Price comparison sites to be probed by watchdog

A still from a Go Compare advertisement

The way price comparison websites work is to be examined by the Competition and Markets Authority (CMA).

Among other issues, it will look at how well sites such as Moneysupermarket, Uswitch and Gocompare can be trusted by their customers.

The CMA says it will look at whether consumers should be made more aware of how such sites earn their commission.

The study will look at all price comparison sites, including broadband, energy, insurance and banking.

Consumers are not always made aware of the cheapest deals on price websites, and usually they cannot switch to such deals immediately.

Companies often pay a fee of about £30 to a site for each new customer they gain.

Analysis: Brian Milligan, personal finance reporter

The CMA study will be seen by many as an opportunity to revisit one of its most controversial decisions. Back in June, its inquiry into the energy market ruled that price comparison sites would no longer be under an obligation to show consumers the cheapest deals.

In other words, such sites only need to show deals on which they are making a commission.

That decision reversed a previous ruling by the energy regulator Ofgem, which said consumers should see all the deals on offer. MPs on the Energy Select Committee have already complained about the U-turn.

While the CMA claims this new inquiry is completely separate, it says it will "see what issues it throws up".

It is now asking for evidence. There will certainly be no shortage of people willing to give it.

Andrea Coscelli, CMA acting chief executive, said: "Digital comparison tools have played a big part in changing markets for the better, bringing new ways of doing things and forcing businesses to up their game.

"Consumers have benefited as choice and access to goods and services have grown."

He said they had been more successful in some sectors than others.

The CMA said it wanted to understand why this was the case and whether more could be done to ensure consumers and businesses can benefit from them more widely.

It will examine four areas:

• What consumers expect from comparison tools, how they use them and their experiences

• The impact of such tools on competition between suppliers listed on them

• How effectively comparison tools compete with each other

• The effectiveness of existing regulation

One energy provider said the CMA was clueless about comparison sites.

'Farce'

Luke Watson, GB Energy managing director, said: "This latest investigation shows that the CMA has no idea what it thinks when it comes to comparison sites.

"It makes a farce of the CMA's energy market review, which handed more power to the comparison sites only a few months ago. Let's not forget some of those sites are also being investigated for anti-competitive practices. I think this is beyond a question of trust; these sites are profit-making machines posing as consumer champions, and they need proper regulation."

A MoneySuperMarket spokesperson said: "We look forward to working with the regulator to provide information and support as its work progresses."

The CMA must announce within six months whether it intends to refer the market for a more in-depth investigation and must publish its report within 12 months.

Margot James, the consumer minister, said: "The government welcomes this market study, as consumers deserve to have access to the best deals and the clear, reliable information they need to make the best decisions."