The UK Competition Appeal Tribunal (CAT) on 8 August 2022 set aside a £17.9 million fine against price comparison website Compare The Market, criticising the Competition and Markets Authority’s (CMA) legal and evidential assessment of the case.  The CAT found that the CMA’s “anecdotal evidence[1] failed to prove that Compare The Market kept home insurance premiums artificially high by using most favoured nation clauses (MFNs) in its contracts with insurance providers.  The CMA has said it is disappointed with the CAT’s ruling and is considering its options, including a potential appeal.

The traditional concern with MFNs is that they can make it more difficult for rival platforms to compete

MFNs (also called parity clauses) limit the prices or terms that a supplier can offer for a product or service through alternative sales channels.  They often involve digital platforms that list offers from different suppliers.  MFNs typically relate to price, but they can extend to other parameters of competition like quality or availability.  There are two general categories of MFNs:

  • Under narrow MFNs, a supplier agrees not to set lower prices (or better terms) through its own website compared to prices or terms offered on the platform imposing the MFN.
  • Under wide MFNs, a supplier agrees not to set lower prices (or better terms) on both its own website and other sales channels like rival platforms.

It has been argued in the past that MFNs could be justified on the basis that they reflect a non-discrimination promise, which an investor – for example a platform operator – may need in order to protect against opportunistic behaviour by a counterparty following its investment (e.g., in setting up a platform) and once the counterparty is locked in.  Without such non-discrimination promise, the investor might not have an incentive to create the platform at all.[2]

In recent years, however, MFNs have caught attention from authorities in the UK, Europe, and worldwide for potentially restricting competition.  The main concern is that they make it more difficult for rival platforms to compete by reducing suppliers’ ability and incentive to offer lower prices or a better service on rival platforms.

For MFNs to be an issue under competition law, the platform requiring an MFN must possess some degree of market power.  This does not, however, need to extend to dominance thresholds, because MFNs can still be challenged under rules relating to anticompetitive agreements.

The CMA originally objected to Compare The Market’s wide MFNs because they allegedly foreclosed rival platforms

In its 2020 decision, the CMA found that Compare the Market blocked insurers from offering lower prices through rival price comparison websites by using wide MFNs.  In the CMA’s view, these wide MFNs protected the company from effective competition because they made it harder for Compare The Market’s rivals to enter the market or expand and challenge the company’s strong market position.[3]  The CMA considered that Compare The Market’s network of wide MFNs” could have a particularly significant restrictive effect on competition, analogous to resale price maintenance.[4]  According to the CMA’s Executive Director for Enforcement, “price comparison websites are excellent for consumers. They promote competition between providers, offer choice for customers, and make it easier for consumers to find the best bargains”.  According to the CMA, Compare The Market’s wide MFNs risked limiting these bargains.

By contrast, the CMA was less concerned about Compare the Market’s narrow MFNs.  It regarded these clauses as either beneficial or necessary because they prevented home insurance providers from undercutting, on their direct sales channels, the premiums quoted on the price comparison websites that home insurance providers might subscribe to.  The CMA therefore ultimately allowed Compare the Market to restrict insurers from charging lower premiums on their own websites.  The CMA did not, however, rule out the possibility that “narrow MFNs may in themselves in certain legal and economic contexts give rise to potential restrictive effects on competition”.[5]

The CAT quashed the CMA decision because it found that the wide MFNs at issue were not by object infringements and the CMA had failed to show anticompetitive effects

The CAT unanimously overturned the CMA’s finding regarding Compare the Market’s wide MFNs, holding that the CMA erred in both law and in its evidentiary assessment.

As a legal matter, the CAT held that wide MFNs are not by object infringements but rather require an examination of effects.[6]   According to the CAT, this is because wide MFNs may have a variety of outcomes, not all of which are anticompetitive or undesirable.  In particular, the CAT pointed to three factors in its explanation as to why these clauses were not suited for the “by object” box:[7]

  • First, the CAT explained that the purpose of Compare the Market’s wide MFNs was similar to that of narrow MFNs to the extent they prevent home insurance providers from undercutting the premiums quoted on the platform. It recognised that one way of competing is to ensure that Compare the Market’s website reliably quotes the best price from any given home insurance provider.
  • Second, the CAT considered the negotiated nature of these wide MFNs and the fact that a significant minority of home insurance providers subscribing to Compare The Market’s services were not subject to such clauses. It concluded that there may have been a number of commercial reasons why certain insurance providers considered it in their commercial interest to sign up to wide MFNs.
  • Third, the CAT found that the wide MFNs in question only served to restrain competition between sales channels selling the same home insurance product. The most these clauses could achieve is the elimination of price differentiation (or intra brand competition) by a home insurance provider.  Other forms of competition between home insurance providers were not affected.

