What difference do comparison sites make to energy prices? Does the commission that Compare the Market are paid affect prices?
The only cost price comparison adds to the energy market is that of distribution or marketing - and at the cost of a commission per switch. Without comparison tools, whether it’s a digital one like comparison websites or alternatively, a broker, customers would have to research the market themselves and liaise with each supplier individually. Just as any other product needs to sell through a shop window, website or sales person – similarly energy tariffs need to be sold too and have had a combination of brokers, door to door salesmen and now in the digital times – websites. Every product has costs in marketing or distribution and the commission we would charge is no different from the way other business that pay commission work.
By making the shop window accessible in one place in a comparison tool, we allow customers to see many supplier’s tariffs in one window. This way, we can encourage suppliers to compete for customers. Ultimately, they need to be careful about the price of their tariffs because if they’re too expensive compared with the rest, they might not get any new customers.
The Competition and Markets Authority (CMA), the government body that helps promote fair competition between companies for the benefit of consumers and the economy, says:
“For prices to be kept as low as possible, there needs to be competition between companies to offer the best possible deal to their potential customers.”
“Digital comparison tools have played a big part in changing markets for the better, bringing new ways of doing things and forcing businesses to up their game. Consumers have benefited as choice and access to goods and services have grown.”
Andrea Coscelli, Chief Executive, CMA