Oral evidence: Energy price comparison websites, HC 899, Tuesday 3 February 2015
Oral evidence, 3 February 2015.
Witnesses
Peter Plumb, Chief Executive, MoneySuperMarket, Steve Weller, Chief Executive, uSwitch, Paul Galligan, Managing Director, Compare the Market, Martin Coriat, Chief Executive, Confused, and Phil Morgan, Chief Finance and Operating Officer, Go Compare, gave evidence
Chair
Good morning, and thank you very much for coming in. I would like to start with a very simple question to each of you in turn, and it is capable of a yes or no answer. Do you agree that it is wrong to conceal the best available deal to a consumer on your website? Mr Plumb first.
Peter Plumb
Do I think it is wrong to conceal the best available deal on the website?
Chair
So the answer is “yes” to that question?
Peter Plumb
Sorry, I was just checking the question.
Chair
Yes, that is all right.
Peter Plumb
I was just settling in. I do not think it is wrong to not allow a customer to apply for a deal or—
Chair
No, I want a yes or no answer. Is it wrong to conceal from customers the best available deal, yes or no?
Peter Plumb
No.
Chair
It is not wrong. It is right, therefore, to conceal from a customer the deal that is best for them?
Peter Plumb
Let me start again. I think it is wrong to hide the best available deal on a website.
Chair
That is all I need to know from you. Yes, next one. Mr Weller?
Steve Weller
I would agree with Peter that we should be making all of the tariffs available, based on the customers selecting that option.
Chair
Say that again, I could not quite hear it.
Steve Weller
Make all the tariffs available for consumers.
Chair
You will need to speak up a bit. So was it a yes or a no?
Steve Weller
The answer is yes.
Chair
It is wrong?
Steve Weller
Correct.
Chair
Mr Galligan?
Paul Galligan
We have always made available to our consumers every available tariff on the market, so we believe—
Chair
I wanted to know whether it was yes or no, was the question.
Paul Galligan
We believe that, yes, consumers should be able to access all available tariffs.
Chair
Okay, right. Mr Coriat, is it yes or no?
Martin Coriat
My answer is yes.
Chair
Mr Morgan?
Phil Morgan
Yes, customers should have the ability to see all tariffs.
Chair
Was it the reason that in the past all your websites have sometimes concealed the best available deals? Was that because you were earning commission from deals that were less favourable, Mr Plumb?
Peter Plumb
We have always shown the best deals on the site, so we have not hidden tariffs to customers where we do not get a commission. We have always given the customers the choice of seeing two tables along the Ofgem guidelines: a table available through MoneySuperMarket or a whole of market table.
Chair
Has the default position on your side always been to show all available deals?
Peter Plumb
No—
Chair
Right, that is clear. So in the past you have not shown customers all available deals, including some that are better than the ones on which you are earning commission. So was the reason you concealed the better deals from your customers because you were earning commission, yes or no?
Peter Plumb
No, there are three reasons.
Chair
What was the purpose in that case of concealing a good deal from a customer?
Peter Plumb
There are three reasons. Some providers do not want the volume, like Flow energy. They do not want to be on a price comparison table because they cannot cope with the volume and actively do not want to be linked through. Secondly, some providers—some of the Big Six—do not want to show their existing customers because they do not have the infrastructure in place. Other tariffs they can switch to today, they do not want to be on MoneySuperMarket tables and—
Chair
Is the purpose of your site to help the Big Six screw their customers?
Peter Plumb
No, the purpose of our site is to help millions of customers break through and finally understand how they can switch energy and save themselves at least £200 a year by having a transparent view into the market and finally have the confidence, and the tools, to be able to move from tariffs they have been on for years to be able to finally switch to other providers and help rich and poor, old and young, to save money on their household bills.
Chair
On the first of your excuses, would it not have been helpful at least to say to the customer, “There is another company”—Flow I think you said—“who offer a cheaper deal but they do not want any new customers”? Would that not have been more honest?
Peter Plumb
In our whole of market tables, we show the providers. We do not provide links. I am a marketing tool for the industry. I cannot show providers who do not want to be shown.
Chair
So the reason you do not show—to give this question again—the best available deals to your customers is because you are earning commission on other deals, yes or no?
Peter Plumb
No. That is one of the reasons.
Chair
Mr Weller, what is the reason you do not show the best available deal? Is it because of the commission?
Steve Weller
No, it is not. We have given customers the choice to either see the whole of market or ones that they can use uSwitch to go through and help them with that switch service.
Chair
What was the default position on your site?
Steve Weller
We did not have a default position. We actively ask customers to make an active selection if they wish to see the whole market or those deals that they can switch through with uSwitch.
Chair
Mr Galligan?
Paul Galligan
First, we have always shown and made available to our consumers the ability to see the whole of market. As you have pointed to, the question is: what do we default to? There are a number of reasons why providers may not want to appear on our site. First, some providers may not want the volume that we can provide. Secondly, as we have already heard, some of the providers do not want to allow us to show a better deal to their existing customers for a tariff that they may offer.
Chair
Which are the providers who do not want more customers?
Paul Galligan
Some of the providers, as we have already—
Chair
Just name some that is all.
Paul Galligan
As an example, we have already heard that Flow Energy do not want to take our volume.
Chair
We will obviously check with the companies you name to make sure that you are telling the truth.
Paul Galligan
Yes.
Chair
Which are the companies that would say “no” to more customers?
Paul Galligan
I would need to come back to you with the specifics of—
Chair
So you cannot name any others?
Paul Galligan
I cannot name the others right now but that is an undisputed fact insofar as some companies—
Chair
Given modern technology, would you like to text your office now so before the end of the meeting they can tell you which companies are turning away business?
Paul Galligan
I can try to get that information for you and—
Chair
You do not have it at hand, obviously.
Paul Galligan
I do not have that to hand, no.
Chair
It is not a very persuasive answer, is it, to say, “There are other companies that do not want more business but I can’t actually name them”?
Paul Galligan
You may think it is not a persuasive answer but—
Chair
It is not what I think. I do not think the public will think it is very persuasive either.
