Markets b - market structure Flashcards
What is consumer protection?
The protection of consumers again being manipulated by businesses
What is consumer protection legislation?
When consumers purchases goods or services, contracts are formed between the consumer and the retailer and the producer of those goods or services. To clarify the nature of these contracts and to establish the requirements of producers and retailers, as series of laws have been passed.
The sales and supply of goods act 1994
States that the goods must be of merchantable quality, fir for their intended purpose, lasting for a reasonable amount of time and be as described. This means that the goods must be capable of doing what they were designed to do and what the purchaser would reasonable expect them to be able to do.
The consumer credit act 1974
Controls the way that goods can be bought and sold on credit. Under this act the use of APR was establishes. APR is the annual percentage rate of interest – this must be clearly stated when credit is being offered. The use of APR allows consumers to easily compare competitive interest rates and to judge the true cost of borrowing. Also this act established the use of ‘cooling-off’ periods where in many cases consumers have 14 days in which they are able to change their mind about entering into a credit arrangement.
The trade descriptions acts 1968 and 1972
Designed to prevent and make it a criminal offence to give untrue or misleading descriptions of goods with regard to their content, size, weight and price. Because of this legislation manufacturers and retailers have to take a great deal of care about information presented on the packaging of their goods or within advertisements and any other form of promotional material.
Distance selling regulations
Help protect consumers who buy over the phone or online. If businesses break these regulations then the consumer is not bound by the purchase contract. These regulations provide the consumer with a cancellation period of 14 days: the ‘cooling-off period during which consumers are entitles to change their minds and cancel the contract and receive a full refund, regardless of whether the product is defective. Also, consumers are not bound by chargers they have no expressly agreed to – such as hidden delivery or card payment costs.
The role of the ombudsman
However, retailers and consumers still find issues to dispute. If a customer has a complaint that in their view has not been satisfactorily dealt with by the business concerned the next step in finding redress might be the Ombudsman Service. The Ombudsman Service can be used to complain if consumers have an issue with pricing, quality of service, quality of goods or mistreatment. In a number of industries, including financial services, communications (e.g. phones and the internet), energy (e.g. gas and electricity), and property (e.g. estate agents and surveyors) the ombudsman findings are binding and the business concerned must comply with the ruling
The competition and markets authority (CMA)
Consumer protection legislation is fully enforced by the courts, but to further assist the consumer there are various organisations to help ensure that the law is abided by. On
a national basis, The Competition and Markets Authority (CMA) works to encourage the establishment of voluntary codes of practice within industries. For example, ABTA (Association of British Travel Agents) and ATOL (Air Travel Organisers’ Licensing) protect and reimburse holidaymakers if their travel company ceases trading (if the company is a member). The CMA will also advise the government when it believes that new legislation is required. On a local basis, Trading Standards Departments and Environmental.
What are health departments?
Health Departments work to help ensure obedience to the legislation. For example, Trading Standards officers are often found touring markets and car boot sales checking for sales of counterfeit goods.
Legislation with regards to competition policy
Competition policy is focussed upon controlling the power of big business. If businesses in a monopoly or near monopoly are able to hold a dominant market position, then they are likely to have control over price or the amount produced within the market. Governments (UK and EU) will therefore put in place laws and regulators to limit the potential abuse of market power and thereby protect consumers. In April 2014 the Competition and Markets Authority (CMA) replaced the Competition Commission and most of the roles of the Office of Fair Trading. One role of the CMA is to examine situations where companies act together, forming an illegal cartel to limit the competition within an industry. Businesses, if they have a choice, will not compete on price and they may take the view that by creating a dominant market position by working with other large businesses, they can limit price competition. Because of the potential of cartels and collusion between businesses, legislation allows for guilty parties to be fined up to 10% of turnover for each year of illegal activity.
The roles of the CMA
- Investigating mergers which could restrict competition conducting, market studies and investigations in markets where there may be competition and consumer problems
- Investigating where there may be breaches of UK or EU prohibitions against anti-competitive agreements and abuses of dominant positions
- Bringing criminal proceedings against individuals who commit the cartel offence
- Enforcing consumer protection legislation to tackle practices and market conditions that make it difficult for consumers to exercise choice
- Co-operate with sector regulators and encouraging them to use their competition powers
