• European Commission Launches Competition Inquiry into EU Financial Sector
  • June 21, 2005 | Author: Brian N. Hartnett
  • Law Firm: Squire, Sanders & Dempsey L.L.P. - Brussels Office
  • On June 13, 2005, the European Commission launched a sector inquiry in the field of financial services, more particularly, in the areas of retail banking and business insurance. The inquiry will be of interest to the broad range of players in the sector, including banks, insurance companies, intermediaries and any other institutions providing financial services, as well as to consumers and consumer associations.

    Through the means of a sector inquiry, the Commission seeks to examine whether competition in that sector is free of illegal anticompetitive practices. The inquiry, which covers all 25 Member States, responds to concerns that many consumers do not yet benefit from competitive and integrated markets. Today, prices for comparable retail banking products differ considerably among Member States. In addition, other factors, such as switching costs and product bundling, may affect the customer in his or her choice of banking services. In the area of business insurance, the level of information and the risk covered by clients tend to be higher than in retail insurance markets.

    To carry out a sector inquiry, the Commission can request that relevant companies, associations and governmental agencies supply information, documents or statements. Companies may be fined if they do not submit information or refuse to reply. The Commission's investigative powers also include the authority to undertake surprise inspections at company premises -- so-called "dawn raids."

    In the current inquiry, the Commission will likely address questionnaires to banks, insurance companies, reinsurers and other providers of financial services. Information may also be collected from users of financial services, consumer organizations and Member States authorities. The Commission also intends to have an open dialogue with consumer associations, banks, insurance companies and their associations in the course of its inquiry.

    The inquiry starts with a retail banking investigation, focusing initially on payment card services. Other aspects of retail banking (such as conditions for market entry, state of competition among payment networks, and the degree of effective choice for consumers and small and medium enterprises [SMEs]) will be investigated later in 2005, as will the field of business insurance (more particularly, property and casualty insurance, reinsurance and reinsurance intermediation). The main results of the Commission's inquiry will be published in 2006. Action to enforce the competition rules (i.e., proceedings against individual companies), either by the Commission or by national competition authorities, may flow from the inquiry.