What has happened?
The Competition and Markets Authority has launched a market study of Digital Comparison Tools, such as Price Comparison Websites and switching Apps (CMA DCT market study). The CMA has identified DCTs as playing a key role in competition and switching as they allow consumers to compare prices in one place. The CMA has also identified digital markets as a key priority area for review and, where appropriate, enforcement.
The CMA’s focus on DCTs is consistent with its focus on price comparison websites in recent market studies. For example, enhanced use of price comparison websites have formed part of the remedy packages in the retail banking inquiry (creating of an SME-focused price comparison website) and energy market inquiry (removing price comparison websites’ duty to show offers across the whole market with the aim of increasing competition between rival websites – see previous post).
However, the CMA has also uncovered a range of concerns about transparency and possible distortions in competition as a result of the way in which DCTs operate in the course of its recent work. This new market study will provide the CMA with the ability to review comprehensively the role of DCTs in competition across a number of sectors.
Is the CMA following a general regulatory trend?
The CMA’s review is in line with similar reviews of digital markets and data by peer regulators.
The Financial Conduct Authority has recently released its findings on the role of Big Data in the general insurance sector (FCA Big Data Feedback Statement).
The European Commission is in the middle of an e-commerce sector inquiry, which is also addressing the role of price comparison tools (European Commission e-commerce sector inquiry). The Commission published its preliminary report on 15 September and has also opened individual enforcement investigations on the back of evidence uncovered in the sector inquiry.
What will the CMA focus on?
The CMA’s market study will focus (non-exclusively) on four “case study” sectors – credit cards, home insurance, flights and broadband – and will also draw from recent and ongoing reviews of other sectors of the economy. The CMA has been clear that it wants to hear from stakeholders in other sectors too – for example hotels, general insurance and utilities. The CMA will look particularly at:
- Consumers’ perceptions, use and experience of DCTs. Part of this is likely to assess whether there should be greater transparency for consumers on how DCTs make money;
- Competition between suppliers listed on the DCTs – including whether the contractual arrangements between DCTs and suppliers are anti-competitive (e.g. as a result of price parity obligations which could limit the opportunities for price competition);
- Competition between the DCTs;
- Existing regulatory approaches to DCTs.
The CMA has stated that the aims of this study are to:
- Produce an authoritative assessment of the role of DCTs – to be used by all policymakers and stakeholders.
- Identify how to maximise the benefits that DCTs can deliver.
- Reduce barriers to the effective functioning of DCTs.
Reading between the lines of the CMA’s Statement of Scope, further and more comprehensive regulation of DCTs is certainly a realistic outcome.
The CMA has invited submissions from interested parties by 24 October. It may also issue individual information requests to ensure it gathers the information needed in the time required. The CMA has published an online form for respondents to use: https://www.surveymonkey.co.uk/r/SYDVVLJ.
The CMA has 6 months to announce whether it intends to refer the market for a more in-depth (phase 2) investigation. It must publish its report within 12 months, setting out its findings and the actions (if any) it proposes to take.
Potential outcomes from this market study include referring the market to a CMA Panel for a detailed (phase 2) investigation, accepting undertakings in lieu of such a reference, or recommending more robust industry self-regulation or government regulation.
If the CMA uncovers evidence in the course of the market study which suggests that individual firms may have breached competition law, it could launch individual enforcement investigations into that conduct.
What are the opportunities?
The market study represents an opportunity to influence future regulation. It also provides a means to raise any concerns which firms may have as regards market operation, without the need to identify any particular cases or counterparties.
What are the risks?
Market studies can be resource and time intensive for businesses involved. The timeframe is very tight, and CMA information requests typically provide only a few days – and sometimes less – to provide a response. As noted, the outcomes could be significant, including further detailed review of the market, possible regulatory reform or individual enforcement actions for suspected competition law breach.
What should I do?
If you are interested in finding out more, or receiving direct communication from the CMA, please get in touch with the authors.