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Price and choice in remote communities

Start date: 10 February 2012
End date: 8 June 2012

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Summary of the work

In February 2012 we launched a call for evidence about price, choice and access to goods and services in remote markets in the UK. The purpose of this work was to improve understanding of how remoteness affects choice and access.

We considered the issues under the full range of OFT tools and published our findings in June.

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Our findings

The main issues raised in the call for evidence were:

  • Prices: particularly in local shops, perception that they are unjustifiably high because of monopoly position, concerns about lack of transparency.
  • Internet: unavailable or available at slow speeds only, lack of competition in terms of service provider, advertised speeds not available, poor mobile phone coverage.
  • Delivery: Concerns about excessive/unjustified charges, terms and conditions, slow delivery times, not delivering to the door, location not accurately described.
  • Road fuels: concerns about high fuel prices, about price differentials between locations, monopoly supply/lack of competition, lack of transparency in how prices being set and the general impact of fuel prices  on all aspects of remote living.
  • Public transport services: lack of or infrequent services, expensive services, lack of competition.

Our report concludes that:

  • Weak economies of scale play a central role, especially in retail and that this is likely to have a more significant effect than distance.
  • In certain key markets weak competition is a highly significant factor and some businesses enjoy a market position that is a quasi monopoly.
  • The invigorating effect of the internet on choice, prices and quality  is currently constrained by limitations of connections and take up and by issues with delivery.
  • Competition in markets is often short lived, with uneven benefits in terms of winners and losers. For example, a low cost competitor establishing at a distance benefits some customers but disproportionately disadvantages less mobile consumers.

Our work has also highlighted two clear themes:

  • First, markets in remote locations are closely interconnected: changes in one market can rapidly affect the functioning of another, for better or worse. These effects are often predictable, though difficult to quantify accurately.
  • Second, markets that are interdependent call for joined up solutions.

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The report identifies a range of actions that can be taken by individual consumers, communities, businesses, government and the OFT. For example:

  • Consumers, by knowing their rights, shopping around and being aware that where they shop may have local consequences.
  • Communities, by cooperating can increase buying power; local ownership of businesses and community provision of services can be beneficial.
  • Businesses, through greater transparency about the costs of doing business in remote communities may give rise to new ideas about how supply may be organised to suppliers' and consumers' mutual benefit.
  • Government, through investment in infrastructure, procurement, promoting local enterprise and other direct interventions through subsidies and taxation.
  • OFT, through investigation and enforcement of the law, providing advice and guidance and supporting the education of businesses and consumers on their obligations and rights.

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Related documents

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Senior Responsible Officer: Kyla Brand (0131 220 5930)
Project Director: James Macbeth (020 7211 8958)
Team Leader: Darren Eade (020 7211 8534)

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