Rationale
UK consumers now benefit from choice in most of our essential services such as gas, electricity and telephony. For more than twenty years, the Government has been championing open, competitive markets wherever possible, to deliver this choice and to foster high standards and good value in our key markets.
A step change was made to the growth of competition in 1996-99, when the domestic gas and electricity markets were liberalised. A further step was taken when the postal services sector was fully liberalised on 1 January 2006.
Liberalisation of the markets for essential services and the development of regulatory regimes, took place over a lengthy period. But there was a common model: licensed companies overseen by an independent economic regulator plus a consumer body with duties for that sector.
This led to the position where, prior to the changes introduced under the CEAR Act 2007, we had several sector-specific consumer bodies which represented the consumer interest across a range of markets, alongside a national body, the NCC.
Markets are changing and so are the needs of consumers…
A study undertaken for the DTI in 2000[1] to assess and measure consumer knowledge and skills across all sectors found that more than one in three consumers (38%) reported having reason to complain about goods or services over the previous year.
Most consumers who complain do so to the product seller or service provider (87%). However, 46% of these consumers are not satisfied with the result of their complaint and, of these, only 15% pursue their complaint further.
A survey prepared for the OFT in 2004[2] found that about 40% of consumer-facing businesses had no consumer policies in place for dealing with disputes, and 32% thought that consumer legislation did not apply to them.
Consumer welfare is enhanced by the satisfactory resolution of complaints but business also benefits. The OFT’s survey found that 70% of consumers who had their complaint resolved satisfactorily will continue to trade with the same company. Good complaints procedures and effective mechanisms for resolving disputes can bring in more business and enhance overall business performance.
Despite the valuable service provided by energywatch, Postwatch and the NCC, there were issues with the old system of consumer representation that needed to be addressed:
• any consumer who encountered a problem or who wants advice or assistance needed first of all to establish which body to go to in order to find help
• the fragmented nature of consumer representation in the UK meant that there was no single, coherent voice for the consumer, which could reflect priorities across the different markets, or which could speak with expertise and authority for all consumers in discussion with companies, Government, or in Europe
• each sectoral consumer body could only deal with the aspects of a company’s service to consumers which fell within its statutory duties. Legal restrictions on exchange of information between bodies could prevent meaningful sharing of resources or facilities. Some companies are active across multiple markets making it hard to tackle poor customer service across the whole business.
• some sectoral consumer bodies had to deal with large numbers of complaints, to which significant resources needed to be devoted
• sectoral consumer bodies did not have any powers to enforce resolution: they could not order the service provider to provide compensation or redress
[1]MORI survey (on behalf of the DTI), 2000, The Consumer Knowledge Survey.
[2]Survey prepared for the OFT by Synovate, May 2004, “Competition Act and Consumer Rights”(available here).