Price comparison websites harmful to consumers

Research from the University of Warwick’s Department of Economics has suggested that the existence of price comparison websites may be bad for consumers.

David Ronanyne, author of a research paper into price comparison websites, has found that they may push prices up rather than down. Increasing the amount of these websites, he argues, may only intensify the problem.

Mr Ronayne said: “The common belief is that these sites benefit consumers by increasing competition between service providers. But these websites are not charities; they charge fees to firms, which in turn have to be passed on to consumers through increased prices.”

Rihan Dewan, a second-year Economics student, commented: “Everyone wants to shop around to find the best possible deal, hence why price comparison sites are so popular.

“Despite this, our benefit isn’t in their best interests. Many comparison sites get commission when a customer switches from one company to another. This means that information is often misrepresented to entice customers.”

Mr Ronanye’s paper argues that before service providers had an online presence, the benefit of price comparison sites was more obvious. Companies now have their own websites where their prices can easily be found.

“In 2015, the scope for a profit-maximising comparison service to benefit consumers is now fundamentally more questionable,” said Mr Ronayne.

“Of course, given that these sites exist, we as consumers are of course better off by using them to navigate to the cheapest deal on the market. What I am asking in my research is under what conditions it is true that consumers would actually prefer them not to exist at all.”

Mr Ronanyne’s research makes the recommendation that there be a limit on fees charged by price comparison sites to firms. He also suggests a cap on the amount of price comparison sites being allowed to operate.