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Discrimination through price comparison platforms?

Fair consumer contracts: iwp-researchers at the have examined the distributional effects of price comparison platforms and possible regulatory requirements.

"Special Prices"-Schild an einem Schaufenster

Consumer contracts for telecommunications or energy are usually offered in fixed-term contracts with automatic contract renewal. For new contracts, temporary discounts in the form of time bonuses or continuous discounts on the monthly contract price are common. However, these discounts expire at the latest at the end of the minimum contract term. If consumers do not proactively terminate their term contract before the end of the notice period, they are still bound to the contract for a fixed period of time and pay - possibly unintentionally - during this period the originally agreed full monthly basic fee. Other consumers, on the other hand, benefit from this kind of contract design through regular terminations.

Price comparison platforms play an increasingly important role in the mediation and administration of these consumer contracts. In the research project "Price comparison platforms, cashbacks and automatic contract extensions: Fair consumer contracts and regulatory issues from the perspective of consumer protection", a team led by Professor Steffen J. Roth of the Institute for Economic Policy at the University of Cologne (iwp) has now examined the influence that the increasing relevance of price comparison platforms can have on this type of contractual arrangement of consumer contracts.

In a recent discussion paper, Roth and the iwp researchers Christoph Oslislo, Clemens Recker and Rebekka Müller-Rehm argue that the platforms are likely to benefit customers, who carefully manage their current contracts and regularly terminate them in due time, increasingly at the expense of the more "sluggish" consumers, because on comparison platforms, providers would be in intensive competition for the lowest effective price. Direct discounts on the basic fee bring them just as much an advantage, as so-called cashbacks, i.e. discount payments from the comparison platforms. These cashbacks, however, reinforce the redistribution at the expense of the "sluggish" consumers, especially since empirical surveys show that a large proportion of the cashbacks are regularly not called up.

According to Christoph Oslislo, Clemens Recker, Rebekka Müller-Rehm and Steffen J. Roth, the possibilities for individual price discrimination will increase even more in the future due to the increasing amount of user data generated by the platforms. For example, comparatively with the help of high cashbacks expensive contracts could be specifically brokered for a supposedly low effective price to customer groups from which, based on the data, a low probability of being called up is expected. By simultaneously only offering contracts with lower discounts to customers who are more likely to switch, platforms and providers could in future skim off a large part of the consumer benefits still existing today through differentiated contracts.

[Source: - summarised version of the text by Christoph Oslislo, Clemens Recker, Rebekka Müller-Rehm and Steffen J. Roth, translated into English (CC BY-SA 4.0)]