Steve asks....OFT Report – Threat or Opportunity?

I have read with interest the outcome of the recent OFT investigation and I have to say that the industry has potentially got off lightly. Why do I say this?

I have been in two industries (Consumer Electronics and Major Kitchen Appliances) where separate investigations by the OFT have led to a full scale Monopolies and Mergers Commission (MMC) inquiry. In both cases the outcome had far reaching and long lasting effect on the entire industry and its consumers. The MMC concluded that the widespread use of a manufacturer's Recommended Retail Price (RRP) or similar was creating a market with low price competition and this was not in the best consumer interest. Their view was that a ‘Complex Monopoly' existed because suppliers were collectively using RRP to keep prices high even though there was no evidence of actual collusion to do so. RRP's or anything similar was outlawed and special legislation was put in place to make it illegal to use them. That is why you never see a RRP when you shop for a widescreen TV or washing machine in Comet or anywhere else.

Manufacturers and retailers had to change all their pricing. Without the RRP benchmark, everyone thought they would be out-priced so the whole market went into price freefall and within less than six months average prices had fallen by between 10 - 15%; great for consumers but a horrid impact on supplier and retailer bottom lines.

The mobility industry OFT investigation on the other hand has simply concluded that there needs to be more price transparency in order to better help consumers know how much they should be paying. And, I have to say that it makes loads of sense. The hidden danger is that a greater general awareness of pricing will inevitably lead to increased price competition and gradual price erosion.

Having gone through this process on many occasions I can tell you that it shouldn't necessarily be viewed as a threat. It can be, and should be, a real opportunity for those who are prepared to grasp the nettle. It is possible to mitigate these effects by suppliers having well planned and implemented cross-channel consumer and trade pricing policies with mix management at its core. I know because I have successfully done it on more than one occasion. If you want some help – contact me.