Energy price comparison websites play an important role in helping consumers to make informed decisions about switching energy supplier. In order to fulfil this role the websites must be trusted by consumers and be fully transparent about the service they provide. In the last year there has been growing criticism about the way in which some of these comparison websites operate. We have been alarmed by suggestions that some comparison websites have been hiding the best deals from consumers by concealing tariffs from suppliers that do not pay the website a commission. We conclude that all deals should be made available by default to the consumer. We strongly object to any attempt to lure consumers into choosing particular deals by the use of misleading language. We recommend that, as an immediate and essential first step towards rebuilding confidence, compensation should be provided to those consumers who were encouraged to switch to a tariff that was not the cheapest or most appropriate for their needs.
Another issue of concern is that consumers choosing telesales services may also be missing out on cheaper deals. The Confidence Code (a voluntary code of practice) only applies to online operations and not to the telesales operations run by the accredited sites. Price comparison websites must be clearer in the language their sales staff use over the phone to avoid any confusion about whether consumers are actually getting the best deal available to them. We recommend that Ofgem applies the same transparency and accuracy requirements to telesales activity, collective switching schemes and face-to-face sales.
Consumer awareness of the Confidence Code is low. Not all price comparison websites are eligible to apply for accreditation and consumers will often opt for websites with big advertising budgets regardless of their accreditation status. The current hands-off approach is clearly not working and we recommend that Ofgem urgently carry out an impact assessment on moving to a licence-based system for price comparison websites or alternatively a licence requirement on energy suppliers to use only Ofgem accredited websites.
A further shortcoming is the lack of transparency about commission arrangements between the websites and suppliers. We have no objection to commission being paid by suppliers to price comparison websites as long as the arrangements are clearly disclosed. We recommend that Ofgem should consult on the merits of requiring price comparison websites and other third party intermediaries to disclose-at the point of sale-the amount of commission received for each switch.
If consumer trust is to be maintained in the energy market it is essential that price comparison websites operate with greater transparency.