There is growing evidence that competition authorities’ emphasis on traditional demand-side remedies does not work for consumers. Relying on consumers to take action has had only limited effectiveness in markets such as energy, and in financial services markets such as cash savings and current accounts.
While the Panel supports efforts to make switching easier, the evidence shows that providing more information and a few prompts will not overcome consumers’ perception that the potential benefits of switching are simply not worth it.
Sticking with the same product and provider can be a rational decision. Consumers should not be penalized for this loyalty; the result should be neutral at worst. Remedies that focus on prompting consumers to switch do not encourage firms to treat their existing customers fairly in the first place.
Against this background, the authors looked at how far it is reasonable for competition authorities to expect consumers to drive competition, and what else they might do instead. They were also mindful of the rapidly growing market in automated switching services, and how these might affect the conclusions.
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