Follow the Money – Beware of online comparison websites

Whether we’re buying a car, searching for a loan, contemplating credit card options, considering house insurance or researching the best deals on power costs (and more), many Australians use online comparison websites. 

This process may bring some discipline into an important and often complex decision. But it’s important to understand that some sites are not the independent and impartial sources of information that they appear to be. That’s because the promoters of these sites often receive payments and commissions to promote, sell or give more prominence to products and services with which they have a commercial relationship. 

In a landmark case decided this week, the Federal Court has ordered iSelect Limited to pay $8.5 million in penalties for making false or misleading representations about its electricity comparison service.

iSelect admitted that between November 2016 and December 2018, it misled consumers by representing on its website that it would compare all electricity plans offered by its partners and recommend the most suitable or competitive plan, when this was not the case. During the period, hundreds of thousands of consumers visited the website.

Actually, iSelect’s commercial arrangements with partner electricity retailers restricted the number of electricity plans those retailers could upload onto the iSelect systems. Therefore, the recommended plans were not necessarily the most suitable or competitive.

The Chairman of the Australian Competition and Consumer Competition (ACCC), Rod Sims, said that iSelect was not upfront with consumers and that it wasn’t comparing all plans offered by its partner retailers. In fact, about 38 per cent of people who compared electricity plans with iSelect at that time may have found a cheaper plan if they had shopped around or used the government’s comparison website Energy Made Easy.

It seems that iSelect received commissions from the retailers when those consumers selected a plan via the iSelect website or call centre.

In addition, iSelect failed to adequately disclose that cheaper plans from its preferred retail partners were only available via its call centre and were not available through iSelect’s online comparison service. 

iSelect also admitted that between March 2017 and November 2019 it misrepresented the price of some of the plans it recommended to almost 5,000 consumers. The total price for some plans underestimated the cost by up to $140 per quarter.

Furthermore, it appears that iSelect’s misleading conduct may have caused some consumers to switch electricity providers or plans on the basis of a price that was understated or without being aware that a cheaper plan was available.

According to the ACCC which brought the case against iSelect:

“It can be complex and confusing for consumers to compare prices and other features of electricity services in a bid to get the best deal for what often is a major household expense. Comparison sites need to make it very clear if their recommendations are influenced or limited by commercial relationships.”

“Comparison websites also have a responsibility to ensure that their algorithms are correct, and must implement measures to prevent incorrect recommendations. This is particularly so when they generate significant revenue in commissions from those recommendations.”

iSelect to pay $8.5 million for misleading consumers comparing energy plans

So next time you think about using a comparison website, make an effort to understand the commercial relationships. Follow the money. And as always, remember that if the deal looks too good to be true, it probably is.