GFS LinkedIn
GFS Facebook
GFS Twitter
GFS RSS feed

Tied products set to unravel

Sunday 28 March 2010 - by Helena Walsh

The European Commission is scrutinising the tying and cross-selling of products in a bid to end anti-competitive practices that reduce customer mobility and price transparency

Last month the European Commission for Internal Market and Services launched a consultation on tying and other potentially unfair commercial practices in the retail financial sector which went somewhat under the radar.

In the consultation, the Commission says: “Some tying and cross-selling practices, such as packaging two or more products together are unfair because consumers are unable to switch between products or make clear and accurate price comparisons.”

The consultation follows an investigation commissioned by the EC of cross-selling across EU member states, which found that 572 million contracts could be switched Europe-wide if such practices were not in force.

The most common forms of harmful bundles identified by the Commission include mortgage loans with life and other insurance, pension products with life insurance and investment advice with other services, such as fund transfers.

The study also highlighted the fact 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.



Uncompetitive and unfair tying practices were found in the UK while, tying was found to have survived despite legal prohibitions in Belgium, Portugal and Slovakia. In the cases of Ireland and Spain, tying had been replaced by other uncompetitive practices.

The Commission says: “The results of the test suggest cases of tying practices that are anti-competitive as well as harmful to consumers and small and medium enterprises as they reduce customer mobility, price transparency and the comparability of providers on the market, increase switching costs and negatively affect consumer confidence. It also finds that mixed bundling often has a similar negative effect on consumers as tying.”


Article pages: |   1  |  2  |  3  |



WHAT DO YOU THINK?
 
Name:
   
Email:
   
Comment:
   
Post as Anonymous
  Display name
   
Please, enter security code
   
 

READERS' COMMENTS
2010-04-01 17:17:18 | Mike Fitzgerald
I wish the European commission luck in trying to stop banks selling bundled products.The practice of selling a cheap 2-year mortgage deal tied together with insurances is in most cases confusing and many cases very uncompetitive. The consumer is losing out and the increasing lack of choice offerred by bundled products must be halted.
Many clients are better off by having separate products individually prepared to suit their needs.
INTERVIEWS & FEATURES
What corruption really costs
Heidi Lawson, partner at Chadbourne & Parke LLP, looks at the impact of compliance and corruption on a company's value.

STRAW POLL

Will markets in 2012 have a tougher time than 2011?

Yes

No

Don't know

View results

FIND A REGION world regions