Paul Galligan
That is a matter of fact. If we turn to what the consumers want, we always had a viewpoint that consumers wanted to see and compare the market providers that they could switch to. What we saw when we offered the consumer the ability to see whole of market, on average we were getting only 600 interactions with that offer every day. Now we have reversed that out—we automatically show whole of market—over 8,000 people are choosing to reduce that search on a daily basis in order to see providers that they can switch to. So we think the facts speak for themselves, consumers do want the ability to see a narrower range of providers that we can help them switch to.
Chair
Has your company ever arranged a switch for a consumer knowing that there was a cheaper available tariff somewhere else?
Paul Galligan
Of course the consumer chooses who they want to switch to.
Chair
The question was: has your company ever knowingly helped a consumer switch to a tariff when they knew that was not the cheapest available tariff, yes or no?
Paul Galligan
We provide the consumer a range of answers. The consumer chooses. What you have to bear in mind of course—
Chair
So I am the consumer—poor, dumb, stupid consumer—I say, “I want tariff A”. You know that tariff B is actually cheaper. Do you say, “Just go ahead with tariff A”?
Paul Galligan
Let us take your average consumer sitting in their front room on a Saturday morning. They input their details on to our site. In less than five minutes we will return to them 140 prices. The choice is then in their hands. If you take as an example what the Citizens Advice view is on it—and if I quote—they would say that we have transformed the ability of consumers to search the energy market in their own time and without sales pressure from any particular provider, making it easier to get the best deal. So we do not apply pressure. The consumer makes the choice.
Chair
I think you are telling us that you have. Your company has arranged a switch for a consumer knowing that there was a cheaper tariff that that consumer could have switched to.
Paul Galligan
That is not the case. We present the answers and the choices to the consumer. The consumer makes the choice.
Chair
The consumer may well make a choice that is not in their interests because you have not made it easy for them to find out where the cheaper tariffs are.
Paul Galligan
We have always made it easy for the consumer to see the whole of market.
Chair
Mr Coriat, how have you got on in this matter?
Martin Coriat
I would merely echo what has been said. Confused.com is committed to transparency and we always make available all the deals to our customers. We have a search now that consumers can see a full market comparison, including suppliers that we do not receive commission from. This means consumers will see every tariff available in the market and it will not be filtered. I do not know if that answers your question, but we always help customers to switch. We do act always in the best interests of consumers, showing them all the tariffs available and make them choose.
Chair
You are saying that your company has never knowingly helped a consumer switch to a tariff when you were aware there was a cheaper one available?
Martin Coriat
We give all the choices to consumers and they make a decision. They can make a decision to not go to the cheapest provider. They can make a decision to go with the more expensive provider because they trust the brand, because it is the reliability of the suppliers that they prefer to switch to, which they can pay by direct debit and not all suppliers accept direct debit. There are a lot of considerations taken into account when a consumer makes a decision for their energy provider, and cost is only one of them. We give them all the information and then they can make an informed decision.
Chair
Mr Morgan?
Phil Morgan
I would echo the other panel members. We always show customers the ability to see all tariffs. I think you mentioned that we only assist the larger energy companies. I think—
Chair
I did not say that. I suggested companies that paid you commission.
Phil Morgan
Indeed not. Basically we had only 44 customer queries on energy in 2014 versus over 60,000 sales so I think that shows the level of engagement we have with the end consumer and satisfaction of the service we provide.
Chair
So your company has never knowingly helped a customer switch to a tariff when you were aware there was a cheaper tariff available elsewhere?
Phil Morgan
If that situation did occur, we would expect our customer to inform us. We would fully investigate it and if there was a process failure that we needed to improve we would certainly act on that and make sure it did not happen again.
John Robertson
Could I ask you about the companies you do have on your websites: how do you go about getting these companies? Do you approach them or do they approach you? One person answer because I have to imagine it applies to all of you. Mr Galligan, what about you?
Paul Galligan
Yes, that would go both ways. In some cases it would be because we have approached the providers and in many cases they approach us.
John Robertson
You would approach providers. Did you see, gentlemen—I notice you are all gentlemen by the way; no women in higher up places here, which is ridiculous—in yesterday’s Sun newspaper the article about your comments about this company Zog Energy? That seems to be the cheapest energy company of all the companies that you deal with and yet you do not have them on your website. You are going to tell me whether you have or you have not approached them to find out whether they want to be included.
Steve Weller
I think I have answered that. Zog Energy is a gas-only provider and they do not want to work with comparison sites and make their product fulfillable.
John Robertson
You have approached them then?
Steve Weller
Yes. We have their tariffs. There are other providers who do not even share their tariffs with us and have requested not to be included on comparison sites as well.
John Robertson
Mr Weller, you tell me that you will give people—particularly if they wait the 24 hours—everything that they want from all the competitors. Would you then include Zog’s prices within that, even though you could not transfer somebody to them?
Steve Weller
If people go online and select “whole of market” you will see Zog Energy tariffs available to—
John Robertson
That will appear on your website? You can get it from your website?
Steve Weller
Yes, you can get that from our website but you have to look for gas only. For instance, if you are a dual fuel customer, so you use gas and electricity, they will not appear in the listing because they only offer gas.
John Robertson
You will appreciate that if a newspaper can go and get all this information very quickly—but they also have people helping them of course—that it puts your companies in a very bad light. I go back to something that somebody said about competition—I think it was you, Mr Coriat, I am not sure—that they will come to your site and they will pick the company and sometimes they might pick it because they know the name. The problem with that is all the big companies that are in your business have a particularly poor name. I would go so far as to say if I went on to your websites today I would be looking for a company that wasn’t one of these companies. It pulls the rug from your phrase that people want to go to a company that they trust because, to be honest, they do not trust any of these big companies, so why would you say that?
Martin Coriat
I think our duty as a price comparison website is to give information to customers to make sure they make an informed decision. We list the entire market; a market with big names and providers and some new entrants. The British energy market is one where there are a lot of new entrants coming in, and I think these new entrants came into the market and disrupted this market because of the price comparison websites that allow them to get access to customers. That is why I think we do act in favour of customers. We help them and also help new entrants offering cheaper deals to customers.
