Most favoured nation clause example: ComparetheMarket fined £17.8m
First published by Author on February 02, 2022 in the following categories: Advertising Consumer Law Digital Industry Investigations Market Dominance Abuse Pricing Selling Restrictions and tagged with advertising | cma | competition law | consumer law | contracts | investigations | market abuse | pricing
Last year, the Competition and Markets Authority (CMA) published the details of its full decision having fined ComparetheMarket £17.8m for reportedly breaching competition law. The investigation that had been concluded by the UK’s competition regulator led to the finding that the famous price comparison website was said to have broken the law by including a most favoured nation clause in some of the contracts it had with home insurance providers.
Over the course of December 2015-December 2017, ComparetheMarket is said to have used the clause to retain its domination of the comparison website market. The knock-on effect may have been the prevention of healthy growth of its competitors and possibly restricting customers from finding better deals on their home insurance.
Designed to empower consumers to find bargains in a crowded and confusing market, price comparison websites should be on the side of their users. This is why it was concerning that ComparetheMarket had been restricting competition seemingly for their own gain. The enforcement action taken by the CMA hopefully helped to restore competitiveness in the digital price comparison market, and is a real example of where the most favoured nation clause can lead to problems for competition law.
The CMA investigation and the most favoured nation clause
In late 2018, the CMA revealed its initial findings in its investigation of ComparetheMarket, claiming that clauses used in its contracts with home insurers breached competition law. Last year, the final verdict confirmed these original findings, specifically criticising the use of most favoured nation clauses.
According to the CMA, the most favoured nation clause was apparently designed to prevent home insurers in contract with ComparetheMarket being able to offer lower prices on other price comparison sites. As ComparetheMarket was already ahead of many of its competitors, this seemingly unfair agreement only made it more difficult for other sites to outrun the company.
As a result of the most favoured nation clause, there were reportedly lower competitive pressures felt by ComparetheMarket and the home insurers advertising on price comparison websites. It was also said to have been more difficult for rival comparison websites to negotiate advantageous deal with home insurers that could have allowed them to gain better prices than ComparetheMarket.
The side-effect of this reduced competition was that consumers may not have been able to find the bargains they deserved.
The implications of the verdict
The verdict was a victory for price comparison websites and consumers alike. No company should be allowed to dominate the market unfairly, and ComparetheMarket may have leveraged its strong market position when making deals with home insurers.
Moreover, it is worrying to think that price comparison websites, which present themselves as well-intentioned assistants to the consumer, could potentially mislead their users in such a way. The CMA fine may have equated to only a fraction of ComparetheMarket’s profits, but it is our hope that it will nevertheless have the dissuasive effect the CMA intends; discouraging unfair deals from being made again.
The importance of the CMA in this example
We understand that the business world can often feel dominated by giants, which is why it is important to make sure that smaller businesses and consumers are not disadvantaged by deceitful or unfair practices. Everyone should be able to get a fair deal, which is why the CMA’s role for intervening for breaches of competition law is so vital.