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OFT publishes research to help identify problem markets

30 September 2004

Research aimed at developing a method of selecting potential areas for market studies has been published today by the OFT.

Under the Enterprise Act, the OFT has the power to proactively investigate markets that do not appear to be meeting the needs of consumers. This research, commissioned by the OFT and Department for Business, Enterprise and Regulatory Reform, and conducted by economic consultants NERA, will help inform the selection of new studies.

Download the report 'Empirical indicators for market investigations' -
summary (pdf 301 kb) 
Part 1: main report (pdf 812 kb )
Part 2: main report (pdf 1014kb)

The work has identified a number of indicators that could be used to highlight markets which may not be working well. Measures such as market concentration, profitability, consumer complaints, new entry and productivity can be tested to give a preliminary indication of how well a market is functioning. For example low new entry and low productivity could be an indication that competition is not working well in a market.

However there are limitations in interpreting these indicators so any sectors identified by the methodology will always require substantial additional analysis by OFT staff in order to confirm whether it is worth studying further.

The OFT will consider the extent to which this methodology should be used to help generate future market studies.

NOTES

1. The report into Empirical Indicators for Market Investigations was carried out by National Economic Research Associates (NERA) and is available from the publications page.

2. The OFT and Department for Business, Enterprise and Regulatory Reform commissioned the research in February 2004 as part of an ongoing review of how to highlight and prioritise potential areas for market studies.

3. The research has already been used to feed into the OFT's study into public sector procurement.

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