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IAB awaits Ofgem verdict on proposed revision of ‘cashback model’ ban in energy market

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By Jessica Davies, News Editor

August 23, 2013 | 4 min read

The Internet Advertising Bureau (IAB) and affiliate members have met with Ofgem to appeal for a revision of its Retail Market Review, in which the regulator calls for a ban on cashback models in the energy market.

The report, published in June, has been devised to help create a “simpler, clearer and fairer” energy market, tackling issues such as the widespread confusion among consumers over energy tariffs, poor supplier behaviour and a lack of transparency which is “stifling competition”, according to Ofgem.

The report aims to crack down on complex and confusing multi-tier tariffs while ensuring all tariffs have a standard basic charge, among other reforms.

However, sections of the report relate specifically to the banning of ‘cashback’ models, which has caused some concern in the online performance market and prompted the IAB to appeal to Ofgem for clarification.

The body has been lobbying on behalf of its cashback affiliate members and The Drum understands a decision from the energy body over whether it will revise its report is imminent.

In its initial written appeal to Ofgem, the IAB stated there would be an “adverse” effect to both consumers and to competition in the market if the restrictions to cashback models go ahead.

Since then companies including Affiliate Window, Online Media Group (OMG), Affilinet, TopCashBack and Quidco, have requested a revision, which has been backed by the IAB.

In its written appeal the IAB stated: “We support the collective submission by Affiliate Window, Online Media Group (OMG), Affilinet, Top CashBack and Quidco. It is our belief that cashback can continue to offer a simple and effective incentive to the consumer within the boundaries of the Retail Market Review. Further the IAB is concerned by the restrictions that Ofgem seek to place upon cash back incentives,- when it clearly recognises the value and role of other incentives.

"We have seen that cashback is an established, important part of the incentive mix and its popularity should be properly considered. The IAB believes there is a fundamental misunderstanding of the role that cashback plays in the context of affiliate marketing, and indeed with whom the relationship lies. It is not the energy company incentivising customers.”

Nathan Salter, chief operating officer, OMG, and chair of the legislations and standards committee on the IAB affiliate marketing council, said they support Ofgem’s overall objective of simplifying the process for consumers to switch or shop around for accounts, but that affiliates have been “caught in the crossfire” of the changes.

He told The Drum: “Cashback is a very popular channel for consumers and millions of people use it frequently. Ofgem is aiming to create a better environment for consumers through greater transparency and we fully support that. But there is concern that some of the innovative and current means of facilitating and tapping into consumer engagement with energy products and services will be damaged and consumers will miss out.

“It is the cashback publisher that passes on the commission to the consumer, not the energy supplier. We don’t understand if the intention is for our model to be affected and that is what we are seeking clarification on. But we also want to put forward the case that it is a mainstream way of consumers engaging with products and brands, and it doesn’t lead to a cluttered or confusing market,” he said.

Ofgem is expected to make a decision in the coming weeks.

IAB Affilinet Quidco

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