John Robertson
Why do you all make so much profit? According to The Sun some of you make an extraordinary amount of profit. Why would you make that kind of profit when you are trying to help customers to save money? Confuse.com, you made £16.4 million profit; uSwitch, you made £9.8 million; Go Compare, you made £53.9 million in profit[1]. Why should people trust you? Let me do Comparethemarket.com, a favourite of my grandson. It has £69.7 million profit, and Go Compare you have a £19.8 million profit. Why the difference between uSwitch and Go Compare, whether it is £9 million to £60 million-odd, in a company that is trying to supply a good deal for the customers? I am not worried about you making a profit. I do not have a problem with you making a profit. I do have a problem with you making exorbitant profits, and I feel you should be looking at getting a better deal because somebody somewhere along the line pays for these profits. Who is paying for it? Let’s go to Go Compare.
Phil Morgan
Thank you. I think the important aspect to appreciate is every pound of profit we make is based on a customer saving money. We only receive income if a customer buys a policy or an energy deal from the end supplier, so basically our profit is predicated on the consumer and end customer saving money. In that respect, the larger the profit the more savings we are bringing to the market.
John Robertson
Surely your job is to help them not just to make a profit. I understand you want to clear any costs you may have and the payments to your company so you will exist, but do you have to make that kind of profit? If you did not make that kind of profit, how much of that money do you think would be transferred to customers who come to your company honestly to try to save money?
Phil Morgan
If you look at price comparison sites in general, the actual commission that we receive from end companies, whether it is insurance, energy or any of the other products we offer, is a very efficient way for those companies to bring their product to market. In particular, with energy, if you look at the First Utility submission to the panel, you will appreciate that they are saying that they would not have been able to enter the market and grow to the size they are without the efficiency of a marketing channel that price comparison brings. That is equally the same across a number of the other products, and it has been indicated by the FCA and the CMA that price comparison websites are an efficient method of companies being able to market services, so in that respect we are a force for good for the end consumer and customer.
John Robertson
I would believe you and I would say you were right if it was not for the fact that The Sun newspaper—not a paper I buy I have to tell you—can go and tell me how much money each person that goes to your companies loses. I do not want any customer to lose money. I certainly do not want them to lose money to go to a comparison website when they can go to another website and get it cheaper, because I think your companies, while very smart, very clever, the advertising that you do, does not tell the customer really anything. No offence, and your cat is very cuddly and very nice and is very good, and the story about going to Africa now with the baby, all that was very clever but, to be honest, what the hell did that have to do with somebody changing their business? So I want a bit more reality and realism into your companies. So prove to me that you are doing a good job and that you are not just in it for making money.
Martin Coriat
First of all, I think it is wrong to say that people are losing money when they use a price comparison website.
John Robertson
They are losing money compared to where they could go.
Martin Coriat
When we did research at the end of last year, 99% of customers using Confused.com were saving on their previous tariffs—99.1%—so we save people money. That is what we are here for and that is what we are doing as an industry. Over 50% of our customers save over £190 when they switch energy providers. I think your question about how much could have been transferred to customers is not the right angle, if I may, because the question is: what would happen if there was no price comparison website in this industry? What would the world be like without us helping people save money on their insurance? Customers would not have the option and ability to switch that they currently do, and application costs will rise as a result.
John Robertson
I do not have a problem with you supplying the service. I think what you do is a good thing for people, particularly people like me who are on the go all the time and want to look at something quickly. I have done it and I have used your comparison websites to have a go at the energy companies, to prove that they are charging too much. But the fact of the matter is there seems to be some kind of ethos in the energy market and the energy companies that says, “I want to rip off every person I get hold of”. I find that quite annoying and it is my duty to make sure that you guys adhere to the rules, the same as everybody else. One other question I want to ask about is your fees for people moving to another site, cutting their contract early. You always seem to have different prices and I am told there are some companies that want to charge the big companies double the fees from these companies, which strikes me as a bit underhand and we will not know anything about it. But I am told that some companies want £60 from a company to switch away from them; some are £30. The Zog one, which we were talking about there, is £25. Why is there such a difference and why should a customer have to pay that kind of money when, at the end of the day, they thought they were getting the cheapest deal at the time and then it turns out they didn’t? Why should they have to pay for something that in effect if you were the companies they have used to get the price you should take the dump for that not them, because you did not give them the truth in the first place? So tell me about these charges.
Peter Plumb
I am happy to talk about charges. So at MoneySuperMarket we charge a fee not a commission. The fee is a flat fee. No matter whether a customer is a—
John Robertson
How much?
Peter Plumb
Our fee ranges from £30 to £27, depending on the provider. On average, our fee in 2010—
John Robertson
This is what I am talking about. Why the difference on providers? Why isn’t it the same for everybody?
Peter Plumb
Part of it is historic of the energy companies and how they are put together.
John Robertson
Who can pay the most?
Peter Plumb
Can I just explain? The fee in 2010 was £29.56 on average for a single energy switch. The provider does not pay if a customer does not switch or cancel and every customer is given 14 days to cancel. In 2014 our fee was £29.36. Our fees have remained flat and have gone slightly down, while energy tariffs have risen to £1,346 in 2013 and started falling now. So the fee we charge is a success marketing fee for an energy company to pay for customers who switch to them. The reason it is a fair flat fee, if a customer switches dual fuel—to answer your question—the provider pays twice, one for energy and one for gas. The fees are required to fund price comparison websites. We are not a simple computer programme. We have teams of people who have to work with providers to make sure the tariffs on our site are accurate to the letter every day. We have to work with providers to make sure that, as tariffs become available to customers, all that data is loaded up, is accurate and the customer sees real time prices. We have to spend money on technology and we have to spend money on marketing if, as an industry, we want to help—
John Robertson
I do not have problem with you spending money—
Chair
John, we can come back to this in a moment. Albert wants to come in.
Albert Owen
Yes, it is only on that and a couple of questions. Mr Galligan, you said about your response to a customer who makes an inquiry that you send a suite of 140 different companies.
Paul Galligan
Possibly 140 at a guess.
Albert Owen
Excuse me, I have not been on your website. I am asking a very genuine question. Is it categorised alphabetically? Do the prices range in descending order or whatever? People do not have an awful lot of time to go through 140 different ones and do it. Can you explain for my benefit and I would be an ordinary consumer in this inquiry?
Paul Galligan
Of course, and that is a key point because your average consumer does not want to spend a lot of time researching the entire market. The proposition that we operate is that a consumer will come to our website and they will input their details to us. We have the technology that operates behind the scenes to go out to the whole of the market and so then we will present, in the case of energy, a little over 140 prices back to the consumer. In energy, just as it applies right across our product range, we always rank that by the cheapest price. So obviously we will be reviewing the impact of commissions but it is important to note the level of commission we receive will never influence the ranking on the site.
