Buyer beware: comparison sites profit from your desire to snatch a bargain

How product comparison sites make money from your desire to snatch a bargain.

Online comparison sites are a boon for consumers who can now easily switch to service providers offering better value for money, especially if they are seeking bargain basement power prices.

Comparing the plethora of energy plans on the market is a chore that would have once taken days or more, but these sites do all of the grunt work for you. Or do they?

Not all comparison sites are equal and some of them make no secret of the fact that they will only recommend energy retailers from a limited list.

Others are more opaque in disclosing their relationships with third parties, leaving you wondering whose side they are really on.

Apart from the government-sponsored sites, comparison companies are in it for money, not love.

Forget any notion that they are providing a community service without strings attached.

They may save you cash, but are they saving you as much as the next comparison site? And are they doing it for the greater benefit of the ‘little person’ or because they are feathering their own nest?

Even the highly-respected Mozo admits in its Financial Services and Credit Guide that while it is independent, it does have ties to financial institutions “with regard to remuneration”. The disclosure statement says it “may receive fees or commissions from the financial institutions, issuers of financial or credit products and third party advice providers that we display on our site”.

It is also paid for sharing market research data with third parties, for hosting financial calculators and other tools on its site, and it collects commissions per click and licensing fees for displaying badges awarded to top providers.

And there is more … it charges fees for referrals to product issuers, when you complete an application for a third party’s product after being referred by Mozo, and also when you are approved for that product, when you click through to a third party’s website and submit your contact details, or request that Mozo pass on your contact details, and for each of your enquiries it passes onto the third party.

What a multi-layered and lucrative business plan. The company doesn’t just get paid for recommending the cheapest product … it owns you as a customer during all the steps you take towards the transition to your new energy retailer.

Another reputable site, Canstar, has a similar business model, as disclosed in its credit guide.

Comparison site disclosures are mandatory under financial regulations, without which we might never know what motivates them to recommend one product or another.

But having said that, it is worth noting that Mozo and Canstar emphasise that the commissions they are paid in no way influence the fees customers are charged by recommended institutions.

None of this insight is meant to detract from the integrity of the free product both organisations provide. In fact, compared to a few other comparison sites they appear to be more ethical.

Over the past few years, the Australian Competition and Consumer Commission (ACCC) has nabbed several sites accused of dodgy practices.

EnergyWatch was fined $2 million for misleading advertising, Compare the Market paid $10,200 in penalties over claims related to health insurance comparisons, and iSelect had court enforceable action taken against it, too.

“In two of those cases, the sites were giving the impression that they compared most or all of the market, when in fact they didn’t,’’ the ACCC said.

The consumer watchdog recommends that energy customers wishing to compare price plans visit a government-sponsored site such as energymadeeasy.gov.au. Victorians can find electricity offers at www.compare.switchon.vic.gov.au. For more information on WA deals, visit www.treasury.wa.gov.au/public-utilities-office, and for NT pricing go to the Utilities Commission.

The ACCC warns that: “Comparator websites may not compare all the offers or products in the market. Check what’s on offer across a range of comparator sites.”

It also advises consumers to identify the site owner, check offer availability, work out the total cost and keep a record of any telephone calls.

And importantly, it recommends that a site’s privacy policy should be checked before you provide your personal details.

“Some operators use your information for purposes other than comparing products. Make sure you are comfortable with how your data will be used,” the watchdog said.

And importantly, the ACCC advises that consumers ensure the company has an Australian financial services licence before they supply personal details to action a switch.

Two years ago, One Big Switch attracted the interest of another watchdog, the Australian Securities and Investments Commission, over its unlicensed operations. Although not a pure comparison site, One Big Switch was forced to fix up its compliance practices before being allowed to continue to obtain cheap, bulk power prices for its huge membership.

Checking out who owns, or has an interest in, an online site that promises to save you money can also be eye-opening. This was the case with One Big Switch, again, when it was revealed that media giants Seven West Media and News Corp bought stakes in the company after its launch.

