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CAT Sets Aside CMA Infringement Decision On Wide MFNs – Antitrust, EU Competition

On 8 August 2022 the Competition Appeal Tribunal (CAT) set aside
the CMA’s infringement decision in its Compare The Market
investigation relating to the use of wide MFN clauses. The CAT
concluded that the CMA’s definition of the relevant market in
the decision was materially wrong and that the CMA had failed to
show, to the requisite standard, that the wide MFNs had any
appreciable anti-competitive effects. The CAT was highly critical
of the lack of quantitative and econometric evidence in the
CMA’s decision which was one of the main reasons for
overturning the decision.

The Compare The Market decision was the CMA’s first
Competition Act 1998 infringement decision involving wide MFNs. The
CMA ‘s 2015 market investigation into private motor insurance
identified that wide MFNs cause competitive harm, and resulted in
an order prohibiting their use in the market for private motor
insurance. This approach was confirmed in the CMA’s market
study on digital comparison tools, which concluded that wide MFNs
are likely to restrict competition and result in higher prices for
consumers. These developments informed the CMA’s approach to
wide retail MFNs in the new UK vertical agreements block exemption
Order (VABEO), where they are expressly listed as a hardcore

The Compare The Market decision predates the VABEO and it is
unclear to what extent the CAT’s ruling will impact the
CMA’s approach to wide MFNs going forward. The ruling is
clearly a setback for the CMA, which lost on five of the six
substantive grounds of appeal, and should provide helpful guidance
for anyone who is trying to justify the use of wide MFNs.

Key takeaways

  • The CAT’s ruling takes an interesting approach to market
    definition in relation to multi-sided platforms. It rejected the
    CMA’s single two-sided market approach which it replaced with
    two separate markets, one on each side of the platform (a market
    for the supply of customer introduction services to home insurance
    providers and a market which includes all direct and indirect
    channels for the purchase of home insurance products for
    consumers). The CAT considers this to be the correct approach for
    the assessment of multi-sided platforms.

  • The case was run as an infringement ‘by effects’ and
    the CAT held that the CMA had failed to demonstrate any appreciable
    adverse effects on competition to the requisite legal standard. It
    provides a useful reminder that the CMA must produce sufficiently
    precise and consistent evidence to support its decision that the
    alleged infringement took place.

  • Wide retail MFNs are now listed as hardcore restrictions under
    the UK VABEO and although the case precedes the new VABEO, the
    CAT’s approach and analysis can be expected to have an impact
    on any parties trying to justify the inclusion of such MFNs in
    their agreements. The CAT held that wide MFNs should not be
    classified as ‘by object’ restrictions as they can have a
    range of outcomes, not all of which are anti-competitive. Whereas
    they may restrict intra-brand competition or the ability to price
    differentially, they do not restrict inter-brand competition, where
    different products compete against each other, and it is therefore
    necessary to consider their anti-competitive effects on a case by
    case basis.


Most favoured nation clauses (MFNs) are restrictions that limit
the price (and other terms and conditions) at which the supplier
can offer its products or services through other sales channels. In
the context of price comparison websites MFNs are often used to
ensure that sellers do not free-ride or undercut the price
comparison website by enabling consumers to access the product or
service through another channel.

An important distinction is drawn between narrow MFNs, which are
less likely to be seen as problematic, and wide MFNs, which are
considered more likely to be harmful. Narrow MFNs require the
supplier to offer the same or better terms and conditions on the
price comparison website as those offered through its own direct
sales channels, but does not stipulate conditions for sales via
other channels. Wide MFNs specify that a supplier sets a price on
the price comparison website which is no higher than the price
offered through its own website or through any other sales

In November 2020 the CMA fined Compare The Market £17.9
million for imposing wide MFNs on a number of home insurers,
preventing them from quoting lower prices on other competing price
comparison websites.

The CMA concluded these wide MFNs had the appreciable effect of
preventing, restricting or distorting competition, in breach of the
Chapter I prohibition of the Competition Act 1998, by

  • Reducing price competition between price comparison

  • Restricting the ability of competing price comparison websites
    to expand (enabling Compare The Market to maintain or strengthen
    its market power; and

  • Reducing price competition between home insurance providers
    competing on price comparison websites.