Albert Owen
So you are leading them towards the cheapest at the top?
Paul Galligan
We always present the cheapest at the top. What we do thereafter is we offer the consumer a range of tools as they may want to refine their search. As an example, often we will find—
Albert Owen
You have done some research and found out that that is the cheapest available. So if I am a busy person, or my constituent is a busy person, they click that top one and they are guaranteed, in your opinion, that they are getting the best deal?
Paul Galligan
Absolutely, yes, and in less than five minutes you will see 140 providers and you are then in a position to make your choice.
Albert Owen
Why do you think the public are getting a bit concerned about this then?
Paul Galligan
If I take yesterday’s reports in the news, I think it is important to note that that was research undertaken by a commercial competitor. It was misleading, to say the least. We fundamentally disagree with the assertions that were made in those claims, and—
Albert Owen
I am just asking in general: why do you think the public are concerned?
Paul Galligan
I think in the energy market in particular this is a market that is broken, and we have alluded to the fact that consumers are paying too high a price. If you look at the level of switching in the marketplace, it is nowhere near high enough. I believe last year about 3 million houses—
Albert Owen
So you think it is trust in the energy companies, which we will come to in a minute, that is the issue and you are the glue that holds this broken market together?
Paul Galligan
Certainly trust is one component. We believe that there are two significant factors that reduce switching in the marketplace. The first is consumer understanding. They do not understand the bills that they are presented with and that makes it difficult for them to engage in the process. Secondly, the switching process itself takes far too long and is perceived to be too complex. As a consequence, too few consumers are engaging in the marketplace. We do present a solution to that of course because, as I have said, in five minutes we can compare 140 providers and equally we invest in both technology and telephony services to undertake that switch on behalf of the consumer. So undoubtedly we offer a solution in the marketplace. By one example we typically save the consumer £200 per switch and indeed last year we saved our consumers in the energy market almost £40 million.
Chair
Just to be clear, we are very strongly in favour of switching and encouraging switching and making switching easier but we are very concerned that the consumer trust in the switching process will be damaged if the sort of reports that appeared in The Sun yesterday turn out to be true. You have referred to those reports. The recorded call that was reported in The Sun yesterday, when your employee or agent quoted three tariffs: third place npower, second place Scottish Power, first place Green Star Energy, caller, “Let me clarify what you have said. The cheapest one for me and the one I am probably going to go for is Green Star Energy at £538”. Your staffer, “You’re right. That’s the one” when actually there was a cheaper deal available. Are you saying that story is not true?
Paul Galligan
I am saying it is misleading, yes.
Chair
Why is it misleading?
Paul Galligan
Earlier on in the call our agent—and if I may quote—had stated to the consumer, “I’m now comparing your price with a wide range of suppliers available via Compare the Market”. In the particular case that is referenced in the press, that we did not mention Zog Energy; they do not offer a telephony service. On our website we would have shown Zog Energy and the consumer would have seen that that was the cheapest available online, but they do not allow us to switch the consumer to them over the phone, and so that was not a price that we were able to offer the consumer over the phone.
Chair
Does Zog Energy pay you a commission if you do a switch to them?
Paul Galligan
No, they don’t.
Chair
Does Green Star Energy pay a commission if you—
Paul Galligan
They do issue a commission.
Chair
So you failed to draw attention to the fact that a cheaper tariff was available, unfortunately for you a company that did not happen to pay you a commission, so your agent told the customer that the cheapest deal was one from a company that did pay you a commission. Those are the facts.
Paul Galligan
That the—
Chair
Are those the facts or not?
Paul Galligan
—cheapest deal available over the phone—
Chair
Is what I just said true? Your agent says Green Star Energy is the cheapest when it is not. Green Star Energy pay you a commission and the one that is cheaper does not pay you a commission. Those are the facts.
Paul Galligan
So the facts are we told the customer—
Chair
Which of the facts I have just read out are not true?
Paul Galligan
The important fact is we told the customer—
Chair
The important facts are the cheapest deal was from a company that you did not mention to the customer. Unfortunately, it is a company that does not pay a commission. You then told the customer that a more expensive deal was the cheapest one and that was a deal provided by a company that paid you a commission. Those facts are going to undermine trust in the whole switching process. They are probably already undermining trust in your business and they deserve to. If you mislead people in that way and if you try to persuade us—earlier on you were saying, “Oh, commission does not come into it”. The fact is that you are recommending deals because you are getting a commission and you will not recommend deals if you do not get a commission.
Paul Galligan
Perhaps it would be helpful to the Committee if I could outline certain elements of that call that were not reported in the press. As I say, first, we made it clear on the call that we would be comparing for that customer deals that were available to switch via Compare the Market. Secondly on the call the consumer outlined that he did not like using the website. He had tried our website and preferred to use the telesales channel. Now, the fact that Zog Energy do not offer a telesales service—
Chair
Or commission.
Paul Galligan
—means that is not a provider that is available for that customer. If they had chosen the internet channel we would have represented that price, but he chose the telephony channel.
Chair
But he had told you that he could get on the internet because you just mentioned that he said he did not like doing that.
Paul Galligan
But equally he said that he had abandoned the website because he wanted the telesales service. He said he was rather old fashioned and he would sooner use the telephone, so we—
Chair
So in future will you warn your customers that by using the telesales services they may be missing out on cheaper deals?
Paul Galligan
We do tell them that we will be comparing them with deals to which we can switch. Of course, I would love to be able to switch to the cheapest provider. I have a team of people back in Peterborough that go out and try to negotiate with every provider in the market. We want to make sure and, indeed, we will only be successful if we make it easy for people to find the best deal for them. I believe in this case we were clear to the consumer and we offered him the cheapest available tariff over the phone from any provider.
Chair
The cheapest one from a company that paid you a commission.
Paul Galligan
It happens in this case they pay us a commission, yes.
Sir Robert Smith
I want to check, do you make any money out of displaying someone who does not pay you commission? Is there any other revenue stream or is your only—
Paul Galligan
No, our model is entirely aligned to the consumer’s interest insofar as we only earn money if the consumer switches and, therefore, that pushes our investment towards making it easy for consumers to find the best deal.
