The Office of Fair Trading (OFT) is a non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, which enforces both consumer protection and competition law, acting as the UK's economic regulator. The OFT's goal is to make markets work well for consumers, ensuring vigorous competition between fair-dealing businesses and prohibiting unfair practices such as rogue trading, scams and cartels. Its role was modified and its powers changed with the Enterprise Act 2002.
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Role
Studies into how markets are working
The OFT investigates markets to see whether they are working well for consumers. As far as business conducting is concerned, studies cover some government laws and regulations to ensure a competitive environment. Where appropriate, studies will lead to market investigation references to the Competition Commission, to enforcement action, consumer awareness campaigns or to recommendations to government, which will be published.
Communication to explain and improve awareness and understanding
Showing how competitive markets that work well are important for consumers, fair dealing businesses and economic performance; explaining its decisions transparently; promoting compliance by explaining to business what the law is and how the OFT will apply it; promoting consumer awareness and confidence; coordinating effectively with enforcement partners locally, nationally and internationally, and advising government on how to achieve the most effective regime for competition and consumers.
Structure
The OFT has three main operational areas: Competition Enforcement, Consumer Regulation Enforcement and Markets and Policies Initiatives.
Competition Enforcement
- Enforces European Community and UK competition laws including Articles 81 and 82 of the EC Treaty and the Competition Act 1998
- Stops cartels and other damaging anti-competitive agreements
- Stops any abuse of a dominant market position
- Investigates qualifying mergers under the Enterprise Act 2002
- Promotes a strong competitive culture across a wide range of markets
- Informs business, through a widespread education programme, about changes in legislation
- Works with the European Commission and national competition authorities of other EU Member States on Article 81 and Article 82 cases
Consumer Regulation Enforcement
- Ensures that consumer legislation and regulations are very properly enforced and well done
- Takes action against very unfair traders
- Encourages codes of practice and good moral standards
- Offers a range of very good information to help consumers understand their rights and make good choices
- Liaisons closely with other regulatory bodies that also have enforcement powers
Markets and Policies Initiatives
Based on expanded powers granted under the Enterprise Act 2002, the OFT explores how different market sectors operate, in order to help markets work well. They may research one particular market in detail or, for example, how codes of practice or professional rules operate across different markets in a range of businesses. The results of the research, which are published, help the OFT to assess what action, if any, needs to be taken to protect consumers' interests. They may recommend stronger enforcement, or a change in the regulations, or suggest an awareness raising campaign for consumers (but will not always recommend intervention and when this is the case, will ensure that any non-intervention decision is well-informed and open to public scrutiny).
In 2006, the OFT restructured in response to Treasury proposals for splitting the department into separate consumer and competition regulators. The OFT argued that to protect consumers effectively, it had to be able to use both consumer law and competition law approaches in a holistic fashion. Moving away from division by legislative area, the OFT created divisions based on market sector - Services, Goods and Infrastructure- with officials specialising in the different legal and regulatory regimes working closely together in each of the three market sectors. These officials are supported by a dedicated economics branch also including statisticians and financial analysts (the Office of the Chief Economist), a legal specialist, and a policy advisory branch.
Cases
Credit card charges
In 2006 the OFT investigated the charges being imposed on customers of credit card companies. In its report, the OFT confirmed these charges were unlawful as they amounted to a penalty, rather than the actual losses suffered by the companies. It said it would be prepared to investigate any charge over £12 [£16 for Egg credit card accounts][1] indicating that £12 would not be a "fair and acceptable charge" itself. The OFT said it would be up to a court to determine such an amount based on the established legal precedent that the only recoverable cost would be actual costs incurred, i.e. liquidated damages.
The credit card companies did not produce evidence of their actual costs to the OFT, instead insisting their charges are in line with clear policy and information provided to customers. Charges have been as much as £38 per item, which campaigners argue is well beyond the cost of sending a computerised letter.
Consumer bank charges
Reputation
The OFT has been criticised for being ineffective and for many of its investigations leading to no action, in contrast to the more vigorous approach of US (United States Department of Justice Antitrust Division) and European Union (Competition Commission[2]) regulators. Criticism has been levied, among others, in the cases of:
- Supermarkets[3]
- Oil companies retail sales / petrol - in October 2008 the UK Prime Minister Gordon Brown threatened oil companies with an OFT investigation unless lower oil prices were passed to consumers;[4] this was despite several OFT investigations in the past giving the industry a clean bill of health.
The National Audit Office issued a report in March 2009 on the OFT,[5] which indicated progress in 7 out of 10 objectives, but also concluded:
- ...So whilst the OFT has improved the value for money it provides, there remains scope for further improvement.
According to the same report, in 2007 the OFT claimed direct savings to consumers worth £77m; the OFT costs for the same year were £78m.
The OFT board
The board is:[6]
- Philip Collins - Chairman[7]
- John Fingleton - Chief Executive
- Jonathan May - Executive Director
- Vivienne Dews - Executive Director
and seven non-executive members:
- Lord Blackwell
- Bronwyn Curtis
- Alan Giles
- Professor Frédéric Jenny
- James Hart
- Anthony Lea
- Richard Whish
See also
- Financial Services Authority
- Bundeskartellamt
- Conseil de la Concurrence
- Federal Trade Commission
- Competition regulator
- Consumers' Association
- Consumer Credit Act 1974
- Merger control
- UK default charges controversy
References
- ^ OFT Statement on bank credit card default fees, 18 May 2006
- ^ EU Competition Commission
- ^ Fair trading remains toothless in face of Tesco
- ^ Brown: Petrol firms must lower fuel prices or face OFT inquiry
- ^ National Audit Office: The Office of Fair Trading - Progress Report on Maintaining Competition in Markets
- ^ The OFT Board
- ^ Mission impossible?
External links
- Office of Fair Trading website
- "Report: The Office of Fair Trading: Enforcing competition in markets - REPORT BY THE COMPTROLLER AND AUDITOR GENERAL" (in English). National Audit Office. 2005. http://www.nao.org.uk/publications/nao_reports/05-06/0506593.pdf Report:.
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