Judgment

Judgment of the Tribunal on an application by BGL (Holdings) Limited and others (collectively, “Compare The Market”) for a review under section 46(1) of the Competition Act 1998 (“the Act”) of a decision of the Competition and Markets Authority (the “CMA”) dated 19 November 2022 entitled “Price comparison website: use of most favoured nation clauses” (the “Decision”).

The CMA in its Decision found that Compare The Market had infringed the Chapter I prohibition contained in section 2 of the Act and Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) by imposing certain obligations known as Wide Most Favoured National Clauses (“wMFNs”) on 32 home insurance providers.  In the context of home insurance, a wMFN is a clause imposed by a price comparison website which prevents a home insurance provider from pricing lower than the price quoted on that particular price comparison website, for the same policy, both through the home insurance providers’ own website (or other direct marketing channels) and on any other price comparison website that the home insurance provider lists on. In summary, the CMA concluded in the Decision that the imposition of 32 wMFNs by Compare The Market had the appreciable effect of preventing, restricting or distorting competition in breach of the Chapter I prohibition and Article 101 TFEU by:

(i) Reducing price competition between price comparison websites.

(ii) Restricting the ability of Compare The Market’s rival price comparison websites to expand, enabling Compare The Market to maintain or strengthen its market power.

(iii) Reducing price competition between home insurers competing on price comparison websites.

As a result of the findings made in the Decision, the CMA imposed on Compare The Market a financial penalty of £17,910,062.

In its Notice of Appeal, Compare The Market advanced six substantive grounds of appeal in respect of the Decision (in relation to the finding of the infringement), which may be summarised as follows:

1. Ground 1: the market definition adopted by the CMA in the Decision was flawed.
2. Ground 2: the CMA erred in respect of “effective coverage” of the wMFNs, such that certain home insurance providers should have been excluded from the assessment of “effective coverage”, and consequently the coverage of the agreements was far less than the CMA had found.
3. Grounds 3 to 6: the CMA failed to show – to the requisite standard, or at all – that the wMFNs had anti-competitive effects. In particular, (i) the CMA failed to provide evidence of effect on Premiums or Commissions; (ii) the CMA failed to provide evidence of effects on promotional deals; (iii) the CMA failed to establish the counterfactual and causation; and (iv) there were further factual errors in relation to Compare The Market’s wMFNs by the CMA.

Compare The Market advanced two further grounds of appeal against the penalty imposed in the Decision (Grounds 7 and 8) contingently in the event that it was unsuccessful on Grounds 1 to 6.

For the reasons given in the Judgment, the Tribunal unanimously decided that all of the substantive grounds advanced by Compare The Market (except for Ground 2) succeeded and the Decision is set aside accordingly. In summary, the Tribunal decided that:

1. In relation to Ground 1, the market definition in the Decision was materially wrong and the process by which the CMA arrived at the market definition was flawed. In particular, the Tribunal found that the CMA (i) adopted an inaccurate definition of the consumer side of the market, (ii) failed to properly consider the significance of other channels for the purchase of home insurance by consumers, (iii) fell into error by adopting an approach to market definition which was not “outcome neutral”, (iv) failed to properly test for demand substitutability on the consumer side of the market by incorrectly applying the SSNIP test (Small but Significant Non-transitory Increase in Price), and (v) incorrectly included Narrow Most Favoured Nation Clauses in the market definition assessment.
2. Ground 2 is dismissed. The CMA was correct and justified in considering all of the 32 wMFNs collectively for the purposes of assessing anti-competitive effects, instead of individually assessing whether any given wMFN in and of itself constituted a restriction of competition.
3. In relation to Grounds 3 to 6, the CMA failed to establish that wMFNs had the anti-competitive effects articulated in its Decision. The Tribunal considered that a great deal of the CMA’s analysis as to the alleged anti-competitive effects of wMFNs in the Decision operated at the level of theory or bare assertion, with no significant reference to quantitative evidence (rather, the Decision was principally based on qualitative evidence) and it was extremely difficult for the Tribunal, and Compare The Market, to identify the evidential basis for the effects stated to exist in the Decision. The Tribunal found that (i) there was no reliable evidence upon which to conclude the existence of any adverse effect of wMFNs on either Premiums or Commissions, (ii) the evidence which was adduced by the CMA was anecdotal at best and lacked depth and consistency with the CMA’s theory of harm, and (iii) it was not possible for Compare The Market, and the Tribunal, to test the evidence relied upon in any way. In relation to promotional discounts, the Tribunal did not consider that the competitive structure of the market was harmed, even potentially, through an effect on promotional discounts.
4. Grounds 7 and 8 concerning penalty were not considered by the Tribunal given the Tribunal’s findings on the substantive grounds of appeal.