Sir Robert Smith
You only make money if they switch through you. On the site, if someone wanted to use Zog Energy they would have to go directly to Zog?
Paul Galligan
That is right, yes.
Sir Robert Smith
So why do you display them?
Paul Galligan
We show whole of market so the consumer has visibility as to where the best deals are. We hope that the customer will still choose to switch via Compare the Market and that all the factors such as our investment in technology, making it easier, the after sales service will mean that they do choose to switch via us, but if they choose to go direct to an alternative provider they can choose to do that.
Sir Robert Smith
You are more making your money by the fact that people are confused or reluctant to do direct purchasing from a supplier?
Paul Galligan
I do not believe there is anything there that confuses them. We rank the table based on price. The consumer can then observe that table and choose who they want to switch with. We know a good deal of our customers will choose to go direct or indeed they may well then visit one of our competitors. Equally, a number of customers will choose to switch via the service that we provide and, therefore, that is why we invest in providing a better switching service.
Sir Robert Smith
How do you find the energy market compares with the other markets, those of you that have other switching sites?
Paul Galligan
I think the key difference is that the switching rates in energy, if I could contrast that to car insurance as an example, are much lower. If you take the total number of households in the UK, approximately 26 million households, only 3 million people switched last year. If I contrast that to car insurance with about 25 million cars in the UK, switching times are three times higher than car insurance. I think that speaks to some fundamental issues in the way that the energy market operates. As I say, consumers do not understand their bills. They find the switching process too complex. We believe if we can tackle those issues we will increase the amount of switching in the marketplace and, the available dividend, we believe consumers are being overcharged to the tune of £4 billion. So that is the industry issue that I believe we should be focusing on.
Sir Robert Smith
All of you have identified a market in which, left to their own devices, the consumer does not have the confidence to switch directly and you are saying to them, “Come through us and we will make it easier for you”?
Steve Weller
Mr Smith, let me try to answer some of this as well. I think there are two elements to every switching service. It is free and consumers can go on and do a full market comparison. Typically consumers are comparing between 300 and 400 historical tariffs, so we have to check to see all of their old historical tariffs. They may be comparing against 140 tariffs that may be available. That is very time consuming to do with a calculator. That is the first part of the service, which is free for millions of customers. Some choose to go direct because they now have the information at hand that enables them to go direct to the energy company and choose the selected one they wish to switch to. Some customers prefer to use an organisation such as ourselves to help them through that process and the switching side, because it is a further few steps of information and if anything goes wrong they can come back to a company, and then we can pick that up with the energy company to try to help that smooth transmission to the new supplier. Ofgem has already taken some strong steps to help the consumers around switching. They have just recently introduced three-day switching, which is a cooling-off period of two weeks and then three days later the switch will take effect. So there are a number of measures that are going on in the industry to try to help improve the process for consumers, and Ofgem is working hard and puts very strict guidelines and procedures around what comparison sites should do and how they should be working with consumers to help build on that trust.
Chair
On this point, in that case, Mr Weller, is it true that the question you ask customers is, “Show plans we can switch you to today”?
Steve Weller
That was the question we had in place last year. A site constantly makes changes and we are explicitly now focusing on trying—
Chair
What is the question you ask today? Do you still ask that question?
Steve Weller
We have two options for the question we ask today. We say, “Only show me plans uSwitch can help me switch to” or “Show me the whole of market” and then there are further explanation next to those two options allowing consumers to make the choice.
Chair
When was the last time you just asked the one question, “Show plans we can switch you to today”? How recently was that?
Steve Weller
That would have been December.
Chair
Do you think that was a fair question to ask your consumers?
Steve Weller
From the research that we have done with consumers, we believe consumers understood that. Being able to then understand and to see the whole of market or understand which plans uSwitch can go to, yes.
Chair
It is not a rather leading question, which is expecting a certain answer, which is yes?
Steve Weller
We have done research and we constantly review that with customers. We get focus groups in and we ask them directly to see if they understand that. We have then taken further steps to make that even more explicit and to help consumers more in the understanding of that question.
Chair
Do you get paid a commission by First Utility?
Steve Weller
Yes, we do.
Chair
Do you get paid a commission by Extra Energy?
Steve Weller
No, we do not.
Chair
Was that the reason why a caller from the north of Scotland, who wanted to change a dual fuel tariff, was told that the cheapest one is First Utility. “That’s about £1,400.” uSwitch agent, “That’s exactly right, sir”. Actually there was a deal at £1,371 from Extra Energy.
Steve Weller
No, that is not the case. I have been on to the article that you have just mentioned. Our agents have very strict procedures in place where all agents need to describe to the consumer the whole of market and give the consumer all of the information. As it turns out, we are undergoing an investigation because that is against company policy and is against our strict procedures that we have with our agents. All our agents have training and we lay down very strict guidelines that they must represent the whole of market. So it has been unfortunate that one of our agents was going against company policy and against those procedures that we had in place. So we are now undertaking an investigation of what we need to do to retrain and tighten up our procedures to help consumers when they are on the phone to get a full market view, which has always been the case with us for the 15 years that we have been in business.
Chair
Would you like to apologise publicly to the customer who was told by your agent that the cheapest deal was First Utility, when the cheapest deal was Extra Energy?
Steve Weller
As I mentioned, I am sincerely disappointed that our service was not living up to the high standards that we set out and our procedures that we have laid down were not adhered to.
Chair
Would you like to apologise to the customer who is now paying more than they need do for their energy?
Steve Weller
That customer, depending on their needs, may find the right service but if they were looking to select Extra Energy and that would have been right then I do apologise to that consumer.
Chair
Would you like to apologise to the customer of yours who is now paying more for their energy than they need do?
Steve Weller
It depends on the customer choice, but in that situation not because—
Chair
You do not want to apologise to someone who was misled by one of your agents?
Steve Weller
Mr Yeo, you have misheard me because I did say I do apologise to that consumer who should have been given that option.
Chair
Will that apology now take the form of financial compensation?
Steve Weller
If the consumer found that we were misguiding then we will take it up direct with that consumer if they would like to contact me personally.
Chair
Will you compensate that consumer financially for the fact that your agent misled them?
