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OFT launches fact-finding market study of internet shopping

81/06    27 April 2006

A new fact-finding study into online shopping is launched today by the Office of Fair Trading.

Around 130,000 UK businesses now sell online, in a market representing about 2.5 per cent of all household spending (over £18 billion a year in total). In the last five years, internet retail sales in the UK rose by over 350 per cent, compared with growth of only 20 per cent for all retail sales. In 2005, the typical online shopper spent £560 online, and forecasts suggest that this could grow to over £860 per year by 2010 (see note 5). Other research has, however, also identified consumer concerns when shopping online about security of payment, or potential problems with delivery. 

The study will explore consumer confidence in this area and, in particular, whether the current consumer protection regime meets any new challenges raised by this mode of selling. It will examine whether:

• consumers are confident when shopping on the Internet
• consumers receive the right level of regulatory protection
• consumers are aware of their rights when shopping online, and
• businesses understand and comply with the regulations for online  shopping.

The study will concentrate on four representative 'case study' sectors: domestic electrical goods, music sales (including downloads), airline ticket sales (including accommodation bought at the same time), and online auctions. These sectors have been chosen because they represent at least a third of all online spending (see note 6) and are good examples of the internet as a growing and developing marketplace. It is also anticipated that these sectors will provide useful lessons to apply to other areas of internet shopping.

Throughout the course of the study the OFT will consult widely with businesses, trade bodies, consumer groups and public sector organisations. It will also research consumer and business perceptions and needs, enforcement practice, and consider international experience in this area.

John Fingleton, Chief Executive of the OFT, said:

'The Internet is fast becoming a hugely important channel for consumers and businesses. Its rapid evolution means that we need to ensure that the consumer protection regime gives current and future users the confidence to realise the internet's potential for shopping. This study is core to the OFT's mission to make markets work well for consumers. The OFT is committed to looking proactively at  identifying and addressing new and future challenges, so as to ensure that consumers and the economy benefit from the innovation and choice that the internet can offer.'

The OFT expects to publish its findings in spring 2007.

NOTES

1. Market studies such as this are performed under section 5 of the Enterprise Act 2002.

2. The OFT has taken action in a number of areas to ensure that consumers are protected on the internet. Recently it acted to ensure that the major supermarket chains provide clearer information about online pricing of products. On a number of occasions it has worked with businesses to address consumer concerns about delivery and cancellation rights, for example obtaining agreements guaranteeing that Amazon.co.uk and BOL.com include delivery charges in refunds. It also actively promotes self-regulation by online and offline traders, particularly through its Consumer Codes Approval Scheme. SafeBuy, a code of practice for web-based retailers, has recently completed Stage One of the two-stage approval process.

3. The OFT will make contact with businesses and other stakeholders in a range of sectors, to hear their views. However, the purpose of the study is to conduct exploratory research, not to investigate particular companies.

4. Download Key data (pdf 127 kb) for further background information on internet shopping. 

5. Verdict e-Retail 2006.

6. OFT estimate based on ONS, Verdict and eBay figures.

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