A price comparison site is being investigated over a potential competition law breach which could have pushed home insurance prices up.

The Competition and Markets Authority (CMA) today said it had opened a case into the comparison site's use of 'most favoured nation' clauses, special contracts which mean an insurer agrees with a comparison site not to offer a cheaper deal to a rival – potentially resulting in some consumers paying more for insurance.

While the watchdog hasn't named the comparison site concerned, a spokesperson for Compare The Market did not deny that it was the site under investigation.

In a statement Compare The Market said: "We welcome the CMA's conclusions that digital comparison tools are a force for good which lower prices for consumers and inject competition into markets.

"CompareTheMarket.com operates some simple contractual arrangements with home insurers to ensure that our customers always get the lowest available price. We welcome the opportunity to discuss this further with the CMA."

The CMA will now conduct a six-month investigation into the potential breach.

CMA sets out ground rules for comparison sites

The CMA's announcement follows a year-long market review into comparison sites, looking at how well they work for consumers.

The review found the majority of customers who have used a comparison site were "very or fairly satisfied", but the CMA believes more could be done to improve this.

It focused on areas where comparison sites play a big role, such as car and home insurance, energy, broadband, flights and credit cards.

Today it set out a number of ground rules. The sites should:

  • Be clear, accurate, responsible and easy to use
  • Say how they make money, how many deals they're displaying and how they are ordering results
  • Be clear on how they protect personal information and how people can control its use
  • Make it easier to compare prices from different comparison sites, for example through better information about products

The CMA said it will also keep several other practices under review, such as 'non brand-bidding' (which means bidding on a rival's name to appear in a search engine), 'negative matching' (to try to stop the competitor's advert appearing on search engines) and 'non-resolicitation agreements' (which stop comparison sites contacting customers about the same product for a time once they have bought something).

CMA chief executive Andrea Coscelli said: "Our study has found that most people in the UK have used a comparison site at least once so it is vital that everyone gets the benefits they deserve.

"The good news is that more than 90% of the people we surveyed were very or fairly satisfied with the sites they used.

"But we have also found that improvements are needed to help people get even better deals. We have set out ground rules for how sites should behave, as well as being clear on how regulators can ensure people have a better experience online.

"We are also taking enforcement action where we suspect the law may have been broken."

Additional reporting by the Press Association.