Steve Weller
Anything done by our agents that have misled, yes, we will compensate them.
Chair
So, if there are any other consumers who turn up and can show that they have been misled by your agent into signing up to a tariff that was more expensive than others that were available, you will compensate them as well?
Steve Weller
On the phone we have a strict procedure policy. Please send me any direct cases and I will review those and the overall circumstances. If we are found at fault we do take active measures internally but also if the customer is out of pocket and they would have selected that tariff for that option, we can look at providing them some financial compensation.
Chair
Are your phone calls recorded?
Steve Weller
Yes, they are.
Chair
It is unfortunate, is it not, that on this case the tariff that was the cheapest, which was not mentioned by your agent, was one that did not pay you commission, and the one that the agent wrongly informed the consumer was the cheapest is one that did pay you commission? That is unfortunate, isn’t it?
Steve Weller
It is.
Chair
Right.
Dan Byles
I think I am detecting, from listening to this whole thing here, that there seems to be a difference of opinion, from people on this side of the table to that side of the table, about language. It seems to me—and I think from the tone of most of my colleagues—that we do not necessarily consider the language that your agents are using and that your website uses to be clear and transparent whereas it seems to be that you five do; for example the Chairman’s questions about: do you want to switch today or not? I agree with the Chairman, it sounds like a leading question: do you want to today or not? “Well, yes, today obviously.” Do you put as a caveat next to that question, “If you click ‘yes’ you may not see some of the cheapest deals available”? Is there a sentence that basically says that there might be cheaper deals available if you click this button rather than that?
Steve Weller
Yes.
Dan Byles
It does?
Steve Weller
It does.
Dan Byles
So it specifically says, “By clicking the ‘today’ button you may not be seeing some of the cheapest deals available”?
Steve Weller
There is a descriptor providing customers with a lot further information as to what those options will mean. So the customer selects because there is no default. They select one of those options and a box appears to provide them further information before they—
Dan Byles
But does it specifically tell them that they might not be seeing some of the cheapest deals available if they go with that option?
Steve Weller
I will come back to you and provide you with the exact wording but we have done a lot of work to provide it as clearly as we can in a couple of sentences. It is not just one sentence but two or three sentences.
Dan Byles
Am I right in thinking that two of you, Mr Coriat and Mr Plumb, no longer have this box? Is that right?
Peter Plumb
Yes.
Martin Coriat
Correct.
Dan Byles
You simply by default automatically show all that are available?
Peter Plumb
Yes.
Dan Byles
We hear that there is a problem with some that you can then switch to and some that you cannot. How do you manage that process in a way that the others seem to find harder?
Peter Plumb
We are accredited. We were asked in an e-mail by Neil Barnes on 18 December to move to whole of market and not have a default filtered view, which we acted on and went live on 8 January with a full market view with no defaults.
Dan Byles
What happens if somebody picks one that is not one that you can then manage the transition through?
Peter Plumb
We have a clear box on the front page. When a customer arrives and starts entering the simple data to try to switch and to find the cheapest prices—and on average customers save £228—we explain how we make money. In a box we say, “We receive a fee from these providers and the providers we don’t receive a fee from you will see there is no link to be able to apply”. So we clearly differentiate between the two, but we do have a whole of market box.
Dan Byles
So they would all be ranked by price—
Peter Plumb
They are all ranked.
Dan Byles
—and it is simply some of them they can click through to sign up and some of them they cannot. They are just told they cannot.
Peter Plumb
Yes, because the provider, as I said earlier, might not want us to, might not have the infrastructure to do it or might not pay. There are lots of reasons why some providers do not—
Dan Byles
Tell me more about the trigger. You said the trigger for that was about being accredited.
Peter Plumb
Yes, so we are a credited provider. Ofgem has been very clear and is very clear—which we support as MoneySuperMarket—in their latest conduct code that price comparison sites have to do one of two things: either show defaulted whole of market or show a filtered market with clear text to a customer, which Ofgem has to approve, that explains why there is a filter view. Ofgem has been very clear, and the results came out on Friday, that price comparison websites have two choices: to apply with default, everyone, or filtered view with wording that has been tested with customers and approved by Ofgem. We fully support the proposals recommended by Ofgem for 2015 and beyond, because we think that is a fair approach.
Dan Byles
Is it that Ofgem change that triggered you to make the change to give everybody by default?
Peter Plumb
In Neil Barnes’ e-mail of the 18th we were requested to not default to a filtered view, so we took the decision to default to a whole market view, awaiting the findings of Ofgem. Ofgem has been very clear to us all that we have the option of filtered view, explaining why, or whole of market view, so there are two models going forward.
Dan Byles
The split now, among the five panel, Mr Coriat and Mr Plumb, is that your organisations do the whole market view and you other three do the filtered view. Is that correct?
Paul Galligan
Not for compare the market. We show the whole of market, but we do still pose a question to enable the customer to refine their search and reduce it to only show those providers.
Dan Byles
Does that question come first?
Paul Galligan
It is defaulted, so we automatically will show 140 providers. If the consumer takes an action we will reduce that result to about 106 providers.
Dan Byles
So yours looks a bit like theirs, unless they click the button that says, “Please filter this to make it smaller”?
Paul Galligan
Correct.
Dan Byles
What about Mr Weller and Mr Morgan? How do you do it now?
Phil Morgan
We have introduced a new question before the results page to engage with the customer in a proactive way, so we don’t default to “All tariffs” and we don’t default to those that GoCompare show, and the customer has to select which view they wish to see.
Dan Byles
What is the question that has to be asked?
Phil Morgan
Basically there is now a paragraph before the selection of “Only show those tariffs that you can switch to “via GoCompare” or “All tariffs”, which clearly explains tariff that will be displayed, or if you click on the “Go compare” button there are those we earn commission from.
Dan Byles
Does it state clearly at that point that if they choose to click only the “Go compare” button that they may not be seeing some of the cheapest deals potentially available to them?
Phil Morgan
It states that the “All tariffs” will be those suppliers that either do not pay us commission or do not switch via our comparison sites.
Dan Byles
So it does not state clearly that it may include some of the cheapest deals?
Phil Morgan
It does not state categorically. We are working with Ofgem—
Dan Byles
Do you think it would be more transparent if it did?
