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Clifford Chance

Clifford Chance

Antitrust/FDI Insights

CMA's 'Wide Most Favoured Nation' Decision Overturned in the Compare the Market Case

The UK's Competition Appeal Tribunal (CAT) overturned the Competition and Markets Authority's (CMA) "most favoured nation clauses" decision in the Compare the Market (CTM) case (Decision).


In November 2020, the CMA issued a Decision against CTM and imposed a c. £18m penalty. The Decision took issue with contractual obligations known as wide most favoured nation clauses (wide MFNs), which were imposed by CTM in its agreements with certain home insurers. These clauses required home insurers to provide to the price comparison website (PCW) the lowest (or equal lowest) prices on offer anywhere for that product, whether on other PCWs or via their own direct channels. In contrast, narrow MFNs prevent the home insurers from undercutting the prices quoted on the PCW only on its own website or other direct marketing channels.

CTM appealed the Decision, and the CAT substantially agreed with the appeal and set aside the Decision.

The CMA erred in defining the market

As the CMA brought a 'by effects' case, it was required to define the relevant market. The Decision characterised the market as 'two-sided' comprising the supply by PCWs of: (i) customer introduction services to home insurance providers; and (ii) price comparison services to consumers. The Decision found that there was only one relevant market, being the provision of PCWs for home insurance products in the UK.

The CAT overturned this finding. It rejected the CMA's approach of defining a single overall market, instead holding that the different sides of the market have different constraints, requiring separate examinations. On assessing these separate markets, the CAT found that PCWs not only compare prices, but to also enable customers to conclude insurance contracts (by clicking through the quote to the insurer's website). Accordingly, PCWs are a form of intermediation, working alongside direct channels. The CAT found that the Decision should have examined other available purchase channels, which acted as constraints on PCWs.

Rather, the CAT provided its own market definition. It agreed that the upstream market was limited to customer introduction services to home insurance providers. However, for the downstream market, the CAT found that the market includes all channels, including direct channels. In reaching this conclusion, the CAT noted that customers do not 'pay' for the use of PCWs and hypothesised that, even if there were a monopolist for the supply of PCWs, it would still be unable to introduce a charge to consumers for its services, because other channels pose a competitive pressure. Accordingly, these other channels fall within the market.

No anticompetitive effects

The CAT also overturned the Decision's finding of anticompetitive effects, making both general and specific observations.

First, the CAT noted that the Decision's analysis of the effects of the wide MFNs was limited to qualitative evidence (e.g. contemporaneous documents and responses to the CMA). The CAT accepted that a case can be brought on such a basis, but noted that, in the present case, that evidence simply showed that the wide MFNs were effective and constrained the home insurers from being able to quote lower premiums on rival PCWs. However, that this does not prove that those effects were anticompetitive. Rather, the Decision needed to prove that, in the counterfactual, there would have been greater incentives for home insurers to reduce their premiums. The CAT find that the Decision did not prove this, and instead operated "at the level of theory or (less helpfully) bare assertion".

Second, the CAT held that there were also several general features of the market that militated against the existence of anticompetitive effects. For example, inter-brand competition between the home insurers was not constrained by the wide MFNs, and the CMA had not considered the impact of inter-competition. Yet it was significant. Moreover, there were limits to which wide MFNs could constrain intra-brand competition. For example, the wide MFNs only applied to differential pricing in respect of the same product with the same risk profile. However, home insurers assess consumers' risk profiles based on the answers to the set questions posed by the PCW. As PCWs often asked different questions, the same consumer can end up being offered different premiums on different PCWs without any PCW having breached its wide MFN obligation.

Third, the CAT accepted that the quantitative evidence – advanced by CTM – suggested that the wide MFNs did not have anticompetitive effects. The CAT found it "prima facie odd" that the CMA did not rely on quantitative evidence, particularly given that the CMA itself had relied on quantitative evidence to examine wide MFNs in another case.

Criticisms of the CMA's approach to evidence

The CAT also levelled several criticisms at the CMA's approach to the use of evidence.

First, the CAT noted that, while the Decision contained cross-references to the evidence on which it was said to be based, it was "extremely difficult […] to get a sense of the true nature of this evidence." Despite various requests off the CMA, the CAT found that "there is no meaningful corpus of material, capable of being considered, that constitutes the evidence on which the CMA relies."

Second, the Tribunal outlined the approach that it expected to be taken in CA98 decisions. They should draw a "hard-and-fast distinction" between: (i) evidence; (ii) analysis of that evidence or inferences being drawn from it; and (iii) conclusions of fact drawn from (i) and (ii). Each of these elements should have their own place in the decision and need to be properly, and separately, set out. Unless the factual basis for a decision is properly stated, it can neither be properly attacked nor defended. In the present case, the CAT found it impossible to identify the CMA’s primary facts; and so impossible to understand the reasoning of the Decision.

Third, the CAT accepted that documentary evidence was admissible by itself. However, without some important witnesses who could speak to the documents in question, they will not, automatically, be accorded weight or substance. Indeed, the CAT noted that where oral or other evidence might be material, issues must be resolved against, rather than in favour of, the CMA.

Fourth, the CAT confirmed that, while it was best practice for a company under investigation to put forward all its points during the investigation phase, there was no bar to an appellant (as opposed to the CMA) adducing new evidence on appeal. The CMA will be entitled to respond to such evidence, and often will.

Take aways

The judgment is arguably a considerable set-back for the CMA's comparatively more strident approach to wide MFNs. On the advice of the CMA, the Government recently included wide MFNs as a category of "hardcore" restriction under the UK's Vertical Agreements Block Exemption Order (VABEO). Such hardcore restrictions are not only excluded from the benefit of the VABEO, but are also, according to the CMA's guidance, "generally" considered as "by object" restrictions (which do not require the demonstration of anticompetitive effects). That the CAT has found that CTM's wide MFNs had no proven anticompetitive effects calls into question the logic behind their legal characterisation as "hardcore" in the VABEO and their presumptive "by object" status.

The judgment is also important as regards market definition for 'two-sided' markets, with the CAT finding that such markets should comprise two distinct product markets. In practice, the CAT's approach to market definition may have implications for many other industry sectors: the CAT's judgment provides support to arguments that other sales channels, including direct sales channels, may form part of the same relevant market or at least constitute important competitive constraints.

Finally, the CMA may need to reflect on how it drafts its decisions, and how it chooses to defend its decisions on appeal. In the CAT's view, any decision needs to identify – in a comprehensible manner – the corpus of material that constitutes the evidence on which the CMA relied, and which constitutes the foundation for the factual findings made in the decision. Moreover, if the decision relies on documentary evidence, the CMA will need to consider the benefits of producing witnesses that can be cross-examined on such evidence.