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OFT critical of Government's proposed consumer protection reforms

The Office of Fair Trading (OFT) has criticised Government proposals to reform the consumer protection regime in the UK.30 Sep 2011

The UK's consumer protection regulator said that giving a number of different organisations responsibilities for different strands of consumer protection issues and enforcement could lead to a disjointed approach that would threaten consumer trust in markets and could "place additional burdens on business".

"The OFT is concerned that the proposed reforms will lead to a weakening of the consumer protection regime's capacity to protect consumers where they need it most, and will place additional burdens on business," the OFT said in its response (97-page / 1.45MB PDF) to a Government consultation on changes to the UK's consumer protection regime.

In June the Government announced a raft of plans to radically change the way the UK's consumer protection regulation works. In its plans it outlined proposals to create a new Trading Standards Policy Board (TSPB) which it said would take on "large complex [consumer] cases which may ... raise novel legal issues across the UK", except with regard to "structural market failings".

A prospective new competition authority, which would merge the competition functions of the OFT and Competition Commission, would be given responsibility for consumer enforcement on structural market failings, the Government said at the time. The organisation would be called the Competition and Markets Authority (CMA).

The Government's June proposals also contained plans to make Trading Standards responsible for guidance, training, international liaison and policy issues that the OFT currently deals.

In addition the Government revealed plans to streamline the advice service that is currently available to consumers, announcing its intention to make the Citizens Advice service principally responsible for developing and delivering consumer "advice and advocacy". The OFT, together with several other consumer groups, currently provide "overlapping" services in a way which confuses the public about the roles and responsibilities of the organisations that provide the information, the Government said at the time.

The regulator said a "round" approach from a central "enforcer" was needed in order to oversee consumer protection matters, including responding to market studies and 'super-complaints'.

Under the Enterprise Act super-complaints can currently be made to the OFT by a designated consumer body when it thinks that "a feature, or combination of features, of a UK market is, or appears to be, significantly harming the interests of consumers". Within 90 days the OFT must publish a response detailing if and what course of action it plans to take and why.

"A modern and forward-looking consumer regime requires a strong national enforcer," the OFT said.

"The OFT therefore urges the Government to give OFT/CMA broader responsibility for nationally significant consumer enforcement cases, particularly precedent-setting cases and tackling market-wide issues," it said.

"The OFT/CMA needs to retain powers to conduct consumer market studies and respond to super-complaints, to ensure that consumer problems are looked at in the round, drawing on an understanding of the drivers of both consumer and firm behaviour, and that proportionate and appropriate remedies are selected which do not place unnecessary burdens on business," said the OFT.

"It should continue to act as a national hub for enforcement expertise, housing specialist functions such as internet enforcement capability and the single focal point for international enforcement coordination and liaison offers greatest scope to build on the existing strengths of the regime and deliver value for money," the OFT said.

The OFT said it was concerned that making different bodies, including regional teams working for Trading Standards, responsible for gathering information about "existing and emerging threats to consumers" would "make it harder to share experience and coordinate action across functions".

"The OFT is concerned that the result will be units within those bodies without a sustainable funding basis, too small to form a critical mass of resources, skills and expertise, and unable to bear the costs and risks associated with major consumer litigation," it said.

The OFT said that transferring most enforcement responsibilities to the TSPB "would fragment capacity to tackle market-wide problems and to pursue nationally significant enforcement cases" and "would reduce the system's ability to take on issues which have been of significant collective concern to consumers, for example in relation to bank charges, airline pricing and residential property markets".

"This gap is unlikely to be offset by a significant increase in regional and national enforcement action by [Trading Standards Services (TSS)]," the regulator said.

The OFT said that there is a "strong risk" that "the proposed TSPB model will not be able to overcome the financial and structural constraints" that the National Audit Office has previously noted "may already prevent TSS from taking on nationally significant cases".

The OFT said that the CMA's responsibilities should be broader based to counter some of these problems.

"The OFT welcomes the acknowledgment in the consultation document that the proposed Competition and Markets Authority (CMA) should take the lead in consumer enforcement actions where this is an appropriate solution to structural market problems," the OFT said.

"However, this response argues that the CMA's consumer enforcement role should go wider than this and that consumer and competition policy should be joined up across the regime, ensuring it delivers effective consumer protection which helps create the conditions for economic growth," the OFT said.

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