Having found that it was necessary to consider anticompetitive effects, the CAT then concluded as an evidentiary matter that the CMA had not met its burden of proof.  It criticised the CMA’s failure to show that these clauses had the “inhibitory effect” which the agency alleged.  The CAT found that there was no reliable evidence to conclude that the existence of wide MFNs had any adverse effect on either insurance premiums or commissions.  The mere fact that insurance providers complied with these clauses was not sufficient to demonstrate an anticompetitive effect.  The CAT also ruled that it was unlikely that the clauses did in fact cause higher prices.

For the CMA, the CAT’s judgment is a clear signal that it cannot merely theorise anticompetitive effects.  The agency should prove effects when it has the ability to do so empirically; mere speculation will be insufficient.

The CAT’s findings are in some tension with the UK’s new vertical block exemption and the approach taken in Europe

The CAT’s conclusions contrast with the approach of regulators across Europe to wide MFNs and the UK’s new block exemption for vertical agreements (VABEO) and the CMA’s accompanying guidance published on 12 July 2022.[8]

  • As explained in our previous blog post, the VABEO includes wide MFN provisions in the list of hardcore restrictions. This means that only narrow MFNs will continue to benefit from the block exemption.
  • The CAT judgment diverges from findings of national competition authorities in Europe. While there is some disagreement about whether narrow MFNs are anticompetitive, national authorities in Member States and the European Commission have consistently challenged wide MFNs, as both abuses of dominance and anticompetitive agreements.[9]  The German Federal Cartel Office, in fact, goes further because it also objects to narrow MFNs.[10]
  • In the EU, the new Digital Markets Act (DMA) will prohibit both wide and narrow MFNs for certain core platform services operated by designated gatekeepers. Gatekeepers will no longer be allowed to include these restrictions for any of their online intermediation services (OIS) to the extent those OISs are designated “core platform services”.  Under the DMA, MFNs will be banned outright: a regulator will not need to show that the MFN harms competition.  Gatekeepers will also have no scope to justify MFNs based on efficiencies or benefits.  The DMA’s behavioural rules enter into force in early 2024.



[1]              BGL v CMA [2022] CAT 36, paragraph 262.

[2]              MFNs have long ago been reviewed under an effects analysis, taking into account factors such as market structure, concentration levels, and potential market entrants; see, e.g., European Commission (EC) Decision 75/494/EEC of 18 July 1975 in Kabelmetal/Luchaire; and the EC’s 1995 investigation of AC Nielsen following a complaint by Information Resources Inc. relating to Nielsen’s contracts which prevented retailers to sell data to third parties at a more favourable price than that offered to Nielsen, thereby allowing Nielsen to set prices at a high level raising barriers to entry.  More recently, the EC in 2004 closed its investigation into contracts of six Hollywood studios with European pay-TVs after the studios decided to withdraw their MFNs.  The EC had found that the cumulative effect of the proliferation of these clauses, with many similarities, resulted in an alignment of the prices paid to the studios.

[3]              The CMA found in its infringement decision that Compare The Market had “persistently high market shares since at least 2012 and [its] market share was more than 50% throughout the Relevant Period, around twice the size of the next largest [price comparison website]”.

[4]              The CMA considered it was arguable that Compare The Market’s wide MFNs were by their very nature harmful to the proper functioning of normal competition.  However, given the CMA’s findings on the restrictive effects of these wide MFNs, the CMA chose not to reach a conclusion as to whether these clauses amounted to an object infringement.

[5]              CMA, Case 50505, Price comparison website: use of most favoured nation clauses (19 November 2020), paragraph 6.7.

[6]              By object infringements are reserved for certain types of practices which can be regarded, by their very nature, as being harmful to the proper functioning of competition.

[7]              BGL v CMA [2022] CAT 36, paragraphs 209-210.

[8]              They align more closely with the approach in the US, where MFNs are reviewed under the Rule of Reason, or similar standards applicable under monopolisation claims brought using Section 2 of the Sherman Act.

[9]              See the European Commission’s Amazon eBooks investigation.  The French, Italian, and Swedish authorities accepted commitments from to remove wide MFNs, but retain narrow MFNs.  France and Italy, however, have since enacted legislation banning narrow MFNs between online booking platforms and hotels.  France has now also legislated against any form of “price” MFN in the hotel sector, irrespective of the level of market power of the platform.

[10]            Germany’s Federal Court of Justice upheld the Federal Cartel Office’s finding that’s narrow MFNs were incompatible with EU and German competition law.