Compare the Market has successfully appealed the Competition and Markets Authority’s (CMA) decision that it had infringed competition law and its fine of £17.9m has been overturned.
Since 2017, the CMA has been investigating the competitive practices of price comparison websites. Best price clauses or most favoured nation clauses are customer friendly clauses where the seller agrees to give the customer the best terms or prices it makes available to any other customer, so preventing the seller from undercutting prices quoted by the customer both through the supplier’s own site and through other price comparison sites.
In the case of Compare the Market, its contracts with its network of 32 home insurance providers contained “Wide Most Favoured Nation” clauses (wMFNs) that prevented the insurers from offering lower prices themselves or through alternative sales channels.
On 19 November 2020, the CMA fined BGL (Holdings) Limited and others (BGL), more commonly known as comparethemarket.com, £17.9m for breaching competition legislation. BGL had been using wMFN clauses, which the CMA held had the appreciable effect of preventing, restricting or distorting competition, restricted the ability of competitors to expand and reduce price competition, so were anti-competitive. The CMA’s stance on wMFN clauses throughout this investigation had been that wMFN clauses are likely to be anti-competitive by softening competition between digital comparison tools resulting in higher prices for consumers.
On 8 August 2022, BGL brought a successful appeal before the Competition Appeal Tribunal who agreed with BGL that its wMFN clauses had no appreciable adverse effect on competition and it thus overturned the decision and the fine of £17.9m. The Tribunal also found in favour of BGL on the grounds that the CMA had made technical errors during the decision making process such as adopting the wrong market definition, that there was no reliable evidence, that the evidence provided was anecdotal at best, lacking depth and consistency and that it was not possible for BGL or the Tribunal, to test the evidence relied upon in any way. The Tribunal’s ruling also identified that the constraints of a wMFN clause on BGL’s insurance providers was simply a consequence of the bargain entered into and that, even though they may limit the insurance providers’ ability to enter other types of contract, there was nothing anti-competitive or illegitimate in this.
This decision indicates most favourable nation clauses have not yet been painted with the anti-competitive brush and we will continue to monitor how they are interpreted.
If you require any further information or advice please do not hesitate to contact Paula Dumbill at [javascript protected email address].
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