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09 Oct 2018

The Loyalty Penalty Super-Complaint: New Challenges for the CMA

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On 28 September 2018, Citizens Advice lodged a "Super-Complaint" with the Competition and Markets Authority ("CMA") to ask the CMA to investigate the loyalty penalty: the higher price paid by consumers who stay with their provider, compared to new customers who accept more favourable offers. Citizens Advice's research showed that consumers paying the penalty in each of five "essential" markets (comprising mobile, broadband, home insurance, fixed rate mortgages and savings accounts) would be charged up to £877 more for the services per year. Moreover, that the loyalty penalty may extend to any market where customers are automatically placed on a standard rate upon expiry of an initial deal. The CMA has a statutory 90 day deadline for publishing its response to the Super-Complaint.

Interestingly, the Super-Complaint has been lodged at a time when loyalty penalties and how to address them are already very much on regulators' radars, being discussed in current consultations and market studies conducted by the Financial Conduct Authority and the Office of Communications. It also coincided with the announcement of the Government's Smart Data Review, which considers inter alia how new technologies (including automatic switching services, for example) can be accelerated to improve consumer outcomes in regulated markets. It remains to be seen how the CMA responds to the challenges raised by the potential scope of the complaint and its interaction with these various initiatives (with their differing timetables). In the meantime, interested parties - ranging from charities and consumer groups to price comparison and switching platforms, financial advisers, industry bodies, and those active in the identified markets – may well want to make their views heard.

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