TopCashback welcomes Ofgem’s move to modify cashback ban following industry appeal
TopCashback is among the first affiliate publishers to welcome Ofgem’s plans to modify its previous blanket ban of cashback models in the energy sector, introduced as part of its Retail Market Review (RMR), following an industry appeal.
The energy regulator had banned the use of cashback as part of its Retail Market Review which aims to cut out complexity and confusion regarding the multiple tariffs used by energy providers and in doing so encourage more consumers to switch.
However, in the process it outlined that cashback models were also hindering switching. This triggered concern in the affiliate cashback space with companies including TopCashback, Online Media Group (OMG) and Quidco, claiming that they were being unfairly caught in the cross fire.
The Internet Advertising Bureau (IAB) helped lead them in an appeal, which Ofgem later dismissed.
However, in an open letter issued last Friday (20 December) Ofgem stated that it would revisit its plans to ensure that any “third party intermediaries” are not unfairly penalised as a result of the report’s publication.
Ofgem’s associate partner, retail markets, Neil Barnes said in the letter that certain TPIs had flagged concerns with the provider regarding its rules on cash discounts and bundled products on the grounds that they could hamper competition in the intermediary market and may constrain their ability to engage consumers.
He said that if this were to happen it would be an "undesirable consequence" of the rulings.
"Our [Ofgem's] desired policy outcome is not to stop TPIs from offering cashback or bundled products where these act as a genuine inducement for consumers to engage and do not materially distort consumer choices between different tariffs.
"Our initial view, subject to consultation, is that we would be comfortable, for example, where an intermediary offers the same inducement irrespective of the tariff chosen, and offers a broad range of tariffs.
"As such, we are minded to allow cashback and bundled products to be offered in this way. To achieve this outcome, we will need to resolve some detailed issues and go through a formal process to change suppliers’ licence conditions.
"We will work swiftly to consider how to achieve our desired outcome in this area and will consider potential linkages with the Confidence Code review.
"More broadly, we recognise the growing importance of the TPI sector, and its innovative and developing nature. We consider that good quality intermediation plays an important role in helping consumers engage effectively with the market and make well-informed decisions about their energy supply," he said in the letter.
Although it has not yet been overtly specified that affiliate publishers fall into the category of what Ofgem terms TPI, they are quietly confident that they are included. TopCashback is among those to welcome the proposed changes.
A TopCashback spokesman told The Drum: “Our approach is to let energy suppliers know that we feel this means that we can continue to offer cashback into the new year and is obviously great news for the industry.
"We will continue to offer the Vouchers as an alternative option for those providers who wish to wait until the dust settles and for further feedback from Ofgem who are not uncontactable till the new year.
“We obviously welcome the changes and are happy to be able to continue to let our members have the choice of how they wish to redeem their cashback.
Meanwhile OMG's chief operating officer Nathan Salter, who led the affiliate appeal, said: "Whilst we need to understand the full implications of Ofgem's position we are encouraged by the consideration that is being given to the cashback model. Industry stakeholders have worked hard to clarify how the model sits well with consumers and indeed the objectives of the review.
"Working with the IAB and others we will pick up on this quickly in the new year with a view to ironing out the detail and hopefully ensuring that cashback can continue to operate on energy products broadly within the space just as it does on many other products and services."
It’s understood companies like price comparison site Moneysupermarket has also since expressed its displeasure at the rulings. TopCashback is planning to issue a formal statement later today.