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Comparethemarket fined £18m over cheapest price clause

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
19/11/2020

Comparethemarket has been fined £17.9m for breaching competition law after it banned insurance providers from offering cheaper prices on rival comparison sites.

The fine comes after the Competition and Markets Authority (CMA) found clauses in contracts with home insurers which breached competition law.

During an investigation, it found that between December 2015 and December 2017, it imposed ‘most favoured nation’ clauses on home insurance providers selling on its platform.

This banned the insurers from offering cheaper prices on other comparison websites which meant Comparethemarket was not undercut elsewhere.

The CMA said this also made it harder for its rivals to “expand and challenge” the company’s already strong market position as competitors weren’t able to beat it on price.

And without the clauses, it would have had to compete harder to get lower prices from the home insurers, for example by reducing the commission fees it charged.

As a result, the watchdog said the move was likely to have increased insurance premiums.

It added that in November 2017, two months after the launch of the CMA’s investigation, Comparethemarket contacted the insurers to inform them it would no longer be enforcing the ‘most favoured nation’ clauses.

‘Unacceptable restrictive clauses’

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.”

‘We fundamentally disagree with the conclusions’

A Comparethemarket spokesperson, said: “Comparethemarket.com is disappointed with the CMA’s decision and does not recognise its analysis of the home insurance market. We fundamentally disagree with the conclusions the CMA has drawn and will be carefully examining the detailed rationale behind the decision and considering all of our options.

“For 14 years Comparethemarket.com and the other price comparison websites have revolutionised the way in which consumers shop for their insurance. In the past year alone, we have helped more than six million customers save money. We will continue to deliver on our mission to drive competition, transparency and choice that benefits consumers, so our customers get the best deals possible.”