Study: Mixed bundling of financial products replaces tying
The document, now open for consultation with the Commission’s Internal Market section, places Ireland in the group of intermediate countries for competitiveness in financial products and warns of potential antitrust concerns.
Ireland is one of the few countries that bans products such as mortgages being available only as part of a package that includes, for instance,insurance.
It does allow mixed bundling provided the price of each product is clearly indicated, and it does allow a mortgage to be dependent on opening a current account and payment protection insurance.
But despite the laws introduced five years ago, cross-selling practices actually exist and are widespread, the study found. The most common forms include mortgage loans with life and other insurance, pension products with life insurance and investment advice with other services, such as fund transfers.
“This latter category of cross-selling practice could potentially be relevant as regards the probability that unfair commercial practices emerge in thick relationships, including churning and steering,” the report says.
The study also found that tying practices have been replaced not just by mixed bundling, but also by conditional sales practices, such as the obligation to pay salary into the current account applied to consumer loans; minimum time periods for access to other products when opening a personal account or getting investment advice, and being obliged to get loan guarantees together with life insurance and payment protection.
Soft law initiatives, such as the code of ethics or recommendations from financial regulators, have not been effective in Ireland and a number of other countries, the report says.
The authors looked at the legal systems in each EU country in terms of how likely they were to produce anti-competitive results. Ireland was placed in the second of the three categories with Denmark, Sweden and Poland.
The study, which does not necessarily represent the views of the commission, presents a comprehensive inventory of practices, including tying, conditional sales practices and aggressive commercial strategies.
It is a follow up to the December 2007 white paper on the integration of EU mortgage markets, which Internal Market Commissioner Charlie McCreevy said should only result in a directive if it was shown to be the best and most efficient way forward.
To comment before April 14, go to: http://ec.europa.eu/internal_market/consultations/2010/tying_en.htm
