Brussels, 31 January 2007
SECTION 1: WHAT IS CONSUMER MARKET WATCH?
Consumer MarketWatch is a new EU instrument to investigate markets from a consumer perspective to assess if they are functioning effectively for consumers – or if further investigative or corrective actions are necessary.
The MarketWatch process will analyse the Single Market in 3 dimensions:
At the heart of the process is the annual Consumer Markets Scoreboard published each year. This is the first critical step in the MarketWatch process – it screens all three dimensions of the market against a range of key indicators (see below). On the basis of the scoreboard screening a range of follow up actions could be envisaged.
SECTION 2: WHAT IS THE CURRENT SITUATION?
There are already instruments for market investigation in the Commission. DG COMP does sector inquiries on the basis of Competition legislation and other DGs have undertaken sectoral analyses. They have typically emphasized the business environment and have relied on company information.
For example: the DG COMP energy sector inquiry focused on the functioning of the wholesale sector (company to company). There was no inquiry into the actual situation for consumers at retail level.
Lately, the focus on consumers has increased: DG COMP retail financial sector inquiry looked at prices and conditions for consumers. But there is little data available as only the banks' information is used. No information was gathered on the problems as experienced or perceived by consumers.
There has long been an assumption that if we set the right conditions for suppliers, everything will go well:
If we liberalize the energy markets or telecoms, consumers will benefit from the most efficient suppliers
If we allow firms to compete, consumers will get the best possible outcome
If we remove barriers for cross border trade, this trade will naturally occur
Due to this, competition policy focuses on ensuring that firms do not hinder the ability of competitors to enter the market and compete efficiently. For instance, they will not let a dominant firm like a Microsoft tie products to its operating system in order to limit the extent of competition.
Equally, the internal market policy ensures that barriers to the internal market are removed for businesses so that they can establish themselves or market their product in another country. Regulatory barriers that prevent trade or establishment are removed.
SECTION 3: WHAT IS THE PROBLEM?
Evidence is mounting of market problems in markets where supply side issues are being ‘resolved’, for example:
In recent years, parallel to deregulation and higher competition policy standards, a range of practices seem to be evolving in different sectors at the retail end of the market which might distort consumer choice and behaviour and might act as indirect barriers to competition.
For instance, we have seen an increase in the confusion of consumers about the prices they are offered or pay
We have seen strategies of obfuscation or complex pricing that impairs consumer’s ability to make an optimal decision (mobile phone contracts, financial contracts)
We see commercial practices that exploit behavioural biases to distort consumer choice (teaser offers, tying and bundling smaller services consumers pay little attention to when they make a big purchase).
Competition policy cannot address these issues when they are collectively (and tacitly) adopted by the industry. Competition policy is restricted to act only in cases where a dominant firm is found to abuse its position or when companies are explicitly colluding. It can do nothing against pervasive practices that are detrimental to consumers in a market without a dominant player, or express collusion.
In addition it is clear that the retail dimension of the EU Single Market is not fully integrated - this denies consumers more competitive offers and more choice. 
SECTION 4: WHAT IS THE NEW PROPOSAL? HOW WILL THE NEW MARKET WATCH PROCESS IMPROVE THE INTERNAL MARKET?
There are three main parts to the MarketWatch process: the sectoral consumer market investigations, the benchmarking of the internal market, the benchmarking of the consumers environment.
(1) THE SECTORAL CONSUMER MARKET INVESTIGATIONS
There are 2 steps in the new consumer market investigations.
In themselves, these indicators are not evidence of malfunctioning but they are useful signals that something may not be working in a market. They will point to consumer markets that have a higher risk of malfunctioning and need further analysis.
(2) BENCHMARKING RETAIL MARKET INTEGRATION
After more than 15 years of developing the Internal market, it is clear that retail markets for consumers are not fully integrated – in fact, many markets remain fragmented along national borders, creating 27 mini markets instead of a pan-European supermarket. Whilst 27% of Europeans shopped online in 2006, only 6% did so cross border.
This denies consumers access to better offers and more choice.
The Scoreboard will assess the degree of retail market integration using indicators on the data on cross border trade. It will also explore the reasons behind consumer reticence to shop cross border and exploit the EU wide potential for distance selling, especially e-commerce.
The Scoreboard looks at:
(3) BENCHMARKING THE CONSUMER ENVIRONMENT
Benchmarking the consumer environment in the Member States
Benchmarks are needed to better understand the consumer environment at national level. A lack of resources for consumer organisations, poor consumer confidence, inadequate enforcement measures to deal with consumer problems, or consumers experiencing problems and being dissatisfied with the handling of their grievances, as compared to the situation on other Member States could indicate problems.
Indicators we are looking at are:
This part of the exercise is a real benchmarking process by which Member States must assess whether the consumer environment they have set up is satisfactory or whether they need to take measures to improve the ability of their consumers to elicit the best possible outcomes from markets.
What are the instruments available?
There is a wide range of remedial actions that will vary by market and issue to be resolved. There are five main tools to resolve market malfunction:
As the screening and investigation processes develop and evolve new remedies at EU or national level to correct particular situations may also evolve.
Does this kind of process exist in other Member States?
To some extent: the UK, Italy, Denmark, Netherlands all have different kinds of process for screening consumer markets.
The Federal Trade Commission in the US has also developed a large complaint database (670.000 complaints in 2006) called the Consumer Sentinel that centralizes complaint data gathered by the FTC and 115 other organizations. Thanks to this database they can rapidly respond to violations of the legislation.
 DECO/PRO TESTE, February 2005.
 'Do consumers switch to the best suppliers?' Chris Wilson and Catherine Price, CCP Working paper May 2006.
 Test d' Achat, December 2007 (Belgium)
 By retail market we mean the final link in the supply chain when the retailer sells the product to the final consumer.
 Whilst languages and familiarity with local suppliers explain some of this, it turns out language is not a prohibitive factor for a large part of consumers: 32% of respondents would be prepared to purchase goods and services using another EU language (ranging from 85% and 69% for Luxembourg and the Netherlands to 18% and 20% for Hungary and Ireland).