Competition Commission market investigation – Payment protection insurance (PPI)
The Competition Commission (CC) published its report on payment protection insurance on 29 January 2009.
The Office of Fair Trading (OFT) referred the market for Payment Protection Insurance (PPI) to the Competition Commission (CC) on 7 February 2007 under section 131 of the Enterprise Act 2002.
The CC published its final report on 29 January 2009.
The CC concluded that:
- each distributor and intermediary (such as a bank, mortgage provider or credit card provider) faces little competition for the sale of PPI when it is sold in combination with the credit it insures
- there were features of the relevant markets for PPI which led to an adverse effect on competition (AEC) in these markets and in turn resulted in consumers facing higher prices and less choice than they would if there was effective competition between PPI providers.
- as a result of this lack of competition, is highly profitable for distributors to sell PPI, though the CC found that some of the resultant profit is used to subsidize credit prices
On retail PPI – which is a small part of the overall PPI market relating to protection taken out on repayments for shopping through home catalogues – the CC found that:
- it is highly profitable for distributors to sell
- there is little competition between providers on price and other factors, limited ability for customers to search for alternatives or switch products and a considerable point-of-sale advantage for the providers
The CC identified a package of remedies to address the adverse effects identified. One remedy – relating to the use of information for price comparison tables – falls to the Financial Services Authority (FSA) to implement. The CC can implement the other remedies using its order-making powers. There are no recommendations addressed to Government.
Under the rules of the Competition Appeal Tribunal (CAT), bodies who are the subject of a CC report are able to appeal within 2 months of publication of that report.
Barclays submitted an appeal on 30 March 2009 and the hearing was held on 7-10 September 2009. The appeal was upheld on one ground which relates to CC’s assessment of the remedy prohibiting the sale of PPI at the point of sale of credit.
The CC has been asked to reconsider the loss of convenience for consumers of not being able to buy PPI at the same time as taking out credit.