Making markets work well with customers
An Office of Fair Trading case study

Page 0: Introduction: A fair deal?

Markets exist when buyers and sellers come into contact and make exchanges. It is important that these markets work well if all parties are to get a fair deal. Consumers must take responsibility for the buying decisions they make by shopping around to find the "best value for money" for both goods and services. Consumers are increasingly aware of their rights, as a result of newspaper coverage...
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Page 1: The Office of Fair Trading (OFT)

The OFT is an independent organisation set up by the government and is responsible for ensuring that markets work well for customers. By law it is accountable for its actions and aims to be open, fair and transparent in its decisions. The OFT states: 'Our goal is to make markets work well for consumers. Markets operate well when businesses work in open and vigorous competition with each other.'The...
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Page 2: Making markets work

The OFT is one of several hundred organisations that ensure businesses are trading fairly and safely. These other organisations include local government, trading standards or sector regulators such as OFCOM and in some areas, the OFT co-ordinates this regulatory work.In a competitive environment, businesses look to win a greater market share through superior products, skilful advertising...
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Page 3: Key areas of OFT activity

The OFT has different divisions: Competition Enforcement (CE); Consumer Regulation Enforcement (CRE); Markets and Policy Initiatives (MPI); Legal; Communications; Resources and Services. The CE and CRE divisions conduct the enforcement programme and also intervene in markets.Competition enforcement (CE)This division ensures that competition laws are enforced by identifying and opposing various...
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Page 4: Market studies

The Markets and Policy Initiatives division takes a proactive approach by carrying out research into markets that do not appear to be working well for consumers. The studies can be carried out across a range of industries and their goods and services, for example, doorstep selling.Key operational areas include:Carrying out market studies. There can be many reasons why particular markets are not...
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Page 5: How markets work

Consumers (buyers) demand goods and services; suppliers (businesses) supply these goods and services. Consumers' desire for a particular product creates higher prices that, in turn, stimulates supply. On the other hand, consumers' lack of interest, will push prices down and may cause suppliers to stop manufacturing that product altogether. The point where the amount supplied equals demand (i.e...
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Page 6: Market adjustments plus demand and supply

If the market is not in equilibrium it normally adjusts and moves towards the equilibrium. This occurs in either of the following ways:In the case of excess demand, consumers require more than the market can currently supply. The market will either increase price, to cut off the excess demand, or suppliers will increase the amount supplied.In the case of excess supply, businesses produce more than...
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Page 7: A fair deal in the market place

Markets work well providing buyers and/or sellers do not take advantage of their position. An example of this is 'predatory pricing' - where a business charges consumers artificially low prices in order to reduce or destroy the profitability of competitors. A business is able to dominate the market in this way. In September 2002 the OFT ruled that Aberdeen Journals had a dominant position in...
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Related: Office of Fair Trading
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