Office of Fair Trading
|Office of Fair Trading
(Welsh: Swyddfa Masnachu Teg)
|Non-ministerial government department overview|
|Headquarters||Fleetbank House, 2-6 Salisbury Square, London, EC4Y 8JX|
|Annual budget||£55.843 million (2012-2013)|
|Non-ministerial government department executive||Clive Maxwell, Chief Executive|
The Office of Fair Trading (OFT) is a not-for-profit and 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.
The Department for Business Innovation and Skills (BIS) has announced reforms to the UK consumer protection and competition regimes. The Competition and Markets Authority (CMA) will be established on 1 April 2014 combining many of the functions of the OFT and the Competition Commission.
The majority of the OFT’s work consists of analysing markets, enforcing consumer and competition law, merger control, licensing and supervisory work (of consumer credit, estate agency, anti-money-laundering supervision), advocacy, delivering information, education programmes and campaigns to business and consumers.
Studies into how markets are working
The OFT investigates markets to see whether they are working well for consumers and customers. Where appropriate, studies will lead to market investigation references to the Competition Commission, to enforce 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.
The OFT works under a structure that is arranged by markets rather than legislation with a Services, Infrastructure and Public Markets group and a Goods and Consumer group. Officials specialising in the different legal and regulatory regimes working closely together in each of these two groups. This enables the OFT to look more easily at whole markets and to use all the tools available to improve them if they are not operating effectively. The OFT will use consumer and competition enforcement, market studies and references, education and communication in whatever combination is appropriate. These market sector groups sit alongside other OFT groups - mergers, and cartels and criminal enforcement. The OFT is situated off Fleet Street, near to Blackfriars station. It is next to St Bride's Church.
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. 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.
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) 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.
OFT investigations on Debt Management Companies
On September 2010 the OFT sent warnings to 129 firms after its review of debt management companies found widespread problems, with firms putting profits ahead of customer care. Since it issued that warning, 87 firms have surrendered their licenses.
OFT investigation into transfer of cash ISAs
In March 2010 Consumer Focus submitted a super-complaint to the OFT raising concerns that transferring cash ISAs were taking too long and there were arbitrary rules preventing transfers into some of the most attractive accounts and that interest rates were not sufficiently transparent. The OFT responded in June 2011with a number of recommendations to ensure that transfers of cash ISAs work better and that there is greater transparency of interest rates. This included the following agreements from cash ISA provider to: • comply with new industry guidelines to complete end-to-end transfers within 15 working days, and • provide personalised interest rate information on cash ISA statements delivered in electronic and/or paper form.
OFT investigation into the abuse of a dominant position
In April 2011 the OFT fined Reckitt Benckiser £10.2million after it found that it had abused its dominant position in the market for the NHS supply of alginate and antacid heartburn medicines. The OFT found that Reckitt Benckiser abused its dominant position by withdrawing and de-listing Gaviscon Original Liquid from the NHS prescription channel in 2005.
OFT investigation into Groupon
In March 2012, the OFT accepted undertakings from 'daily deals' company MyCityDeal Ltd, which trades as Groupon, to change some of its trading practices following an OFT investigation. The investigation found widespread examples of Groupon's practices which in the OFT's view breached consumer protection regulations. The OFT had specific concerns over practices involving reference pricing, advertising, refunds, unfair terms, and the diligence of its interactions with merchants. Groupon engaged openly and constructively throughout the investigation and signed undertakings that it will change its practices to comply with the law.
The OFT has been criticized 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 (DG COMP of the European Commission) regulators. Criticism has been levied, among others, in the cases of:
- 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; this was despite several OFT investigations in the past giving the industry a clean bill of health.
- ...So whilst the OFT has improved the value for money it provides, there remains scope for further improvement.
According to the same report, in 2007-08 the OFT estimated that its competition enforcement work led to direct savings to consumers worth £77m per year and that its market studies work had saved consumers £98m in 2007-08; the OFT costs for these areas of work in the same year were approximately £26million of its £78m expenditure in 2007-8.
The OFT board
The board is
- Philip Collins - Chairman
- Clive Maxwell - Chief Executive
- Vivienne Dews - Executive Director
- Sonya Branch - Executive Director
and five non-executive members:
- Alan Giles
- Professor Frédéric Jenny
- Anthony Lea
- Dr Philip Marsden
- William Moyes
The following bodies and companies are designated by the Secretary of State as being able to bring a super-complaint to the OFT:
- The Campaign for Real Ale Limited (CAMRA)
- The Consumer Council for Water
- The Consumers' Association (trading as "Which?")
- The General Consumer Council for Northern Ireland (GCCNI)
- The National Association of Citizens Advice Bureaux (NACAB)
- The National Consumer Council (trading as "Consumer Focus")
- Competition regulator
- Conseil de la Concurrence
- Consumer Credit Act 1974
- Consumers' Association
- Federal Trade Commission
- Financial Services Authority
- Independent school fee fixing scandal
- Merger control
- UK default charges controversy
- "Press Release: Chief Executive Designate appointed to the Competition and Markets Authority". Department for Business, Innovation and Skills. 8 January 2013. Retrieved 27 March 2013.
- OFT Annual Plan 2011-12
- Basher Eyre (15). "TQ3181 : Press Complaints Commission in Salisbury Square". Geograph. Geograph Britain and Ireland. Retrieved 26 August 2012.
- Office of Fair Trading (18). "Press releases 2006 - Statement on bank credit card default fees". Office of Fair Trading. Office of Fair Trading. Retrieved 26 August 2012.
- Europe Direct (31). "Competition". European Commission. Europe Direct. Retrieved 26 August 2012.
- Unknown (23). "FAIR TRADING REMAINS TOOTHLESS IN FACE OF TESCO". Nick Harvey MP. Nick Harvey MP. Retrieved 26 August 2012.
- Andrew Grice (17). "Brown: Petrol firms must lower fuel prices or face OFT inquiry". Oil Depletion Analysis Centre (ODAC) (from The Independent). Oil Depletion Analysis Centre (ODAC). Retrieved 26 August 2012.
- National Audit Office: The Office of Fair Trading - Progress Report on Maintaining Competition in Markets
- page 13 of the report
- page 5
- The OFT Board
- Mission impossible?
- Office of Fair Trading website
- Report: "The Office of Fair Trading: Enforcing competition in markets - Report by the Comptroller and Auditor General". National Audit Office. 2005.