10 Nov 2016

Bridging the business-consumer divide: comparison websites in focus

By Sam Fiddian and David Benson

ACCC guidelines on increasingly popular comparator websites provide useful guidance for their operators.

The rapid growth in the number of Australian price comparison websites, and concerns raised by consumers, have drawn the attention of both consumer advocates and regulators, including the ACCC.

There are no legal or regulatory restrictions which prevent or specifically target comparison websites. However, there are several laws which impact upon the operation of such sites, principally Australia's consumer protection, privacy, and spam laws. The ACCC has also published a set of guidelines for comparator website operators and suppliers in Australia.

In this article, we'll look at the impact Australia's consumer protection law have had on comparator websites, and how these Guidelines have sought to address the ACCC's concerns.

The Australian Consumer Law and the Guidelines

Under the Australian Consumer Law (ACL), a corporation must not:

  • engage in conduct which is, or is likely to, mislead or deceive a consumer; or
  • make false or misleading representations about various matters (particularly matters relating to price, standard, quality, value or style) in respect of the supply, possible supply, or the promotion by any means of the supply, of goods or services.

The Guidelines have at their heart three guiding principles to assist operators of comparator websites when making decisions about all aspects of their service, particularly so as to avoid breaches of the ACL:

  • the facilitation of honest, like-for-like comparisons (Honesty Principle);
  • transparency about commercial relationships (Transparency Principle); and
  • clear disclosure of who and what is being compared (Disclosure Principle).

Honesty Principle

The ACCC regards it as essential that comparison websites allow users to make like-for-like comparisons of products and services. The Guidelines encourage operators to pursue this objective by:

  • presenting results with the best match at the top (this does not always mean best price);
  • disclosing what is meant by any ranking attributed to a particular product or service;
  • making accurate claims about savings;
  • having systems in place to ensure the accuracy and quality of product information; and
  • disclosing any assumptions used when displaying search results.

Transparency Principle

Comparator websites use algorithms of varying complexity in order to generate search results. The ACCC takes a dim view of the use of algorithms which might generate misleading results. Consistent with this view, the Guidelines suggest that operators should not manipulate algorithms to achieve misleading outcomes.

The ACCC also suggests that operators who allow commercial relationships with suppliers to impact upon the presentation of results are likely to be engaging in misleading and deceptive conduct.

So as to avoid sanction for breaching the ACL (including as a result of manipulating the presentation of results), the Guidelines recommend that operators:

  • prominently differentiate sponsored or advertised products from organic search results;
  • ·not allow suppliers to pay a fee or provide some benefit in exchange for preference being given to that supplier's products in the search results; and
  • disclose their commercial relationships with suppliers even where the relationship does not affect the search results.

There is arguably some tension in the Guidelines between:

  • the suggestion that operators should differentiate sponsored or advertised products (which implies that there is a receipt of benefits by the operator from suppliers); and
  • the recommendation that operators avoid the receipt of any fees or benefits in exchange for giving preference to one supplier's products over another as "there is a risk that disclosure may not be sufficient to overcome any misleading impression created."

However, taking the Guidelines as a whole, the better view is that, while the disclosure of a commercial relationship with a supplier may be sufficient to avoid falling foul of the ACL where sponsored or advertised products are differentiated from organic search results, it will not be enough for an operator to disclose the existence of the commercial relationship where there is no such differentiation.

Disclosure Principle

The Guidelines state that "failure to make accurate or adequate disclosure about the nature or extent of the comparison service, including market coverage, may involve misleading or deceptive conduct, including by omission, and the making of false or misleading representations."

Many operators only compare products sold by their commercial affiliates. As such, operators should be mindful of clearly disclosing the identity of those suppliers whose products are being compared and any limiting factors for the comparison service.

Method of disclosure

The Guidelines make clear that disclosure is paramount. However, the Guidelines also accept (consistently with modern convention) that over-disclosure can actually be counterproductive for consumers. Accordingly, the ACCC suggests that an appropriate balance can be achieved by including short sentences which highlight relevant matters, in conjunction with a link or pop-up box which, at the user's election, allows the user to access more detailed information.

The way forward

Trust is crucial to the viability of the comparison website industry. Adverse publicity associated with action being taken by the ACCC may have significant consequences for the reputation of a particular comparator website. Accordingly, compliance with the Guidelines makes not only legal sense, but business sense as well.

As competition in the market intensifies, operators will come under increasing pressure to differentiate themselves from their competitors. The ACCC remains active in this area, meaning operators should continually assess the manner in which its price comparison website operates to ensure that it falls within the legal framework and complies with the Guidelines.

This is particularly so when you consider the considerable investigative and enforcement powers possessed by the ACCC, together with its ability to seek significant penalties through the courts. 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.