. Deal with complaints professionally and fairly; and provide clear information about how to complain.

Easy to use

Make information easy to find and understand

1. Present all key information in a clear, prominent and timely way.
2. Provide contact details, including postal and e-mail addresses.
3. Comply with all obligations under relevant equality law.

These principles apply to all DCTs operating in any sector and reflect existing general law. In regulated sectors, we recommend that regulators have regard to the principles when assessing compliance with the general law by DCTs in their sectors. In non-regulated sectors, other enforcers, the CMA included, should do the same.

We also recommend that where regulators operate voluntary accreditation schemes for DCTs, they consider updating them to remove the most potentially distorting rules – particularly on market coverage requirements – and move to a higher level of principle, to make them more applicable to likely future developments in DCTs.

We see significant opportunities to make more data available, to make it easier for people to make effective comparisons, and also to support people in using more than one DCT. These opportunities are greatest in sectors where DCTs are less well developed, such as telecoms, but opportunities exist even in more developed DCT sectors such as insurance. We have a number of recommendations for regulators and government in this area – see below.

Where we have concerns, we are taking action to enforce the law, and stop behaviour that we suspect is likely to cause harm to people using DCTs, either directly or by damaging competition. We will approach future complaints in the sector in a similar way, prioritising our work to reflect the importance of the sector and of ensuring effective competition and consumer trust.

We have opened a competition law investigation in relation to one DCT’s contracts with home insurers, which limit insurers’ ability to charge a lower price on one platform than on another (‘wide price parity’ / ‘most favoured nation’ (MFN) clauses).

We have an ongoing programme of consumer enforcement work in digital markets, including DCTs. In particular, we are continuing to work with intermediaries in the car hire sector to improve the information they display and, having been considering consumer protection issues in the hotel booking sector, we will be announcing our next steps in the coming weeks.

How offers are presented to consumers is determined to varying extents by the decisions of both DCT operators and product suppliers. We have identified a number of areas where these businesses may need to take action to produce better outcomes for people using DCTs.

Companies: suppliers and DCT businesses

1. All DCTs should follow the CARE principles to treat people fairly by being Clear, Accurate, Responsible and Easy to use, in order to help them to comply with the law and to support consumer trust – including by:
   (a) making clear to consumers how they protect their personal information and how consumers can control its use; and
   (b) taking steps to ensure their websites and apps comply with their obligations under relevant equality law.
2. We recommend DCTs and relevant consumer and charitable organisations work more closely on how to address vulnerable consumers’ needs – including providing links to sources of additional help and support.
3. We recommend DCTs work with sector regulators and suppliers to improve the effectiveness of quality metrics in order to mitigate against the risk of hollowing-out (a reduction of product quality as a result of undue focus on price).
4. We will keep MFNs, non brand-bidding, negative matching and non-resolicitation agreements under review. Companies operating DCTs or supplying services via DCTs should review their contracts in light of our comments on these agreements.
5. We have opened a competition law investigation in relation to one DCT’s contracts with home insurers, which contain MFN clauses which limit insurers’ ability to charge a lower price on one platform than on another (so-called ‘wide price parity / MFN’ clauses).
6. We have an ongoing programme of consumer enforcement work in digital markets, of which our work on DCTs and our CARE principles form an important part. In particular, we are continuing to work with intermediaries in the car hire sector to improve the information they display and, having been considering consumer protection issues in the hotel booking sector, we will be announcing our next steps in the coming weeks.

Government

We have outlined the importance of both general law and sector-specific regulation. Several government departments have responsibility for sponsorship of regulators as well as legislative programmes affecting specific sectors. We have identified a number of issues which may require action by government, in the form of legislation or otherwise.

1. BEIS: We reiterate our previous recommendation to government that it introduce civil fining powers for breaches of consumer protection law.
2. BEIS and DCMS: We recommend that the government look to bring intermediaries like DCTs into regulators’ scope in energy and telecoms.
3. DCMS: We recommend the government consider how to maximise the opportunities presented by the General Data Protection Regulation (GDPR) to use data portability to support competition between intermediaries such as DCTs.

All regulators

Across the UK economy each sector regulator has its own powers and responsibilities in relation to how DCTs work in its sector. We have identified a number of approaches that would help DCTs to work better for consumers (see Chapter 5 for more details).

• We recommend all regulators have regard to the CARE principles when assessing compliance with the law by all DCTs in their sectors, including apps and collective switchers as well as PCWs.
• We recommend sector regulators continue to work together to ensure that they take a consistent approach to DCTs where appropriate, for example through the UK Regulators Network.
• We recommend sector regulators consider ways to free up more data and make it easier for consumers to use DCTs, in order to support more consumer engagement and better informed choice.
• We recommend sector regulators look to work with DCTs and suppliers to improve the effectiveness of quality metrics in order to mitigate against the risk of hollowing-out (a reduction of product quality as a result of an undue focus on price).

FCA

• We recommend all regulators, but the FCA in particular given the amount of information required from consumers to generate a quote, consider whether and how it would be possible to make it easier for people to get quotes from multiple DCTs, in order to support effective DCT competition.
• We recommend that the FCA consider ways to build on its existing work to facilitate accurate like-for-like comparison that incorporates non-price factors.
• We recommend the FCA consider the issue of how insurance providers and DCTs capture consumer preferences on excesses, how this is used in generating a quotation and how it is subsequently presented; and how this may affect consumers’ choice of insurance products.
• We look forward to working with the FCA as the regulator with concurrent competition powers in financial services, as we pursue our enforcement case in relation to price parity / MFN clauses in home insurance.

Ofgem

• Pending any legislative change, we recommend that regulators consider a number of improvements to the voluntary schemes in energy and telecoms – particularly removing the most distorting requirements such as on coverage – and in general paring back the more prescriptive requirements.

• We recommend Ofgem consider how it could make comparison more accurate and easier by supporting better access to consumer usage and tariff data, building on its existing work.

Ofcom

• We strongly support Ofcom’s existing initiative to make more data available for use by third parties like DCTs, including using its Digital Economy Act powers.
• Pending any legislative change, we recommend that regulators consider a number of improvements to the voluntary schemes in energy and telecoms – particularly removing the most distorting requirements such as on coverage – and in general paring back the more prescriptive requirements.
• We recommend Ofcom consider how else it might support the further development of DCTs in telecoms as a way of enabling better competition and consumer choice.

ICO

• Once data protection and electronic privacy reforms are in place, we recommend that the ICO review the practices of DCTs in relation to data protection.

People thinking of using comparison sites and apps

Most of the steps we are taking as a result of this study are for us, regulators or government. However, there are things people using, or considering using, DCTs can do to get the most out of them.

1. Comparison sites can save you time and money.
2. Choose carefully between comparison sites, like you would any retailer.
3. Not all sites are the same, so try more than one if you can.
4. Check how the site has ordered results.

For more information, watch the video below.

Price Comparison Sites - How to get the best out of them

Charities and consumer bodies

During our study we have engaged with a range of charities and consumer bodies which seek to support consumers and particular groups of vulnerable people. There are opportunities for these bodies to help make people aware of how to get the most out of DCTs.

1. We ask that regulators, relevant charities and consumer bodies help spread our messages on how people should use DCTs.
2. We recommend DCTs and relevant consumer and charitable organisations work more closely on how to address vulnerable consumers’ needs – including providing links to sources of additional help and support.

What happens next

Our study comes to a close at this point, but we are talking to DCTs, regulators, government and other bodies to ensure our conclusions are understood and taken on board.