On 15 January 2010, the Internal Market Directorate General of the European Commission published for consultation a paper by the Centre for European Policy Studies entitled "Tying and other potentially unfair commercial practices in the retail financial service sector". The 416 page paper sets out the findings of a study which itself arose from a declaration in the Commission's 2007 Communication on A Single Market for 21st Century Europe that it wished to "do away with anticompetitive product tying" to empower consumers and thus promote the development of a single European market for financial services. The announcement of the study was picked up in the Commission's 2007 White Paper on the Integration of EU Mortgage Credit Markets, which referred to the proposed investigation of "tying and other unfair practices". Concerns over tying were also noted in the Commission's 2007 report on DG Competition's retail banking sector inquiry.
The paper concludes that cross-selling practices (including tying, defined as selling two or more products together in a package when at least one of the products is not sold separately) and conditional sales are widespread in the EU. Concerns are raised over a range of practices, including tying mortgages with life insurance, consumer loans with current accounts and consumer loans with payment protection insurance or life insurance. Concerns are also raised over the cross-selling of insurance products, including life insurance, home insurance, PPI, health/disability insurance and motor insurance, to borrowers, which the authors view as unfair in 90.5% of cases. The paper suggests that such practices can be harmful to consumers and small and medium sized enterprises, as they reduce customer mobility and price transparency and hence reduce the comparability of providers on the market. Perhaps most importantly, the paper details significant divergence in regulatory approaches between Member States and concludes that "the current fragmentation of legal systems has an obvious impact on the Internal Market and on the efficiency of individual national markets". It also claims that this has resulted in limited consumer confidence in the field of financial services in the 27 EU Member States.
The key question is whether the paper will remain simply a repository of information and broad assertions, or whether it will ultimately lead to new regulation. The Commission's consultation document raises a number of options, including EU-wide legislation in the context of the review of the Unfair Commercial Practices Directive. While enthusiasm for the promotion of cross-border retail financial services may have waned in the wake of the financial crisis, it clearly remains on the Commission's agenda. Interested stakeholders are invited to submit their responses to the paper by 14 April 2010.