Tribunal panel rules that prior Competition and Markets Authority decision was based on ‘no reliable evidence’
The Competition Appeal Tribunal has set aside a £17.9m fine imposed by the Competition and Markets Authority (CMA) onto price comparison website (PCW) Compare the Market after finding that the competition regulator’s investigation into Compare the Market’s use of most favoured nation clauses for home insurance was based on “no reliable evidence”.
The CMA originally issued its multimillion pound fine back in November 2020, stating that an investigation launched in September 2017 had found that between December 2015 and December 2017, Compare the Market had imposed wide most favourite nation clauses on 32 home insurance providers using its site.
This meant that home insurers advertising policies through Compare the Market were not able to offer lower prices for the same policies either on their own websites, other direct channels or via any other PCWs, ensuring that Compare the Market was the only distribution channel showcasing the lowest available prices for the specified home insurers.
The CMA said this action “had the appreciable effect of preventing, restricting or distorting competition” and breached the Treaty on the Functioning of the European Union.
As a result, it issued Compare the Market with a £17.9m fine.
‘No reliable evidence’
However, appeal proceedings – BGL (Holdings) Limited and Others v Competition and Markets Authority – led by the Competition Appeal Tribunal has now disregarded the initial findings from the CMA and set aside the fine.
The appeal judgment, which was published on 8 August 2022, found that:
- The market definition adopted by the CMA in its original decision was “flawed” and “materially wrong”.
- The CMA “failed to show” when the most favoured nation clauses used by Compare the Market had “anti-competitive effects”, relying on “theory or bare assertion, with no significant reference to quantitative evidence”.
The Honourable Mr Justice Marcus Smith, Bridget Lucas QC and Professor David Ulph CBE led the tribunal.
The trio “unanimously” ruled that “there was no reliable evidence upon which to conclude the existence of any adverse effect of [most favoured nation clauses] on either premiums or commissions”.
Furthermore, “the evidence which was adduced by the CMA was anecdotal at best and lacked depth and consistency with the CMA’s theory of harm, [therefore] it was not possible for Compare the Market and the Tribunal to test the evidence relied upon in any way”.
The judgment concluded: “The Tribunal did not consider that the competitive structure of the market was harmed, even potentially, through an effect on promotional discounts.”
A spokesperson for Compare the Market told Insurance Times: “We fully support the work the CMA does as vital to protecting the integrity of the markets.
”We are pleased that this matter is now concluded and are, of course, happy with the outcome. We look forward to continuing our work to help people save money at a time when we are needed more than ever.”
A CMA spokesperson added: “The CMA is disappointed with the judgment and is currently considering its contents as well as any next steps.”