15. juni 2011
The report highlights the interplay between competition and consumer behaviour. It takes stock of intensity of competition and consumer conditions as well as compliance of both competition and consumer legislation. Moreover the report takes stock of competition in publicly-provided services.
The outline of the report is as follows. Chapter 1 provides a summary, chapter 2 concerns competition and consumer conditions, chapter 3 highlights compliances with the competition and consumer legislation, and chapter 4 contains a status on competition in publicly-provided services.
The chapter underlines that effective competition and good consumer conditions are important drivers for growth and the creation of new opportunities for consumers. Effective competition contributes to the dynamic development of the business sector and ensures that consumers have access to the best products at low prices. Good consumer conditions ensure that consumers can make safe purchases, businesses compete on a level playing field, and consumers can choose the products they prefer. This enhances market efficiency and increases wealth.
Consumer conditions in Denmark have improved over the years till the present year. Consumer conditions are measured with the ConsumerConditionIndex (CCI). CCI measures consumers’ assessment of transparency, confidence, and conditions for complaining in a total of 49 markets. From 2010 to 2011, the overall CCI is unchanged.
There are signs of a slight improvement in competition intensity from 2000 to 2008 (2008 is the last year with data on the intensity of competition) measured by the competition index. However, there are indications that competition worsened a bit from 2007 to 2008. In 2009, Danish price levels were 12 per cent higher among seven comparable EU countries (EU7), when correcting the prices for differences in wealth, taxes and VAT (2009 is the last year with comparable data on prices). Service prices are 14 per cent higher than the average of the EU7-countries and goods prices are 5 per cent higher. This indicates that the degree of competition in Denmark – especially in services – is not as vigorous as in the other EU7-countries.
In April 2011, the Danish government entered into an agreement with a range of parties in the Danish Parliament to boost Danish productivity through increased competition in the construction sector, the private service sector, and the public sector.
Competent consumers are important for effective markets. Danish consumers have good prerequisites for exploiting the market possibilities compared to consumers in other European countries. Danish consumers have better basic proficiency in arithmetic, better access to the Internet and better knowledge of six out of seven specific parts of the consumer legislation. Furthermore, Danish consumers are more inclined to change supplier than consumers in other European countries.
Danish businesses have better knowledge to the consumer legislation than other businesses in the EU7-countries, Sweden, and UK. Knowledge about consumer legislation is an important prerequisite for a good interplay between consumers and businesses in the market.
Strong competition and consumer legislation, effective enforcement, and preventive effort set out the framework for a sound interplay between consumers and businesses. This contributes to increasing market efficiency.
Within the last year, the competition law has been strengthened. Also consumer legislation has been strengthened in order to strengthen competition and generate a better framework for the interplay between consumers and businesses.
In 2010, the Competition Council’s scope to intervene against harmful mergers was strengthened. The law change brings the Danish merger rules on level with EU’s competition legislation and the countries we normally compare us with. Furthermore, consumer conditions in Denmark were improved in the areas of travel guarantee from Danish providers of car rental and flight tickets in foreign countries, assessment of loan risk, and in the area of consumer rights when businesses do not follow decisions taken by Consumer Complaints Board (in such cases consumers can turn to the bailiff’s court to ensure that businesses follow the decisions).
Breach of the competition legislation may have large economic consequences for consumers, businesses, and the society as a whole. Illegal cooperation between businesses in cartels does on average lead to overcharges of up to almost 50 per cent.
There are also costs for society and consumers when consumers experience scams. If the incidence of scams towards consumers is the same as in the UK, costs associated with scams towards Danish consumer’s are in the magnitude of 2.6 billion DKR a year. This is equivalent to 7000-8000 DKR per scam.
Competition in publicly-provided services contributes to ensuring the cost efficient production of public services and may enhance innovation in public services.
The proportion of publicly-provided services subject to competition has increased in recent years, most notably in municipalities. Competition in publicly-provided services is measured by the value of services subject to competition relative to the value of services that is liable to competition. Thus tasks undertaken by public authorities are not included in the report.
In the municipalities, 25.7 per cent of publicly-provided services were subject to competition in 2010 up from 25.0 per cent in 2009. However, large differences exist between municipalities with respect to their use of private suppliers. The share of publicly-provided services exposed to competition is less than 20 per cent in some municipalities compared to more than 35 per cent in the group of municipalities that use competition the most. It is noteworthy that competition in welfare services is less wide-spread in comparison with competition in technical services (e.g. city development and road maintenance). This suggests that increased competition in publicly-provided services might lead to an even higher level of efficiency in the public sector.
The central government authorities also exposed an increasing share of services to competition. In 2010, 26.4 per cent of the value of services was subject to competition compared to 26.9 per cent in 2009. At the regional level around 20 per cent of the value of services was subject to competition in 2010. No figures are available for 2009 on the regional level.
In the area of welfare services, competition is also reflected in an increased use of free choice of supplier by the Danish citizens. In 2010, 33 per cent of users of domestic assistance in homecare (e.g. cleaning service) chose a private supplier. This is to be compared to 28 per cent in 2007.
Finally, in 2008-2009, 21 per cent of all public procurements were subject to EU tenders. This ranks Denmark close to the EU15-average.
Competition and Consumer Report 2011 (only available in danish)
Read: The Danish Competition and Consumer Authority publishes the Competition and Consumer Report 2011