Phil Morgan
We have introduced the current wording, as my colleague from MoneySuperMarket mentioned. Ofgem are engaging and want to view the transcripts and the wording that we are using. We will engage with them over the next month or two, to refine that text and make sure that it is acceptable. It is worth pointing out that Go Compare voluntarily signed up to the Confidence Code. We are unable to be accredited under that code at the moment, because we do not operate the comparison calculator in relation to energy comparisons.
Dan Byles
Could you use a third party?
Phil Morgan
Indeed.
Dan Byles
Mr Weller, how does it work with your filter or knockdown?
Steve Weller
Similar to what I have already said, that we do not default but we have two clear options. I think the wording I mentioned was, “Only show me plans which can help me”, a switch to, and the other one is, “Show me the whole of market”. A further explanation we give is, “Switching with uSwitch means that we can organise a switch for you and provide support as needed. Choose ‘Show me the whole of market’ to see all plans including those you can’t switch to with uSwitch”.
Dan Byles
You are uSwitch and you are Go Compare, and neither of you specifically state in the explanation that you have said is there to help customers that the whole market option may contain the cheapest deal for them. Basically it says, “Click this button here where we can help you and hold your hand and make it easy, or click this one where we can’t”. That is basically what it says.
Steve Weller
Yes, but we have clearly stated that you will see the whole of market. The code only came out on Friday. We are doing further research with consumers to ensure that the language is very clear. We do pride ourselves on trying to make our site very consumer friendly and easy to understand.
Dan Byles
I am surprised that you need a code and you need Ofgem to tell you that the most transparent approach would be specifically to state that, “If you tick this button you may not see some of the cheapest deals available”. That is really the entire reason we are in this room, and that you guys are in so much trouble and getting attacked in the press. It is around this point, that you are not showing people the cheapest deals available. You are all sitting there saying you want to be as transparent as possible but it strikes me as blindingly obvious that that sentence should be in the description before somebody pushes the button. At the moment all it says is, “Push this button and you will have the easier option where we will help you or click this button where we will not help you”. It seems to me obvious which way people are being pushed.
Albert Owen
Can I come in on that very point? A number of you have mentioned the fact that the market was broken and that energy companies have now moved to more open, simple and more transparent bills. We as a Committee have had inquiries into that and they have moved, along with the regulator. You are in exactly the same position. We are now shining the light on you, as are the public, and you are responding in a very haphazard way because a code has been brought in, as my colleague has just said. How do you respond to that? It is easy to cast aspersions on the energy companies but it is very similar.
Paul Galligan
I cannot speak for all of them.
Albert Owen
No, all of you, but Mr Weller and yourself raised the energy companies.
Paul Galligan
I cannot speak for my competitors, but what I can say is we have always been very transparent with our consumers in giving them the ability to search whole of market, whether we earn a fee or not. As I say—
Albert Owen
Why do you think there is a need for this code? Why do you think the regulator is looking at this as a champion for the consumer and feels it has to put in tighter regulations? Because you are so open, transparent and honest?
Paul Galligan
I cannot speak for every provider.
Albert Owen
I will ask the others the question. Don’t worry, I am not singling you out. I am asking for your opinion.
Paul Galligan
I cannot speak for the other providers in the market. I think what is beyond doubt what all independent commentators will say is that consumers who use a comparison site will say—
Albert Owen
The Ofgem is independent, with respect.
Paul Galligan
Equally Ofgem, if I wanted to quote from Ofgem, would say that, “Price comparison services revolutionised consumers’ decision-making cost-benefit equation. Evidence shows that price comparison sites save people a lot of money and contribute to a better informed market”. Of course regulation is an important part of any market, and so I think what we are seeing from the regulator is that they want to take extra moves, and we would welcome that. Indeed, I would like in certain circumstances to see the regulator go further. If I take the Confidence Code as an example, I think that should be extended to apply to every provider in the marketplace. The regulator is taking moves forward. We would welcome those moves and in fact would like to see them go further.
Albert Owen
My colleague’s point just now is why did you not do this before? Why did you have to wait for the regulator to highlight this issue and then you respond and say you welcome it?
Paul Galligan
That might be a point for some of my—
Albert Owen
For all of you. You are just making yourself available. You mentioned about the energy companies and I made the comparison. Yes, there were problems. Yes, we have had an inquiry into it, and yes, we are pleased that the regulator has responded. I am saying to you, because you raised it, that I think we are in exactly the same circumstances now with the websites.
Paul Galligan
I think that is unfortunate.
Albert Owen
If the others want to join in I am happy to hear from them.
Paul Galligan
I do think that is unfortunate and as I say a lot—
Albert Owen
It is unfortunate for the consumer.
Paul Galligan
A lot of that press has been driven on the back of research that has been undertaken not by a consumer body but by a commercial competitor. It has been misleading, and we would refute those claims.
Chair
It is clearly very unfortunate for you if one of your competitors spots the fact that your agents are telling customers that the best possible deal is one from which you get a commission.
Albert Owen
Just finally, Chair, on that very point, you have mentioned that Ofgem said to us in a previous inquiry, and the new CEO said, that if there are significant problems then clearly they will do something about it. That was in May of last year. They have found out there are some serious problems, and they are taking action. That is what we want the independent regulator to do, because you have not done it previously yourselves. Do you accept that, all five of you?
Paul Galligan
I do not accept that insofar as consumers that switched compared to last year saved £500,000.
Albert Owen
Can I hear from the others now, please?
Phil Morgan
We are proactively engaged with any regulator that we deal with. We have worked with the FCA over the last 10 to 15 years while the price comparison industry has evolved.
Albert Owen
Would you not increase confidence if you moved before a regulator has to wield a big stick?
Phil Morgan
We have been working with Ofgem since they started reviewing the Confidence Code last August, proactively engaging with them and stating that our preferred route was this proactive customer choice, of making a customer choice on tariffs.
Albert Owen
I did not hear you saying that in the opening response.
Chair
Mr Plumb, you mentioned that you changed the practice of the way tariffs are displayed in December. Why did you choose to do it then?
Peter Plumb
As I clearly said, we had an e-mail from Neil on 18 December requesting that we either defaulted to whole of market or if we do offer customers a question that we should have it approved by Ofgem and customer research, and we responded to the request on 18 December to default to whole of market view.
Chair
So it was not anything to do with this inquiry?
