Sunday, April 27, 2008

Charges of the Heavy Brigade!!

The news was dominated this week by misdeeds in the financial services sector. First we had the disclosure that Bank of Ireland had lost 4 laptops containing the personal, financial and health information of up to 10,000 customers. Bad and all as that was, the abject failure of BOI to inform the Data Protection Commissioner, the Financial Regulator and most importantly those affected immediately reflects very badly on the bank. CAI has called for BOI to pay compensation to all those affected, see our press release.

Then we had another damning report from the Financial Ombudsman in relation to the misselling of financial products to elderly people and the attempts by financial institutions to wriggle out of their commitments to people who had serious illness insurance cover. This is awful stuff, here we have vulnerable people, some in their 80's and 90's and then others whose lives have been turned upside down by serious illness and they are out through the wringer when they are least able to deal with it. Kathleen Barrington has an excellent piece on this in Sunday Business Post today.

There was also turbulence in the mortgage market, with some mortgage providers reducing their commissions to brokers, which could potentially lead some to direct business to where the best commission is rather than where the best deal is for the borrower, see more on that here.

Across the water in the UK the big story was the judgement in the High Court in favour of the Office of Fair Trading, and against all the high street banks.

ITN News report on the case.

The judgement gives the power to the OFT to examine the fairness of charges imposed on customers in relation to unarranged overdrafts, such as people going into overdraft. Thursday's decision was a great one for consumers, however its likely that the banks will appeal all the way to the House of Lords, so it is not over yet. In some cases consumers are charged £35 each time this happens, when independent analysis suggests that it costs the bank about £2. From 2005, thousands of customers have begun to reclaim charges. The charges here are not as high as in the UK, which is primarily in my view because of section 149 of the Consumer Credit Act which I wrote about here previously. And the current charges chaos in the UK is a timely reminder why we need to retain section 149.

However the judgment also points to the need here to review the existing charges imposed to determine their fairness on Irish consumers. In particular there are many people in the sub-prime market who are being charged exorbitant fees and charges which only serve to make it even more difficult for them to sort out their finances. CAI will be writing to the Department of Finance seeking such an independent review of charges.

Tonight is my last night playing Roger in "I do not like thee, Dr. Fell" with Dunshaughlin Players. Its been hard work over the last few months learning the lines and moves, but performing has been great fun so far, especially with such a great cast, director and backstage team. Looking forward to the finale tonight and a few beers afterwards perhaps!!

Sunday, April 20, 2008

Getting the messages and message!

When I was a young fella growing up in rural North Tipperary, we used "to go to Borris (Borrisokane) to get the messages", usually from a small number of local shops. Groceries were things that Americans used to buy in large supermarkets and bring home in brown paper bags in TV shows like the Brady Bunch. Shopping patterns have changed a lot since then and many Irish consumers are now buying their "groceries" from large multiples like Tesco, Dunnes and SuperValu.

The week before last the Competition Authority brought out two reports. The first report focused on the effects of the abolition of the Groceries Order in 2006. The analysis suggests that while prices fell as a result of the Groceries Order being abolished, most of the gains have been wiped out by the significant increase in the cost of food globally. There has been quite a bit of comment in relation to this report, so I am not going to go on about it again.

The second report published on April 9th didn't get any coverage that I am aware of, but I found it fascinating. Its entitled "A Description of the Structure and Operation of Grocery Retailing and Wholesaling in Ireland: 2001-2006". Its very useful because in reality the Groceries Order was always in my view a minor factor in determining the cost of groceries. Yes I supported its removal, but it was not the magic bullet to cheaper prices. What we require to improve competition and ensure consumers get a better deal is a well informed policy.

The report tells us that the groceries market was worth €11.6 billion in 2006. It describes really well the nature and structure of the market, between what it calls the "vertically integrated retailers" such as Tesco, Dunnes, Aldi etc, the affiliated retailers operating under the brand of the likes of SuperValu, Londis, Mace and Centra and then the independent retailers. Many people complain about the decline of the local village shop or the corner shop and that is borne out by the report as the number of outlets has halved from 13,775 in 1977 to 6,293 in 2006, with about 55% of these being independent retailers.

Of course size is what counts and while there are less outlets, they have been replaced by large and medium sized supermarkets with a wide variety of products. I was surprised to read the significant position of the other retailers in terms of presence and market share. I had incorrectly assumed that the Tesco and Dunnes were the big beasts, under pressure now from Lidl and Aldi, but that the others were in the ha'penny place. However the report shows that while Tesco has the largest market share at over 18%, SuperValu and the Independent retailers are number 2 and 3 respectively, with Dunnes coming in 4th and Spar 5th.

The good news is that the report indicates that between 2005 and 2006 consumers were shopping around more, by visiting more retail outlets. Depressingly, if of no surprise, 82% of shoppers use their car to do their main weekly shop compared to 16% who walk and only 2% use public transport, and travel on average 22 minutes to do their main shop.

The report indicates that Irish shoppers are more brand conscious. A statistic that stood out for me was that own brand products comprised just 7% of total sales here compared to 45% in Switzerland, 30% in Germany, 28% in the UK and 22% in the Netherlands. While my assumption is that own brand products usually cost less consumers may worry about the quality or value of such products. Perhaps this is fed by memories of the now long gone, Quinnsworth's (now Tesco) own brand "yellow pack" range which is still used as a term to describe a product, service and even a job which is considered sub-standard. As well as price surveys, perhaps we need to work on encouraging Irish consumers to free themselves of brand loyalty or as some would call it brand tyranny.

The report shines a light on a very significant market and the details and information will hopefully be used to inform consumer policy. The Competition Authority is following up this report with a study on the retail planning system as applied to the grocery sector. That will also be very useful in light of the importance of location and convenience in terms of retailer selection.

I cannot let the day go without mentioning the great win by the Tipperary hurlers in Limerick today, couldn't make it due to other commitments, but had the pleasure of attending the game last weekend in Nowlan Park against Kilkenny. Here are some highlights of today's win courtesy of
Tiobraid Arann Abu...bring on the rebels in June!!