UKRN Report on price comparison websites
The UK Regulators Network (UKRN), which included the FCA and the Payment Systems Regulator, published its final report on price comparison websites (PCWs) on 27 September 2016. The report offers a view on the following key points:
- How consumers engage with the market of PCWs;
- What benefits there are for customers and for competition;
- What potential risks could undermine the effectiveness of the comparison sites; and
- What regulatory powers can be applied to address these potential risks now as well as the future challenges that will come from innovations in the market.
In certain circumstances, the FCA directly regulate PCWs operating within financial services. This is where the firm that operates the PCW is undertaking an activity that is defined as a regulated activity under the Financial Service and Markets Act 2000 (Regulated Activities) Order. The Regulated Activities Order includes activity such as credit brokering and insurance mediation. Firms carrying out these regulated activities, unless they are exempt, are required to be authorised by the FCA and regulated by the FCA. They must follow the FCA’s rules and, by virtue of this, the FCA have the power to enforce the Financial Service and Markets Act 2000 (FSMA) and their rules against them as with all other regulated firms.
The Report highlights how PCWs can help consumers navigate potentially complex products and reduce search costs by comparing offers simultaneously in one place. PCWs can also help firms secure new customers, reduce barriers to entry and stimulate stronger competition and innovation between product providers.
It also found that, whilst PCWs can bring benefits to consumers, firms and competition, their effectiveness as a tool for enhancing consumer engagement and competition may be undermined if consumers are unable to navigate the information presented to them, if they do not have confidence in the conduct or safety of PCWs or if they do not shop around amongst PCWs to find the best deal.
Regulators have identified the following concerns which they would seek to address appropriately:
- Rankings may be complex (for example in the credit cards sector, ranking of credit cards and their offers might not always be helpful for consumers)
- Rankings may not be suitable for all customers (PCWs’ rankings are sometimes ordered by ‘popularity’, this may not be helpful for consumers and it could lead to an unfavourable outcome if previous users have made poor choices)
- PCWs may give prominence to suppliers they have a commercial relationship with
- Not all products are presented to consumers because of a lack of commercial relationship
- The method of ranking may affect which deals consumers use.