Comparison sites questioned in price fixing probe
MoneySupermarket.com and uSwitch.com have been asked to submit information to energy regulator Ofgem as part of an investigation into possible price fixing.
MoneySupermarket and uSwitch's new parent company Zoopla have, as a result, seen their share prices drop since yesterday by around 10% and 5% respectively.
"Ofgem has opened an investigation into whether two or more companies providing a supporting service for the energy industry have breached competition law," revealed MoneySupermarket in an announcement on its website.
Collective energy switching campaign The Big Deal reported last October that the big five price comparison sites (uSwitch, Confused, MoneySupermarket, GoCompare and Compare the Market) had all hidden the cheapest deals from users online - "many for weeks on end", it said at the time.
It pointed out that while consumers' energy bills had doubled between 2005 and 2012, the combined profits of price comparison websites had more than quadrupled.
In February this year, The Big Deal published further evidence, including audio recordings, of the big five having lied over the phone to consumers about the cheapest energy deals "to earn themselves more money".
Responding to Ofgem's request for more information from MoneySupermarket.com and Zoopla, Will Hodson, co-founder of The Big Deal, said: "Commissions are a cost that end up on our bills. If comparison sites have been colluding to fix those commissions at a high level, that is a scandal. Comparison sites should now publish their commissions as a matter of urgency, but many consumers will never trust them again.
"First they hid deals that didn't earn them a kickback, and now they may be colluding to keep those kickbacks at extortionate heights. The public has long been wary of the Big Six suppliers, but if Ofgem discovers price fixing among the Big Five comparison sites, we may have two cartels in one industry."
Laith Khalaf, senior analyst at Hargreaves Lansdown, added: "Price comparison websites have been instrumental in helping consumers shop around for the best deal, but any investigation is likely to rock public trust in these services.
"The falling price of shares in Moneysupermarket.com and Zoopla reflects the market's concern that there could be some regulatory action within the sector, though there is at present no indication that either of these companies have done anything wrong."
Ofgem previously gave energy price comparison sites until March 2015 to shape up if they want their services to be accredited by a new 'code of confidence'.
Since the end of March they have had to ensure they include at least 10 tariffs for consumers to compare and they must be upfront about which deals will earn them commission from energy companies.
They also have to make it clear to customers that they are able to switch energy firms by contacting them directly rather than letting the comparison site handle the switch for them.
As part of the code of confidence, accredited comparison sites have also been banned from displaying a 'default partial view' of summary deals from suppliers that pay them the most commission.
This means they have to display all tariffs available, unless the customer actively chooses to see a summary.
The websites were also meant to have put an end to the use of confusing language and ensure they explain tariffs and customer choices clearly to their users. This wording must be signed-off by Ofgem.
Comparison sites that do not comply with the code are not accredited by the regulator and risk being perceived by consumers as less trustworthy. At present, collective switching schemes are not part of the code but Ofgem says it could broaden the scope of the code to such schemes in future.
MoneySuperMarket, uSwitch and energyhelpline, which powers Moneywise's energy price comparison tool, are accredited by the code of confidence. Comparethemarket, Confused.com and Gocompare are not.