Utility Week

UTILITY WEEK | 4Th - 10Th NovEmbEr 2016 | 25 Customers "Price comparison websites have hoodwinked the CMA into removing the 'whole-of-market' obligation – and consumer trust will suffer for it." Personal view Will Hodson T he Competition and Markets Authority (CMA) has a simple – and controversial – view on energy switching: what's good for comparison sites is good for consumers. We disagree. One CMA remedy in particular has stuck in the craw: the proposed removal of the "whole of market" require- ment. This noble requirement obliged comparison sites to show consumers every deal on the market. The CMA argued that, from now on, comparison sites should be able to hide deals that do not earn them a commission – even if they are the cheapest deals on the market. The disgust that followed should not have surprised the CMA. Two years prior, in October 2014, The Sun had splashed on comparison sites hiding cheap deals that did not pay them a commission. There was public outcry and Ofgem clamped down on the practice. It forced likes of CompareTheMarket to, well, compare the market, rather than just compare the bit of the market that pays them a commission. What followed, according to comparison sites, was The Tragic Age of British Switching – a period they nar- rated to the CMA with such heartbreaking grief that the watchdog felt moved to bring that age to an immedi- ate end. So what was wrong with an arrangement that looked like common sense to everyone else? Comparison sites wailed that suppliers were refusing to pay them a commission (despite supplier protests that their commissions were too high). This stand-off reduced their (high) profits. Through bitter tears, comparison sites swore to the CMA that they would abandon the energy market in favour of other industries where every switcher earned them money. The CMA bought this argument. We think that was a mistake, and question the underlying assumptions. For example, did switching go down during the whole of market requirement? No. In fact, overall switching went up. Was the comparison site business model ruined by the requirement to give honest advice? No. Zoopla bought Uswitch, by far the biggest energy switching site, for £160 million in 2015. And is it really the CMA's busi- ness to prop up comparison sites' business model any- way? Is Go Compare's fat opera singer really too big to fail? It beggars belief that the CMA proposes to give domi- nant comparison sites even more market power. Between them, Uswitch and Moneysupermarket have 70 to 80 per cent of the energy switching market. With no require- ment to show suppliers that do not pay them their desired commission, they can threaten companies with obscurity unless they pay up. That will see commissions rise further – and commissions are a cost that ends up on our bills. Uswitch allegedly charges suppliers over £70 for switchers on a deal that costs just over £700. So its com- mission can be as big as 10 per cent of the consumer's bill. No matter what happens next, comparison sites must be made to disclose their commission levels – if only to guard against abuse of market power. Such transparency is generally a prerequisite to trust. And this move will undoubtedly undermine trust in the energy market. That is the major point here. Amid all the commercial noise of the energy market, consumers need a trustworthy signal: what truly is the best deal for me? Under the CMA's recommendation, comparison sites will no longer offer that signal. They should make that clear to consumers weaned on their "consumer champion" propaganda. Even then, a void would remain, along with a ques- tion: if the interests of comparison sites are allowed to veer away from those of consumers, who now can the British public trust? Will Hodson is co-founder of collective switch TheBigDeal.com CMA remedies Giving more data, such as customer meter numbers, to PCWs and other intermediaries, and allowing them to negotiate exclusive deals with suppliers. In return, PCWs must be transparent about how they cover the market. Removal of the confidence code which requires PCWs to show a whole market view – the sites will now only show commission paying suppliers. Measures to help new suppliers compete for prepay- ment meter customers and reduce barriers such as personal debt issues that make it difficult for such customers to switch. A range of measures to help microbusinesses. Ensuring the transparency of green subsidies that go on the customer's bill and assessing their impact beforehand, with a clear rationale for the allocation of funding to different technologies. Reforms to electricity and gas settlement processes to lower costs by enabling more accurate measurement of consumption and more efficient supply – and to enable the full benefit of smart meters to be realised.

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