The report indicates that third-party cartridge manufacturers face barriers to entry into the market, and specifically mentions the effects of "smart chips." The conclusion is that the OEMs "effectively control the pricing of ink cartridges in their after-markets" and that additional information for consumers would help solve these issues.
The report cites three main problems:
* Pricing schemes are unclear. When buying a cheap inkjet printer, consumers are unaware of the long-term costs of ownership due to cartridge prices and performance. This information is not readily available at the point of sale.
* Comparisons between cartridges are not possible. There is no standard test to determine the number of pages the cartridge should print or to compare between OEM and third-party cartridges.
* Warranty information for printers is unclear about whether the OEMs would refuse warranty service to consumers using third-party cartridges. The OFT determined that these unclear terms "present an obstacle to switching" to third-party cartridges, adding that it does not "accept as fair a term which reserves the right to the warranty provider to determining how damage was caused."
The biggest recommendation is that a standardized testing method be created for use in the UK and published within 12 months. The OFT suggests that this methodology could be based on the test used by the UK's Consumers' Association for its "Which?" magazine. The association used its test for an article in the September 2002 issue, rating both OEM and third-party cartridges. This test records when the "printer driver first throws up a low-ink warning, and also when the sample finally fails the printing quality requirement."
The report suggests that this information, along with cartridge pricing, be made available to consumers at the point of sale so that they can compare total cost of ownership between printers. The OFT indicates that this might give OEMs "a greater incentive to lower the price of ink cartridges" and that this might result "in ink cartridge prices falling and, potentially, printer prices rising." Not mentioned by the report is the impact this could have on the aftermarket and remanufactured cartridges due to increased competition.
The OFT also suggests clarifying OEM warranties, so that "they make clear that they will not disclaim liability under warranties simply because a printer is used with compatible products."
In addition to this report on the UK market, a comprehensive analysis of the U.S. market was made, suggesting similar problems exist in the United States.
The OFT Web site (http://www.oft.gov.uk) gives
* the full text of the report (100 pages in PDF format)
* the testing method used by "Which?" magazine (7 pages in PDF format)
* the report on the U.S. PC market (39 pages in PDF format)
All of these are available from this Web page: http://www.oft.gov.uk/Market+studies/Studies/IT+services.htm
For additional information on this report, see the January issue of Recharger Magazine.
