European Commission Launches Antitrust Inquiries into Banking and Insurance Markets

June 14, 2005

On 13 June 2005, the European Commission launched its long-awaited antitrust inquiries into the retail banking and business insurance sectors.

Sector inquiries.  Sector inquiries give the Commission extensive powers to investigate an entire business sector.  The Commission’s Directorate General for Competition (DG Comp) can require companies to hand over data, provide copies of agreements and give explanations.  Dawn raids may be carried out if the inquiry reveals serious infringements where the Commission believes there is a risk that evidence will be tampered with.

The penalties for misleading or incomplete answers are the same as in an investigation of an individual company suspected of having committed an infringement of the competition rules.

Methodology.  The methodology used by the Commission is to identify targets for its inquiry (described by the Commission as ‘stakeholders’), and to send out large numbers of detailed questionnaires.  The task of analysing the data gathered will probably be outsourced to an external consultant.  This stage will probably take six to twelve months.

The next stage is to narrow the inquiry down to a smaller number of targets and business sectors and to narrow the geographical scope of the inquiry.  However, the level of detail requested is likely to be increased. 

The third stage is the publication of a report and a hearing at which the targets/stakeholders are encouraged to participate.  This will probably take place eighteen months to two years following the launch of the inquiry, though pressure will be on the Commission to speed up the process.  On the other hand, previous enquiries have taken up to five years.

Finally, where individual infringements of the competition rules have been identified they will be pursued and proposals may be made to alter the legislative framework.  Co-operation with National Competition Authorities will mean that some action may be undertaken purely at national rather than EU level.

Scope.  The scope of the current inquiries is (a) retail banking products and (b) business insurance.  The way the inquiries are framed, it is clear that the Commission’s main concerns lie in market structure rather than individual behaviour.  Hence, the general approach will be to look at

  • horizontal joint ventures and other forms of co-operation agreement (including cross-shareholdings and interlocking directorships),
  • exclusive vertical arrangements, and
  • the activities of trade associations.

Banking inquiry.  The initial focus of the banking inquiry will be on payment cards.  The Commission believes that interchange fees and merchant service charges are too high and that price differentials between EU Member States indicate a lack of competition.  This is thought to be due to barriers to market entry. Other retail products will be investigated as the inquiry develops.

Business insurance.  With regard to business insurance, the Commission has specifically stated that it will look at property and casualty insurance.  Unsurprisingly, insurance and reinsurance intermediation will also figure large in the inquiry.  The Commission will also look closely at how much risk information is available and with whom it is shared.  The role and function of trade associations will be particularly spotlighted.

How to react.  If you are designated a ‘stakeholder’, you need to take care in how you react.  The two key variables are how much information you volunteer and with whom you co-operate in preparing your responses.  There are pros and cons in working with trade associations and independent advice is almost certainly necessary.

The most crucial requirement is to develop from the outset a coherent and informed position and to maintain it throughout what can be a lengthy and resource intensive process.

For more details on Sector Inquiries, please see "Sector Inquiries under EU Competition Law" [PDF] authored by GD&C Partners, David Wood and Nicolas Baverez,  published in the 8 February 2005 issue of Competition Law Insight.

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For further information, please contact

Peter Alexiadis – Brussels (+32 2 554 72 00; palexiadis@gibsondunn.com)

David Wood – Brussels (+32 2 554 72 10; dwood@gibsondunn.com)

James Ashe-Taylor – London (+44 20 7071 4221; jashetaylor@gibsondunn.com)

Nicolas Baverez – Paris (+33 1 56 43 13 00; nbaverez@gibsondunn.com)

Michael Walther – Munich (+49 89 189 33-180; mwalther@gibsondunn.com)

Copyright © 2005 Gibson, Dunn & Crutcher LLP