The Australian Competition and Consumer Commission (ACCC) has released a report into the comparator website industry in Australia, which examines how the industry operates, and identifies challenges and benefits for both consumers and businesses.

Comparator websites compare goods and/or services offered by a range of suppliers. They are referred to in a number of ways, including ‘price comparison websites’, ‘product comparison websites’, ‘comparators’ and ‘aggregators’.

The ACCC focused on comparator websites that compare products offered by private health insurance, telecommunications and energy providers. Comparator websites in other sectors such as financial services and travel were outside the scope of the review.

In many cases, comparator website operators use an integrated multi-channel consumer interface with a website to initially engage the consumer and drive demand to a call centre.

The ACCC has identified a number of areas where conduct by comparator website operators can potentially mislead or deceive consumers. Lack of transparency is a key issue of concern in terms of both material on the website and behind-the-scenes (back office/commercial relationships) conduct.

Concerns about material on the website broadly relate to representations as to the:

• nature or extent of the comparison service, including market coverage
• savings achieved by using the comparison service
• comparison services being unbiased, impartial or independent
• value ranking.

Concerns about behind-the-scenes conduct broadly relate to:

• undisclosed commercial relationships affecting recommendations to consumers (eg inducements, preferential treatment, operation of algorithms and sales quotas)
• content and quality assurance of product information: the ACCC is concerned that where quality assurance practices are insufficient, this could lead to incorrect information or results being displayed, which could mislead or deceive consumers.

According to the ACCC the undisclosed aspect of preferential commercial relationships may:

• cause consumers to purchase more expensive products when a less expensive alternative is available
• harm consumer trust in comparator websites and limit the expansion of the comparator website industry
• offer some service providers an unfair competitive advantage, by directing more business to a particular service provider than would otherwise have been the case because better product offerings by competitors may be omitted from search results as a consequence of this conduct.

Previous ACCC action

In November 2007, the ACCC accepted court enforceable undertakings from iSelect Health Pty Ltd (iSelect) following concerns that iSelect made various representations that were likely to mislead consumers as to the range of health insurance policies it compared when recommending a policy.

In 2012, the Federal Court ordered Energy Watch Pty Ltd to pay $1.95 million for misleading advertising and its former CEO to pay $65 000 for his voiceover role in misleading radio advertisements.

The misleading advertising related to representations about the nature of the Energy Watch service and the savings consumers would make by using the service and switching energy retailers.

In August 2014 Compare The Market Pty Ltd paid a penalty of $10,200 following the issue of an infringement notice by the ACCC in relation to claims of health fund coverage made in recent advertising promoting Compare the Market’s health insurance comparison service.

Related post: ASIC warnings on credit comparison websites