Trade organisations a barrier for new business

It is quite an experience setting up a business in the UK. Registering a company is no problem. The government has made this process very simple, which is an important step to encouraging people taking up business. But as with most fields of business in the UK, there are authorities that regulate them, and there are trade associations that give businesses “more” credibility. Fair enough, the former is necessary to protect the consumers’ interest, and to ensure that bogus businesses have no place in the market. But the presence of trade associations often pose significant hurdle to new start-ups in the business. Because, these trade associations will only admit companies that have traded a number of years and are willing to pay to become a member. Naturally, new start-ups have no track record in the business and so can not become members of the trade association. This becomes a significant disadvantage to the new company, as customers will likely not want to buy services or products from this company that does not display a logo showing that it is a member of the trade association. This is regardless of whether or not the customers know what these trade organisations actually do.Some good companies with years of track record do not join trade organisations of their field. Why? It is not mandatory. It costs money. These companies have good code of conduct anyway. So these trade organisations are not really adding that much value to what have already been imposed by their respective authority. On the contrary, they give incumbent and big companies edge in the business, as they give customers the impression that these companies are better, which may not always be the case. And quite often, it comes at a price to the consumers as well. Can you imagine these companies not charging you more to cover their membership cost and for their status as one of the members?What needs to be regulated should have been regulated by the authorities, for example CAA which protects customers from losing their money or being stranded abroad. It does this by carrying out checks on the travel organisers it licenses, called Air Travel Organiser’s License (ATOL), and requiring a financial guarantee called a bond, which is lodged with the CAA. If a travel organiser goes out of business, the CAA will make a refund to the customers, or if the customers are abroad, they will arrange for the customers to finish their holiday and fly home. Hence, don’t be fooled into thinking that trade organisations always have an important role to play in the market, as we can see in this case.

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