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OFT consults on approach to market studies

PN 166/03    11 December 2003

The OFT has today published draft guidance for consultation explaining how it selects and carries out market studies.
Download Market studies: guidance on the OFT approach (219 kb)

Market studies are usually carried out under section 5 of the Enterprise Act. Their purpose is to assess whether there are problems with a market that prevent it from working well for consumers; and, if so, which course of action the OFT should take to remedy the problem.

The range of possible outcomes of a market study include:

• giving the market a clean bill of health
• initiatives to help consumers make more informed buying decisions
• encouraging businesses to undertake particular courses of action voluntarily, such as improving the quality of information available to consumers
• encouraging the development of consumer codes of practice within a particular market (see note 3)
• making recommendations to Government or other public bodies on the effect of regulations upon a market
• pursuing enforcement action against companies or individuals suspected of breaching consumer law or competition law
• a market investigation reference to the Competition Commission (see note 4).

The decision to undertake an OFT market study follows a preliminary review of the market. Preliminary reviews take about one month to complete and are not normally in the public domain. The information collected during a preliminary review will vary, but will typically include an assessment of such issues as market size and structure, the types of products and services offered and their prices, the type of customers served and regulation affecting the market.

Where a preliminary review of a market uncovers significant issues that warrant further examination, the OFT will launch either a short, fact-finding study (typically three months in length) or a full study, lasting approximately one year.  All studies will be announced at the outset with a press release or statement, and the OFT will usually publish a report of its findings.

John Vickers, OFT Chairman said:

'Over the past two years the OFT has put increased emphasis on market studies. Their evidence and analysis – published for all to see – reinforce efforts to make markets work better. We welcome views on how to select market studies in the future.'

The consultation will last for 12 weeks and comments are requested by 4 March 2004.

NOTES

1. Download Market studies: guidance on the OFT's approach (219 kb).

2. The OFT has been carrying out market studies in their present form for two years. Following the commencement of the Enterprise Act on 20 June 2003, market studies are carried out under section 5 in order to identify whether perceived problems in a market should be addressed through the OFT's other functions. These functions include the enforcement of consumer regulations, the promotion of consumer information and education, the enforcement of competition legislation and making market investigation references to the Competition Commission.

3. Under section 8 of the Enterprise Act, the OFT has the power to approve consumer codes of practice, produced by code sponsors (usually trade associations or similar bodies), which safeguard or promote the interests of consumers. There is a two stage process for approval (see PN 31/01 and 15/03)

4. The OFT published a guidance document on market investigation references to the Competition Commission in March 2003 (see PN 24/03).

5. To date the OFT has published reports on the following market studies: Extended warranties on domestic electrical goods (PN 40/02)
Consumer IT (PN 85/02)
Pharmacy entry regulations (PN 04/03)
Private dentistry (PN 29/03)
Payment systems (PN 66/03)
Liability insurance (PN 70/03)
Taxi services (PN 147/03)

The OFT is also currently undertaking the following market studies: Estate agency (PN 36/02)
Doorstep selling (PN 75/02)
Debt consolidation (PN 80/03)
Storecards (PN 120/03)

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