View from City Road: Consumers have a new champion

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The Independent Online
WITHIN three weeks of taking up his new post as Director-General of Fair Trading, Sir Bryan Carsberg is talking freely about his plans. It is early days yet but in the autumn he will supply more details.

It is already clear that he intends to take a more proactive stance than his predecessor, Sir Gordon Borrie, who has returned to the Bar. Rather than wait to receive complaints or for bids and deals to be announced, he will go out looking for trouble.

In particular he will study companies and industries that have a high return on capital. For this purpose he is considering building a computer model, which will not surprise those familiar with his earlier work at Oftel, the telecommunications watchdog.

The computer model should catch companies that build up market dominance through stealth rather than takeover. While this might be attractive in principle, the OFT would have to be careful not to disadvantage companies that win market share legitimately, for example, by undercutting the competition. This would undo its good work.

Moving away from sole reliance on market share figures would be welcome. They are subject to too much dispute over definition. But return on capital can be a crude measure meaning different things in contracting and in manufacturing. The OFT will have to take account of sector and other factors. So long as it does, a combination of market share and return on capital should be useful.

Overall, it looks as if Sir Bryan will be building further on his formidable reputation as consumers' champion. Companies with monopolistic tendencies should take note.