OFT to clamp down on computer market

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The Office of Fair Trading served notice yesterday that it intends to clamp down on internet service providers and retailers of personal computers as the Government's "rip-off Britain" campaign enters a new phase.

The watchdog body has launched a six-month investigation into the consumer IT services market. Two other inquiries were also launched into pharmacies and extended warranties for electrical goods.

OFT officials said the three investigations had been launched because there was prima facie evidence that abuses of competition rules and consumer rights were taking place. Companies guilty of breaching competition laws can be fined 10 per cent of their turnover.

John Vickers, the director general of Fair Trading said: "No one is in the dock – though if a study reveals the need for further investigation or action under any of our enforcement powers, we will act accordingly."

More than 40 per cent of households now have a personal computer and access to the internet. But the OFT said a number of concerns had emerged about the contract terms offered to consumers and the charges levied for calling help lines, which can be as high a £1 a minute.

The investigation into pharmacies will centre on the licensing system, under which anyone wanting to open a pharmacy to dispense prescriptions has to obtain approval from their local health authority. If there is already a chemist in the area, a contract may not be granted. The OFT is concerned that this could be stifling competition between chemists whose overall turnover last year was £18.7bn – much of which comes from products and services other than prescriptions.

The use of extended warranties for electrical goods, offered by retailers such as Dixons, was investigated by the OFT in 1994. This led to a voluntary code of practice being adopted. But Mr Vickers said a "mystery shopper" exercise carried out by the OFT uncovered evidence that the code was being ignored.

The investigation will assess whether the warranties are value for money and the extent to which customers are bullied into taking them out through high-pressure selling. Shares in Dixons, which also owns the Curry's chain and PC World, fell 4 per cent to 179.5p.