Peter Plumb
I had an e-mail from Neil on 18 December. That is what we responded to and we went live on 8 January.
Chair
The impression, as Mr Owen has already mentioned, is that none of you wanted to change your practices, but you were rumbled by The Sun in October, that we followed up by announcing an inquiry, Ofgem then woke up out of their customary torpor and suddenly you guys think, “Gosh, our business is going to go bust unless we get our act together”. That is what happened, is it not? If you had not had external pressure not one of you would have lifted a finger to make your operations more transparent or more honest as far as your customers are concerned.
Peter Plumb
I think you will find, and I can certainly talk for MoneySuperMarket, our websites change days, weeks, as we evolve. This is a very young industry for UK consumers. It started in motor insurance back in 2006, and because of the internet we as an industry for the first time are allowing customers to at least start understanding energy bills, insurance bills, and other products. On the back of that, we are all growing. We helped 3.8 million visitors use MoneySuperMarket last year to check energy prices. Only 320,000 bought. That is fine. That means 3.5 million customers across the UK, no matter what home, what age they are, have found that they can take on their current energy provider and have the confidence to look around and switch. As an industry we do need to be profitable to continue to deliver a service to help the 50% of customers that Ofgem tell us are on standard tariffs and have never switched and tomorrow could each save £250. Our services will always evolve, based on what we learn. We are still young, but there is no doubt about it that as an industry we are helping every year more customers to see prices they can switch to. That is the industry we are trying to build on the back of this. So to answer your question, our site would and does evolve based on how customers behave and what we learn, and on whether customers use mobile or not.
Chair
It is a young industry whose growth has been based on a business model that involves systematically and deliberately misleading customers about what is in their interests. The fact is that not one of these five companies can show they lifted a finger to do anything about this until they were rumbled by the press, the regulator and this Committee. If I may give you all a word of advice, you might find you create a better impression by recognising these serious defects, by showing an element of contrition and a willingness to try to co-operate in making the system work better. Coming back to you, Mr Weller, when your website asked this question, “Show me the deals I can switch to today” what percentage of respondents answered no?
Steve Weller
I don’t have that figure offhand.
Chair
1% perhaps? 0.1%? Did anyone answer no? Possibly not.
Dr Whitehead
Mr Galligan, you mentioned earlier that you have agents in the field contacting energy companies. I assume that the agents are contacting energy companies, not customers, in terms of setting up deals with them with your sites and other sites in terms of how the commission process might work. Is that right?
Paul Galligan
Yes, I have a team of people back in Peterborough. We work with a third party provider, Energy Helpline, and between my team and the Energy Helpline team we will proactively go out to providers and try to source their services, yes.
Dr Whitehead
Are you saying to those people the question of what commission they pay you for sending people their way is negotiable?
Paul Galligan
That is done in conjunction with our third party provider, Energy Helpline. There is always a commercial negotiation, but I must go back to that point that the amount of commission we receive never influences the amount of prominence we give to a provider. We always rank on price.
Dr Whitehead
Why should they give you a commission at all?
Paul Galligan
That is an interesting conundrum, both for the industry and the Committee. In a world where every provider is shown you can see how in the medium-term that might pose a risk. Our route to overcome that is to make sure that we invest in our proposition and have a service that means that consumers want to switch with ourselves. The reason price comparison sites have been so successful is, first, from the consumers’ angle we present the most efficient way to access a very large number of providers and get the best deal. Equally as important from a provider’s point of view, we offer a more cost effective route to market for them than traditional channels. We have helped a number of new entrants enter this market and the other markets in which we operate, and we continue to offer a very effective route to market.
Dr Whitehead
If you have agents negotiating with energy companies, presumably some of those energy companies say, “I am not going to give you a commission at all” and presumably your agents at that point say, “Right, you are not going to be on our site”?
Paul Galligan
No, as I say, if you go to Compare the Market you will see all 140 available energy tariffs on the market, whether we receive a commission or not.
Dr Whitehead
So the job of the person who is going out in the field to talk to the energy company is to say, “Hi, would you like to be on our site? Would you like to pay us a commission? If you don’t pay us a commission that’s fine, and if you don’t want to be on our site that is fine, and we’re not going to negotiate what kind of commission you might pay us in order to be on our site”. What is the purpose of the communication?
Paul Galligan
Our conversation with any provider would be, “Look, we can offer you a very cost effective route to market to reach a very high number of users of Compare the Market. The price that we will charge you will be less than you can acquire customers via other channels”. We hope, as a consequence of those discussions we are paid for in the region of over 100 of the tariffs that are available. There is in the region of 35 tariffs for which we are not paid, but we still show those to the consumer.
Dr Whitehead
So the fact that energy companies pay you a commission is their altruism? Why do they do it, do you think?
Paul Galligan
We offer a very cost effective route to market for them to acquire new customers.
Dr Whitehead
Presumably, though, as far as your agents’ discussions with those companies are concerned, there must be some kind of deal reached relating to the commission, or are you saying that there is no deal ever reached?
Paul Galligan
Let us take, for example, a new entrant that might want to come into the market. Over the last 12 months to 18 months there have been a number of new entrants. They could choose a number of ways to reach consumers. They might choose a TV advertising campaign, they might choose to direct market or to acquire customers via Google. If you look at the cost of acquisition via those channels—and I am quoting some standard industry numbers—to acquire a customer via a door drop would cost them in the region of £95, by direct mail in the region of £250, or via national press advertising £150. So our conversation with those providers is that we can offer you a no-risk entry into the marketplace, “Pay us a fixed fee, only pay us if a customer switches to you”, and we have therefore lowered the barriers to entry. As a consequence, as an important consumer outcome here, what we are seeing is more and more people switch away from the Big Six to these new entrants. Let us go back two years—
Dr Whitehead
No, I am not asking you the detail of a particular overall deal. What I am asking you is whether there are any arrangements reached between an agent and an energy company. You say agents are in the field to do this and I particularly asked you, but I would be interested to hear, whether the practice is the same with the other comparison websites. I am asking whether at the point of the contact of the deal let us say an energy company is presently not on your website, and your agent contacts that energy company and says, “You would like to be on their website, wouldn’t you, and we can offer you a deal to be on our website, perhaps not be on other websites”. Are there exclusive deals, for example?