Competition Authority plan for commission-based price-comparison energy websites is not in public interest

Family consumer SSEAnother independent energy provider has criticised the Competition Authority’s report and recommendations into alleged abuses of free and fair competition in retail energy supply services.

In evidence to the House of Commons’ Energy Committee, Dr. Nigel Evans, Chairman of Flipper Ltd, said that the Committee was right to focus much of its time and questioning on the role of price comparison websites and whether the CMA’s proposed remedies will help customers get a better, fairer deal from the energy market.

He said: “Flipper is a new and innovative service that allows retail energy customers to automatically flip their energy supply.

“But we have a radically different approach to existing switching services. We charge a small annual subscription fee (£25) and do not rely on commission payments from energy suppliers. We guarantee to only charge the fee if we can save customers at least £50 on their first switch.

“We offer a service that allows customers to sign up in seconds without even needing to know their current supplier, tariff or annual usage.

“The CMA’s proposed remedy to reduce the whole of market obligation on comparison websites could make life much harder for customers.

“If they use traditional comparison sites they will have to use several sites to guarantee the best deal. Our research suggests that on average it takes customers around 20 minutes to use one of these sites and then the vast majority still pick the wrong tariff and miss out on substantial savings.

“We are also sceptical of the arguments made by the CMA, Which? and other witnesses that they and the media will keep comparison sites honest by “naming and shaming” those who only show a small number of suppliers and tariffs once the CMA’s reforms are in place.

“Unfortunately, many of these organisations and companies have a commercial interest in the commission based model as they run partnerships with energy switching services and receive commissions.

“This is true of Which’s energy switching service and the Guardian, Telegraph and Times).

“So we are not persuaded that they can be relied upon to police the comparison market.

“That is why we set up Flipper to make the whole process simple, hassle free and easy so that nobody ever has to overpay for their energy supply again. And by charging a small fee we can always be whole of market.

“All of the existing price comparison sites have successfully lobbied the CMA on a problem that is entirely of their own making. These sites choose to operate on commission. They could choose not to and charge direct for the service as we do.

 “So the CMA is wrong to suggest that if the whole of market obligation continues this will drive price comparison sites out of business. We think all of this is best left to the market.

“We (and other services now appearing in the market) are trying to solve this problem for customers by using a different model where our interests are fully aligned with our customers.”

It is interesting to note that – after many years of multiple inquiries – the regulator has abolished ‘commission-only’ customer advisory providers in the financial services industry because pervasive and anti-competitive effect of ‘commission bias’.

See also:

EXCLUSIVE: First Utility chief tells MPs how Big Six energy providers rip off British gas and electricity consumers

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