The moral of the story is, look before you leap to another electricity retailer, otherwise you might trip over a wire.

Would you ever use a comparison site to shop for cheaper electricity? If you have used a site, how much did it save you over a year? What other ideas do you have for saving big bucks on power?

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    COMMENTS

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    Maggie
    6th Nov 2017
    9:56am
    There is a fair amount of work in making clear information which is pretty well always deliberately presented to the public in a manner which makes it impossible for the average layperson to make anything like accurate comparisons. Not many people work for free so it is obvious that there is money involved! That is why the information is only about companies that pay to be on these comparison sites.

    It seems to me that we are more and more at the mercy of money-grubbing organisations without much regard for the services they provide.There is not a lot we can do about it, but If anyone is looking for health insurance it pays to insert the words "not for profit" in your google search for companies. It is amazing how much more information becomes available.

    One thing I have found that really does help in reducing power bills it to have the best possible insulation. It would be good if double glazing was introduced as standard practice in house building too.
    fearlessfly
    6th Nov 2017
    10:20am
    Hey, anyone who uses these scam comparison websites needs their head read right up front !
    Eddy
    6th Nov 2017
    12:07pm
    A bit harsh fearlessfly, but your sentiment is right. I used iSelect once and they gave me their recommendations. I asked what about Red Energy, I was interested in Red E as they claimed to be an Australian owned company which used Snowy Hydro power. I was told Red Energy was not on their panel. The penny immediately dropped that if the individual companies did not pay then they would not be considered.
    Since then I have made my own comparisons. Being retired I have time, a computer with Excel and an Electrical Engineering degree. My conclusion is that they all charge pretty much the same for electricity, the big difference is the promotional offers. The best thing I did for my power bills was to install solar panels on my roof in 2015. I calculate they should start returning a profit in 4 more years
    older&wiser
    6th Nov 2017
    2:09pm
    Eddy - totally agree. Without exception, every time I have used a comparison site, for power, health, insurance, etc - always come out dearer. I am convinced that the only people wo benefit from these comparison sites are people who are too lazy to do their own checking. Yes, it takes time, but as company's penalize you for being loyal, it is just something I do every year.
    Rosret
    6th Nov 2017
    10:43am
    Comparing deals is deliberately quite difficult and like mobile phone deals no two are exactly the same.
    When you have worked out a better deal and then swap the rates may all change without you realising. It is so tricky and what is the frustration and time taken as you share all your private details with yet another provider worth.
    Charlie
    6th Nov 2017
    11:05am
    Not in North Queensland. Its Ergon, compared to Ergon.
    ray from Bondi
    6th Nov 2017
    11:39am
    This all comes back to mantra of deregulation and let the market decide, it is impossible for somebody to really compare, I tried and I believe a person needs to be a genius to figure it out, no if you use this much you pay this much they all have what seems different level and different pricing so it is very difficult. all one can do is switch and see what the result is, sadly this can not be done on a whim as a person is locked in for a bit, but they all source the same from the same place so there can not really be too much difference. Once again it is my belief that governments have let their constituents down again, did selling off something that was owned by one entity (the government) to many small businesses really result in saving I do not see how, there are many more snouts at the trough now.
    Janran
    6th Nov 2017
    1:59pm
    Yes, ray f B. It's a lie to say energy prices will fall simply because there are now private companies retailing energy to the public. Like you say: "many more snouts at the trough now" and worse, all those CEO bonuses (which these days seems mandatory, no matter how badly the company has performed under that CEO!).

    It's just a terrible joke. I pity people who rent their homes or who are so poor (or stupid!) not to install solar power.

    All I can recommend is to avoid "the dirty three": Origin, Energy Australia and AGL, who are not so coincidentally always listed with the energy comparison companies. They make noises about investing in renewables but they are the fossil fuel kings.

    Choose Diamond Energy or Red Energy, who are committed to renewable energy production. I believe there's another good one in Victoria.
    jackie
    6th Nov 2017
    11:48am
    When it comes to energy our Governments have failed us. Look at the mess they have left us to deal with.
    Rae
    6th Nov 2017
    7:34pm
    Not just energy either unfortunately.

