UK competition regulator 'sets ground rules' for price comparison websites

* Follows year-long study into sector

* Source says comparethemarket.com subject of investigation (Adds comment from GoCompare.com, MoneySuperMarket, Comparethemarket.com, share reaction, bullet points)

By Simon Jessop, Noor Zainab Hussain and Carolyn Cohn

LONDON, Sept 26 (Reuters) - Britain's Competition and Markets Authority said on Tuesday it was setting "clear ground rules" for how consumer price-comparison websites operate following a year-long review but was opening a formal investigation into only one site, offering home insurance, as a result of the review.

Comparethemarket.com, owned by insurance and financial services company BGL Group, is the company to be investigated further, over it having preferential pricing deals with certain suppliers, a source with knowledge of the matter said.

Comparethemarket.com said it would be discussing its home insurance service with the CMA but declined to comment further. The CMA declined to comment on the identity of the company.

The CMA said its review had found price-comparison sites for insurance, energy supplies, travel and other products and services, offered a range of benefits for customers but that more improvements were needed to help them get better deals.

Because of their advertising campaigns the best known price comparison websites in Britain include Moneysupermarket.com , GoCompare, and Confused.com, which is owned by online insurer Admiral. MoneySuperMarket and GoCompare said in statements they backed the report's findings.

Among the recommendations were that all sites should be clear about how they make their money, how many deals they are displaying and how they are ordering the results. It should also be made as easy as possible to make comparisons.

"We have set out ground rules for how sites should behave, as well as being clear on how regulators can ensure people have a better experience online," CMA Chief Executive Andrea Coscelli said in a statement.

"We are also taking enforcement action where we suspect the law may have been broken."

The CMA said it was therefore opening a competition law investigation into how one site set up its contracts with insurers, as it suspected it could result in customers being charged higher home insurance prices.

The issue concerns the use of so-called 'most favoured nation' clauses, which prevent other websites from offering the best prices.

"Comparethemarket.com operates some simple contractual arrangements with home insurers to ensure that our customers always get the lowest available price. We welcome the opportunity to discuss this further with the CMA," the company said in a statement.

MoneySuperMarket and GoCompare said they were not under investigation, helping them to pare or recover early share price losses. MoneySuperMarket's shares were down 0.7 percent at 316 pence at 1255 GMT, having earlier fallen 3.5 percent, while GoCompare was up 1.7 percent at 107 pence, having earlier dropped by 3.3 percent.

"MoneySuperMarket does not use and has never used wide 'most favoured nation' clauses in any sector and strongly supports the CMA’s proposal to review them across all sectors," a spokesman said. (Reporting by Simon Jessop; Editing by Rachel Armstrong, Greg Mahlich)