UK CMA Announces Closure of Investigation into PCWs for Energy Tariffs

by Latham & Watkins LLP
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[co-author: Calum Warren]

On 6 October 2016, the UK Competition and Markets Authority (“CMA”) announced the closure of its investigation into a suspected competition law breach by some price comparison websites (“PCWs”) for energy tariffs on the grounds of administrative priorities. The suspected competition law breach related to certain paid online search advertising practices allegedly engaged in by the PCWs. No precise description of the practices under consideration is given in the case closure notice.  However, it appears from the notice that the practices at issue concerned arrangements involving PCWs and service providers that related to access to key words likely to be used in search terms. While the CMA has chosen not to pursue the investigation in this instance, the CMA’s case closure notice confirms that marketing initiatives – along with pricing, output and R&D, amongst others – can be an important parameter of competition.  The CMA’s statement serves as a timely reminder that companies need to be aware that communications that can be construed as agreements or concerted practices in relation to online search advertising with other market players may breach UK and EU competition law rules. The potential competition law concerns include limiting access to search terms that, among other things, could change the basis of searches by consumers, as well as impacting bidding in auctions for search terms.

The investigation into the paid online search advertising practices of PCWs in the energy sector was opened by the UK energy regulator, the Gas and Electricity Markets Authority (“Ofgem”), in October 2015 following its ongoing consideration of PCWs. Ofgem transferred the investigation to the CMA on 14 June 2016 and the CMA opened a formal investigation on that date. Following a period of evidence gathering and assessment, the CMA decided to close its investigation for reasons of administrative priorities, noting that remedies in relation to arrangements with PCWs were being implemented in the context of its ongoing investigation into the energy market and that a market study it recently launched into digital comparison tools.

In closing the investigation, the CMA took the opportunity to emphasise that in certain circumstances agreements or concerted practices restricting bidding behaviour in paid online search advertising may amount to illegal  restrictions of competition. This is particularly the case, according to the CMA, where the parties have material shares of the relevant markets or where parties undertake negative matching obligations in relation to brand terms.

The CMA’s message is a timely reminder of companies’ ongoing competition law compliance obligations when it comes to online advertising practices including when acquiring online search rights. More generally, the CMA’s compliance warning comes in the context of heightened scrutiny of companies’ online behaviour as a result of a number of ongoing investigations across Europe, including the European Commission’s e-commerce sector inquiry which is focusing on a broad range of issues.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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