By Daniel Hunter
The number of complaints to the Office of Fair Trading in 2012 about breaches of UK competition rules have reached their highest level since the beginning of the credit crunch, according to City law firm RPC (Reynolds Porter Chamberlain LLP).
There were 2,165 complaints to the Office of Fair Trading (OFT) in 2012, up 5% from the 2,070 complaints made in 2011. The numbers of complaints made in 2012 are now at the highest since 2001.
RPC suggests that the rise in complaints to the OFT may be a factor of the lack of growth in the wider economy, causing businesses, consumers and interest groups to closely scrutinise competitor practices and lodge complaints to the OFT about anti-competitive behaviour.
Anti-competitive complaints to the OFT sometimes result in direct action against individual firms, but they can also influence how the OFT views an entire market, resulting in a lengthy regulatory review of market-wide practices. For example, complaints about the mis-selling of payment protection insurance ultimately led to changes in the sector and huge compensation payments by banks.
Other in-depth probes the OFT has conducted in recent years have been into the fairness and value for money of other financial products such as extended warranties, motor insurance and health insurance.
Stephen Smith, Partner and Head of Competition at RPC, says: “Complaints about popular market practices can have powerful consequences for a sector, and can lead to major overhauls of commercial practices in a particular line of business.”
“The current economic climate has fostered an anti-financial services sentiment amongst businesses and consumers.”
RPC says that more than ever, businesses are on the lookout for malpractices in their competitors’ market plan or product, especially as the fight can often be over a shrinking market.
Stephen Smith continues: “The difficulty many businesses face in winning new business or breaking into a new sector is understandably leading many to use all the tactics they can to make gains above their peers.”
RPC says that when businesses are doing well they are less likely to focus on what their rivals are doing, but in a downturn attention inevitably starts to focus more on what competitors are doing and the legal steps that can be taken to undermine their position.
Stephen Smith says: “Complaints can trigger probes that can radically alter market practices. For example, one recent major positive output of a market investigation is the coming together of the largest retail providers of extended warranties to offer legal undertakings to improve the way that their market works.”
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