WIREDGOV

The CMA have published a discussion paper considering how price transparency (PT) schemes can help consumers make better-informed decisions and strengthen price competition.

This publication builds on the regulator’s response to the November 2023 DSIT consultation on a Smart Data scheme for the UK telecoms market.

The paper is intended to help policymakers understand the potential benefits of PT schemes, assess the circumstances in which these are likely to be effective, and consider how PT schemes should be designed to facilitate the benefits of competition.

Based on their learnings from the implementation of Open Banking schemes, the CMA have identified several ‘building blocks’ for the construction of effective Smart Data schemes:

• Mandated participation, monitoring, and oversight: PT schemes might not always be in the commercial interests of firms, meaning voluntary schemes could struggle to gather momentum or fail to represent the interests of incumbent firms.
• Common and open data standards: For PT schemes to be effective, data should be freely accessible to third parties. Third parties can then develop new tools or integrate data within existing services, so that consumers can access it.
• Data made available that reflects the dynamics of the market and minimises the risk to competition and consumers: The scope of the data should reflect the nature of the market, the objectives of the scheme, and potential use cases.
• Funding model that reflects consumer interests: The costs associated with the setup and operation of PT schemes might require public funding. In addition, charging Authorised Third Parties (ATPs) for access to data to mitigate against costs could inhibit the development of consumer-facing comparison services.
• Interoperability with other Smart Data schemes: Whilst there might be more limited value from interoperability between PT schemes, as opposed to other Smart Data schemes, the CMA propose there might be value in establishing common data standards to assist data transfers between schemes.
• Effective representation of consumers and other end users in scheme administration: For PT schemes, which both have more limited scope than other schemes and do not involve customer data, the relative importance of consumer/end user representation in scheme administration is likely to be lower.

In outlining the potential merits of PT schemes, the CMA have identified the example of the fuel finder scheme, which DESNZ intend to have in operation by the end of 2025. This will help consumers find the cheapest fuel, without having to physically drive between petrol stations. The process for this would be, as follows:

1. Fuel retailers send price data.
2. An aggregator collects, cleans, and provides data to third party providers.
3. Third party providers use the data to create innovative services, such as price comparison sites.
4. Consumers then use these services to identify the best details.
5. The net outcome of this is fuel retailers competing more intensely on price to attract consumers.

According to the CMA, this example demonstrates that PT schemes promote competition through emboldening consumers to compare prices and services. In turn, this should improve consumer engagement, for instance through emboldening them to switch services. The paper also considers which other information would be useful alongside price details, noting this can vary depending on the industry. For example, in the funerals market, providers are already required to publish a standardised price list for a set of common services.

Alongside this, the paper considers which markets might be better suited to PT schemes. The CMA anticipate this is best suited to markets where there are high search costs and limited up-front transparency over prices, alongside the expectation that consumers would act on price information. In particular, markets where there are high degrees of standardisation, as opposed to bespoke pricing, are well suited, and similarly as are markets where price information can be difficult to access.

For any questions about techUK’s work on Smart Data, please contact Dani (daniella.bennettremington@techuk.org), Audre (audre.verseckaite@techuk.org), and Kir (kir.nuthi@techuk.org).