7th Report - Protecting consumers: Making energy price comparison websites transparent - Energy and Climate Change Contents

1  Introduction

1. Price comparison websites are designed to do just what their name implies: compare the price of goods and services from a range of providers and thereby allow consumers to make informed decisions about which provider to choose in order to save money.[1] Some websites focus on specific consumer products while others provide comparison data across a range of products, for example, insurance, credit cards, and energy tariffs.

2. These websites perform an important role in empowering consumers. This role has become "increasingly important in recent years in the energy market and they are now the dominant channel used by consumers to switch supplier".[2] Ofgem told us that:

    Switching rates are relatively low at present. In 2013, 12% of consumers switched energy supplier. Of those that stayed with the same supplier, 14% switched either their tariff or payment method. […] In 2013 approximately 30% of all those who switched did so using a comparison site. And of those that compared tariffs during the year a higher percentage (40%) used a comparison site to find information about available tariffs. This is compared to just over 20% in 2011.[3]

3. Over the past year concerns have been growing about the way in which some of these websites operate. Research by financial website 'This Is Money' found that "some switching websites are keeping new, smaller energy suppliers from competing in the energy market by obscuring some available deals […] many do not necessarily see the full range of deals available, because switching sites obscure access to deals for which they would not receive commission".[4] In April 2014, This is Money reported its findings on some of the major price comparison websites:

·  The default settings on Compare the Market mean that visitors to the website only see the deals for which the site receives commission. In order to see the full market range, users must click on a tab that says 'refine your search', then on another tab that says 'other options', then a tick box that says 'show tariffs I can't switch to now' and then click 'update results'.

·  MoneySuperMarket asks users the question 'show energy deals we can switch you to today?'—the default choice is 'yes', which shows consumers deals for which the site receives commission. Users must click 'no' to see the full range of deals.

·  uSwitch asks a similar question to MoneySuperMarket, but when you hover over 'yes' or 'no' an explanation is provided.

·  Go Compare's default setting shows only deals for which it receives commission. Users have to change the settings at the top of the page to see the full market view.[5]

We raised some of these concerns with Dermot Nolan, Chief Executive of Ofgem, in May 2014. He told us that Ofgem was looking into the issue and added "if we think there is a significant problem then clearly we will act to do something about it".[6]

4. More recently further research was carried out over a thirteen week period by the collective switching service, The Big Deal. In October 2014, The Big Deal reported that:

·  All the major price comparison websites hid the cheapest deal from customers. Many for weeks on end.

·  uSwitch, the largest energy switching website, never showed the cheapest deal. It regularly hid three out of the top five cheapest deals.

·  Every site used a mechanism to hide deals where they ask users if they want to see deals they can switch to "today" or "now".

·  Clicking "Yes" filtered out all deals which did not earn the price comparison site a commission from the energy company. Often these deals were the cheapest.

·  MoneySupermarket and Confused pre-filled this question "Yes".

·  Compare the Market and Go Compare automatically showed users the results without even asking this question. Customers had to go through several screens to "filter your results" to see the cheapest deals.

·  Overall price comparison sites hid almost a third of deals from customers via this method.[7]

The Big Deal wrote to the five major sites—Compare the Market, Go Compare, uSwitch, MoneySuperMarket and Confused—asking that they stop this activity. The letter was copied to us and representatives from Government and the Opposition.

5. In December 2014, we issued a call for written evidence on energy price comparison websites, seeking views on their role and how they operate; the transparency of commission arrangements; consumer trust in these sites; and arrangements for regulatory oversight, particularly through the 'Confidence Code', Ofgem's voluntary code of practice that governs some of these sites.

6. We noted that Ofgem announced, in January 2015, that it would revise the Confidence Code. The regulator set out the changes that it considers will help customers make an informed choice when using an accredited comparison site:

·  Banning a default partial view. Sites must show all tariffs available in the market unless customers actively choose to select to see a smaller number of tariffs.

·  Ending confusing language. The wording of any choice must be very clear to site users. Sites must test their messaging with consumers and be able to prove that it is clear and simple. If a site cannot demonstrate this, it will not be able to give customers a choice of view, and will have to show all tariffs. The wording of this choice must be approved by Ofgem.

·  Making commission arrangements transparent. Sites must explain clearly that they earn commission on tariffs that customers can switch to directly through the site.

7. In response to our call for evidence we received 18 submissions. We subsequently held an oral evidence session with the five major price comparison websites in February 2015. We are grateful to all those who contributed. Given the upcoming dissolution of Parliament ahead of the General Election, we have regrettably not been able to schedule further evidence sessions to hear directly from other price comparison websites and consumer groups. However, we are very grateful to these stakeholders for their written submissions and correspondence. This report provides a brief overview of some of the practices that have been brought to our attention and sets out our recommendations on how to rebuild trust in comparison websites in order to facilitate greater levels of switching in the energy market. Further details about the issues we raise and the views of different stakeholders can be found in the written and oral evidence published on our website.[8] We hope that our successor Committee will find time to follow up on these important issues after the General Election.

1   Which?, How price comparison sites work, accessed 10 February 2015 Back

2   Citizens Advice Service (EPW0004) Back

3   Ofgem (EPW0019) Back

4   This is Money, Fair comparison? How energy switching sites are keeping small suppliers out of the market by 'hiding' deals that won't make them money, 29 April 2014 Back

5   This is Money, Fair comparison? How energy switching sites are keeping small suppliers out of the market by 'hiding' deals that won't make them money, 29 April 2014 Back

6   Q39, Evidence session with Ofgem, 13 May 2014 Back

7   The Big Deal, Letter to price comparison websites, 20 October 2014 Back

8   Energy and Climate Change Committee, Energy price comparison websites inquiry Back

previous page contents next page

© Parliamentary copyright 2015
Prepared 28 February 2015