    Best idea is to cut spending . Maybe give u some no essentials ready for the price rises.

    With electricity rising so will anything needing refrigeration including take out or restaurant foods.
    johnp
    6th Nov 2017
    12:30pm
    my experience has been that its best to call several providers and get their best offers for such as kwh per hour, fixed connection cost ongoing, peak, non peak etc then compare yourself as well as to the existing bill. not forgetting of course solar feed in rates
    TinTin
    6th Nov 2017
    12:45pm
    This is so true, I stupidly got Electricity Wizard to do a comparison check for Gas supply for me and they came up with Lumo Energy and signed me up straight away. When I received my first gas bill from Lumo it was unbelievable considering it was for a very short period plus our central gas heater had broken therefore we couldn't use our gas heater for just over a week. It was after I received the bill that I went onto an online forum to see what other customers had to say about Lumo. I was shocked to say the least when I found that there were a huge amount of people complaining angrily about Lumo. Obviously I dumped them immediately for another supplier. I also rang Wizard and told them what I thought about their recommendation.
    KSS
    6th Nov 2017
    1:46pm
    Here we go again another negative article!
    Comparison sites are useful for what they are and that is as a starting point. At the end of the day, you have to investigate yourself, do the sums for your own individual circumstances, read the PDS and then make your own decision. After all these are only suggestions and offers not compulsory purchases. No one is forcing you to accept anything.
    Janran
    6th Nov 2017
    2:04pm
    That may be true for retired folks, KSS, but people with children are very time poor these days. They go to these comparison sites believing what they are promised, ie, THE BEST COMPARISON RATES. It's a lie.
    Rae
    6th Nov 2017
    7:36pm
    Yes it seems negative effects everywhere KSS. A right proper mess indeed.
    KSS
    7th Nov 2017
    8:36am
    So much easier to make excuses and blame someone else than take responsibility for not doing your own homework isn't it Janran? I bet the dog ate yours regularly!
    marto
    6th Nov 2017
    3:01pm
    Yes there is only one thing to say at any of these sites " Caveat Emptor " I have found you need to check the unit cost not just the discount hell i have found them to be a mine field
    floss
    6th Nov 2017
    4:35pm
    Once our energy providers were privatised it opened the door to any shonky dealer from overseas to get their cut and they have had a field day.Both the federal and N.S.W state governments have been guilty of this.There is no way back from this bloody disaster so power prices just have to go up.This mob have made Australia into a disaster.
    Anonymous
    6th Nov 2017
    6:43pm
    Yep - the Lieberal-Hillbilly COALition are totally inept economic mismanagers who have destroyed the joint. And things are made worse by immigration...
    Rae
    6th Nov 2017
    7:38pm
    Yes floss. Shame to think the great grandkids will live in a colony of China but it sure looks that way to me.
    johnp
    6th Nov 2017
    4:58pm
    Yep, its all done with smoke and mirrors to confuse the public in the interest of various vendors !! I agree with most here.
    A fact these days is the “elephant in the room”. The necessary part which is the actual generation, control and distribution to the door of electricity now only forms part of the electricity bill to the consumer. A reality is that a substantial proportion of the bill goes on all the multitudes of CEOs, CxOs, upper managements, boards of directors, call centres, marketing, sales, administrations, I.T. depts, plush city offices, etc etc. This is multiplied many times by the 100 or so companies involved and especially in the retail part of the chain. So what are we going to do about that ??
    Anonymous
    6th Nov 2017
    6:44pm
    Indeed! Its the evil fruits of hypercapitalism.
    Kathleen
    7th Nov 2017
    12:36am
    You have to do your own research not just for power but private health cover and specials across different companies. It is easy now with the internet. It is time consuming and you need to be thorough.
    Then you ask for an even better deal when you talk to the company you have chosen.
    You have to examine the details of the deal like is the pay on time discount for the whole bill or just useage.
    Ask for loyalty discounts after six months and tell them what others have offered.