Posted on 6th April 2016 by Alex Heys
Here at Flow we’re always encouraging people to consider switching energy providers to make sure they are getting the best deal and the best service. For the majority of us, the first port of call when considering switching would be a price comparison site – Gocompare or Compare the Market for example – and that’s a good thing, right?
Recently I wrote a piece for City A.M looking at the Competition and Markets Authoritys (CMA) initial report into the competitiveness of the energy market. According to the report, price comparison sites are the reason that millions of consumers have switched energy supplier. They promote switching to help customers find cheap tariffs and they then help them switch, saving each customer hundreds of pounds in the process.
The CMA’s belief seems to be that giving price comparison sites free rein would allow them to switch more and more customers to cheaper deals – and they’ve proposed some big changes to the way they operate with that in mind.
However, price comparison sites earn commission for every switch they process and the market is dominated by a small number of big players.
While some of the changes the CMA are proposing for the price comparison site market – for example, the ability to rebate switching commission to customers are clearly positive for customers, others seem entirely focused on boosting their power and profits, for example, allowing them to show customers only the tariffs they’re earning commission on (albeit with a clear indication to customers that that’s what they’re doing).
Of course, the argument is plausible that, since price comparison sites have led the switching revolution, increasing their influence will deliver the end result that so many want all UK consumers on competitive energy tariffs.
However, while they have undoubtedly played an important role in promoting the idea of switching supplier, and will continue to do so, it’s an important question to ask as to whether handing more power to a handful of providers offering a commission-based model is exactly the right approach to take.
If this becomes only real route to switch, and the small number of incumbent players tighten their grip on the market, it’s not impossible that price comparison sites gain the sort of stranglehold on the industry that the big six energy suppliers held for so long.
There are, of course, alternatives to the commission-based model – like the non-commission comparison service displaying every energy tariff provided by Citizen’s Advice.
So while the price comparison site industry is here to stay, and in many ways rightly so, perhaps greater consideration needs to be given to whether it should be quite so strongly supported.
Read my piece on City A.M here: CMA investigation into the big six energy companies: Energy price comparison sites