On the other hand, the CMA regarded the narrow MFNs imposed by
Compare The Market as either beneficial or necessary, as they were
seen as preventing the home insurance provider from undercutting,
on its direct channels, the premiums quoted on the price comparison
websites, thereby preventing the insurance provider to free-ride on
the price comparison website’s efforts to attract

Compare The Market appealed the CMA’s infringement decision
before the CAT on six substantive grounds, relating to the market
definition adopted by the CMA and its failure to show, to the
requisite standard, that the wide MFNs had anti-competitive

The CAT’s ruling

Market definition

In its decision the CMA had defined the relevant market as a
single, two-sided market of price comparison website services for
home insurance in the UK, involving the supply of (i) customer
introduction services to home insurance providers and (ii) price
comparison services to consumers.

The CAT found that the CMA’s market definition was
materially wrong and that the process by which it arrived at that
market definition was flawed. The CMA had failed to properly
consider the consumer-side of the market and was wrong to assume
price comparison sites just supply price comparison services.

It concluded that the CMA should have defined two separate
markets, one on each side of the platform: a market for the
provision of customer introduction services to home insurance
providers by price comparison websites and a market which includes
all direct and indirect channels for the purchase of home insurance
products for consumers. To treat them as a single market runs the
risk that the analysis of the degree of substitution will be
incomplete, and that a single SSNIP test on one side of the market
is insufficient to test the competitive constraints on the

As a result of its failure to assess each side of the platform
separately, the CMA had failed to consider the significance of
other channels for the purchase of home insurance products by
consumers. The insurance market is marked out by the use of
intermediaries or a whole series of different interfaces,
particularly involving the use of brokers. Price comparison
websites are a relatively late addition to this list of indirect
channels to acquire insurance and the CMA was wrong to limit the
market definition to price comparison websites for home

Anti-competitive effects of the wide MFNs

The CAT held that the CMA had failed to establish that the wide
MFNs had the anti-competitive effects articulated in its decision.
The case was an infringement ‘by effects’ case, and while
the CMA was under no obligation to quantify the extent of the
anti-competitive effects, it was required to demonstrate that the
adverse effects on competition occurred on the balance of

The CAT concluded there was no reliable evidence to conclude
that the existence of the wide MFNs had any adverse effect on
premiums or commissions. In fact, the CAT went further and
considered it unlikely that the wide MFNs had any effect on keeping
premiums or commissions at a higher level than they would otherwise
have been.

The CAT was extremely critical of the evidence relied on by the
CMA, which had based its decision entirely on qualitative evidence
and not at all on quantitative/econometric evidence. The CAT
described that evidence at best as anecdotal, lacking depth and
consistency with the CMA’s theory of harm. Much more seriously,
according to the CAT the evidence was untestable by both Compare
The Market and the CAT, and it was never clear exactly what
qualitative evidence the CMA was actually relying on.

The CAT upheld five of the six grounds of appeal advanced by
Compare The Market and set aside the CMA’s infringement
decision. The CMA has until 16 September 2022 to apply for
permission to appeal the CAT’s ruling.

Wide retail MFNs under the new UK VABEO

Under the new UK vertical agreements block exemption Order
(VABEO) that came into force on 1 June 2022, wide retail MFNs are
now expressly listed as hardcore restrictions and are therefore
presumed to restrict competition by object. This means that the CMA
is not required to carry out a detailed assessment to demonstrate
an adverse effect on competition. It also gives rise to the
presumption that the agreement is unlikely to fulfil the conditions
for exemption from the Chapter I prohibition, which is why the
VABEO does not apply. The burden will be on the parties to
substantiate any efficiencies resulting from the inclusion of wide
retail MFNs in their agreement and to demonstrate that all the
conditions for individual exemption (under section 9(1) CA98) are

Whereas it is unclear at this stage to what extent the CMA can
be expected to adjust its approach to wide MFNs in light of the
appeal, the CAT’s analysis in this case should at least provide
a helpful framework for parties seeking to demonstrate the possible
pro-competitive effects of the use of wide retail MFNs.

It is worth noting that narrow retail MFNs and non-retail MFNs
do not qualify as hardcore restrictions under the new VABEO and
will continue to benefit from the block exemption, provided the
market share thresholds and other conditions of the VABEO are

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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