As energy prices soar, utility price comparison sites should be worth their weight in gold. But is all what it seems? A recent ASA verdict on an ‘independent’ claim in one site shows why the recent ‘Confidence Code’ from gas and electricity watchdog Energywatch was timely.
Topic: Misleading advertising
Who: Simply Energy t/a SimplySwitch
Where: The Advertising Standards Authority
When: February 2006
The Advertising Standards Authority ("ASA") upheld a complaint in respect of a national press ad for an online energy price comparison service called "SimplySwitch".
The body copy included the statement "we find you the best deal, including capped price offers. Independent – not owned by any supplier".
The "independent" claim was challenged as misleading because SimplySwitch received commission from suppliers to whom it passed prospects.
SimplySwitch said that although it did have arrangements with suppliers whereby it received commission when a consumer switched to that supplier through their service, they still believed that they acted independently of suppliers and argued that the ad made clear that the basis for the claim "independent" was that they were not owned by any supplier.
Independent = no commercial link says ASA
The ASA disagreed with SimplySwitch, saying that the claim "independent – not owned by any supplier" suggested no commercial link whatever between SimplySwitch and suppliers. The ASA also noted that although SimplySwitch showed consumers information on suppliers' tariffs even if no commercial agreement existed, they were only able to switch consumers to those suppliers who paid them a commission. This meant that in the ASA's view, SimplySwitch was not entirely independent of suppliers.
In its submission, SimplySwitch had suggested that if the current claim was objected to by the ASA, the phrases "impartial switching service" or "impartial comparison service" might be acceptable instead.
The ASA indicated in its verdict that although "impartial switching service" would still suffer from the same problem given that consumers could only be switched to companies with whom SimplySwitch had a commercial arrangement, "impartial comparison service" should be regarded as accurate and acceptable.
Why this matters:
With energy prices rocketing, on-line energy price comparison services are becoming increasingly attractive. Clearly with consumers turning to these services, it is important that there is transparency about the offering. An "Observer" piece on 19 February 2006 reported, for instance, that two of the four leading comparison sites failed to list not-for-profit company Ebico. Ebico claims that it is being kept "virtually hidden from the public" because it refuses to pay commission to energy comparison services and focuses on getting the lowest prices to customers.
That report, this ASA decision, and the recent publication by energy watchdog "EnergyWatch" of a new "Confidence Code" for price comparison services all highlight the need for consumer caution and clarity on the part of those promoting these services.
The new EnergyWatch code addresses aspects such as those highlighted by this ASA verdict. It requires switching sites to explain which energy companies are paying commission to the site each time a customer switches.
The Code also highlights another flaw of some energy price comparison sites, selective presentation of comparable suppliers and their prices.
All available tariffs to be shown
The Code states that "the service provider must include price comparisons for all currently available tariffs for all licensed suppliers (for gas, electricity and dual fuel). Comparisons should be on a like for like basis."
Requirement 3 is that the price comparison service provider must be a company that runs its own website and uses its own tariff database and calculator. Requirement 5 is that prices from no less than five of the cheapest suppliers must be listed.
Requirement 8 is that the service provider must comply with an annual audit undertaken by an auditor appointed by EnergyWatch, the cost of the audit to be borne by the service provider.
Requirement 9 is that the service provider must have effective consumer complaint and enquiry handling procedures in place so that any such enquiries can be responded to within seven working days of receipt.
An accompanying "Guidance" document looks at Requirement 1 of the Code, which is that providers must be independent of any gas or electricity supplier. (Here the Code seems to mean not owned by the utility as opposed to the much wider meaning attributed to "independent" claims in this context by the ASA in the SimplySwitch case). Providers can take commission from suppliers, but this must not influence the provision of information and they must state clearly each supplier that they receive commission from although they do not have to state how much.
A list of those providers with whom a commission agreement exists must be displayed prominently on, or be accessible from, the results page. Furthermore, where consumers can't automatically switch to a supplier through the service provider's site, the service provider should not recommend an alternative supplier.
Other code and guidance provisions deal in more detail with the presentation of search results and provide, for instance, that tariffs must be updated within two working days of a supplier's price change coming into effect.
Hopefully energy price comparison service providers will be redoubling their efforts to ensure transparency and compliance with the EnergyWatch Code, even though it only has voluntary status at the present time.