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European Consumer Commissioner
Press Conference Speaking Notes
I am very pleased to be here today to present the results of the 2nd Annual Consumer Scoreboard.
As you know the central purpose of the Consumer Market Scoreboard is to make the market more transparent and accountable to citizens. It does so by measuring key indicators such as the degree of satisfaction of consumers, the prices they pay or the choices they have.
This exercise screens the entire EU market and as such it is the most ambitious, consumer market monitoring endeavour of its kind.
It is only on its second year, and the existing data is still incomplete. There is still much to be done to bring the necessary transparency to our markets. But the Second Edition of the Scoreboard already brings to light some important results.
I will start with the good news.
The most positive result is that the traditional goods sectors are performing relatively well. Across the 19 sectors analysed they outperform services on satisfaction levels. 70% to 80% of consumers say that they are overall satisfied with both the goods and the retailers from which they bought the goods.
This is true for all the 8 major goods markets surveyed which include products such as meat, new motor vehicles, hi-tech equipment such a computers and mobile phones, electrical appliances, clothing, or books.
These are the basic bread and butter items that people need to run their households and manage their lives. There is no room for complacency, but it is very encouraging to see these markets scoring relatively well.
Although goods markets perform generally better than services, there are also some promising trends in services sectors such as telecoms.
For example, this sector is characterised by active switching. 22% of consumers switched internet provider in the past two years despite the fact that high numbers of people still report problems during switching. The switching rate is also high for mobile or fixed telephony. Also 67% of consumers find it easy to compare offers from internet providers. This is the highest percentage of all sectors surveyed.
With respect to prices the picture is somewhat encouraging. The price of calls over mobile phone are falling. But there are issues of concern, for example the wide disparity in the prices of broadband access.
The country data we have on consumer conditions also show some very promising trends. We measured such things as the propensity of consumer to complain or exercise their rights and the effectiveness of institutions that represent them.
I am very pleased to see that some countries like Finland, Sweden, Germany and the Netherlands score well on almost all the indicators. And I am particularly please that we can see a number of new Member States such as Poland, Hungary, Slovakia, Latvia and Estonia exhibit clear progress on almost all indicators.
And now I will turn to the not so happy news.
At a time when life is difficult enough, some key services are underperforming for consumers. Among the sectors screened, three are cause of particular concern. These are energy, banking and transport (and I mean buses, trains and trams).
Less than two thirds of consumers are satisfied with their energy supplier. In addition, this is a sector where 3 out of 5 consumers report price increases. Yet despite reported price increases and only moderate satisfaction, energy is the sector where consumers are least likely to switch: fewer than one in ten consumers switched gas or energy supplier in the past two years.
You will ask why I insist on switching rates. One of the key trends emerging from this Scoreboard Report is that markets with higher switching rates have better performance and consumers in those markets are also less likely to report price increases. One person switching imposes a discipline in the market that benefits all consumers. So facilitating switching in key retail sectors must be an important policy priority.
The unsatisfactory state of the retail energy market is not helped by the evidence that pre-tax prices for electricity and gas in neighbouring countries can be very different. For example, before taxes, electricity in countries such as Germany and Belgium is 50% more expensive than in countries like Poland.
Retail banking is another sector that clearly also requires attention.
We are all aware of the exceptional situation created by the global financial crisis. The banking sector is already undergoing and will continue to undergo a comprehensive regulatory overhaul.
But this is no excuse for ceasing to pay attention to the deal consumers are served at their local branch. Because we are dealing with a market that exhibits both very low switching rates and increasingly non transparent fees.
On average, only 9% of users of current accounts changed banks. This must be read together with a seeming problem of comparability of offers as 34% of individuals found it fairly difficult to compare offers from suppliers. Some relevant information seems to be hidden from consumers. The UK Office of Fair Trading estimated that in the UK, banks get most of their revenues from fees the consumers are not initially aware of. The found for instance that 20% of consumers were unaware of overdraft charges until they hit them.
In such a seemingly malfunctioning market, it is not surprising that both bank fees and interest rates are very surprisingly different among the Member States and in ways that are difficult to explain. For example, adjusted interest rates on consumer credit between 1 and 5 years vary between 0,21% in Sweden and 12,12% in Estonia.
The evidence published today, indicates that retail conditions for customers and consumer rights need to be key elements of the sector overhaul, just as much as the requirement for prudent banking.
Finally, I will mention urban and extra urban land transport which has also emerged as a major problem for consumers. Satisfaction in this sector is very low, notably because of price issues and a seemingly inadequate customer service. Urban transport is perceived as expensive, and people feel companies don't care enough about their passengers. I hope municipalities across Europe will take note.
So what are the next steps?
I have decided to make the retail electricity market the target sector for 2009.
First, because, of the three problematic sectors identified, energy accounts for the largest part of household spending- 5.7% of the average household budget. And within that electricity takes up the highest share.
Second, because the pattern of indicators produced in this report, reinforce the endless complaints and feedback I have heard over the last 18 months from consumers, agencies and consumer organisations frustrated with the service, and options they receive.
For that reason, with Commissioner Pielbags, I have decided to produce a report that will examine how the electricity market functions for consumers, looking at comparability of offers, unfair commercial practices and billing. I also expect concrete deliveries from the Citizen's Energy Forum this fall.
As Consumer Commissioner my principle task is to empower consumers. To give them all that they need to make informed choices and take part in a well functioning internal market.
This EU wide analysis of the conditions for consumers in the retail electricity market will be a significant contribution to that objective.