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Evidence on switching costs (and implications for barriers to entry)

Deloitte’s response to the Competition Commission's working paper

Deloitte’s response to the Competition Commission's evidence on switching costs paper

Background

Deloitte’s paper adopts the following structure:

  • incidence of switching costs
  • timing issues
  • the costs of tendering and switching
  • avoiding risks to audit quality in the early years of a new engagement
  • investors, company management and switching
  • conclusions

Key findings

Whilst Deloitte agrees that there are some costs to companies in switching, it believes that the CC has a) overestimated such costs, and b) failed to take into account certain evidence; and that the costs of switching cannot be considered to be a barrier to entry. The evidence actually shows that where companies consider that they may not be obtaining optimal quality and value, they will go out to tender.

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Deloitte’s response to the Competition Commission's evidence on switching costs paper (PDF)

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