CC investigation: private motor insurance & MFNs

17.12.2013

E-commerce businesses, motor-related or otherwise, should take a look at the discussion of MFN clauses in the Competition Commission’s Provisional Findings Report in its private motor insurance investigation (see paras 68 onwards). This provisional report contains the first available reasoned finding by a competition authority in relation to MFNs in a real-life online context, assessing how they affect competition. The report makes an interesting distinction between narrow MFNs (a promise by a motor insurer to a price comparison website not to undercut prices on its own website) and wide MFNs (where the MFN promise extends to cover third party websites also). In general, the CC thinks that narrow MFNs do not restrict competition – except where the insurer has a strong brand and strong direct sales channel, whilst wide MFNs will soften price competition which can “lead to less entry, less innovation and higher commission fees, all leading to higher premiums.” Businesses, especially online businesses, engaged in negotiations over clauses like this will be wise to keep an eye on this aspect of the Competition Commission’s investigation.