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CA wants to see return of MCA to stop buy-up

The Consumers&#39 Association is calling for the reintroduction of the maximum commission agreement to prevent providers buying up distribution following depolarisation.

In its response to CP121, the consumer watchdog says controls on commission is the most effective way of producing a level playing field for competition.

It warns that only by bringing back the MCA will smaller, niche providers or new providers be able to compete with bigger, more established firms which can effectively buy up distribution.

Lautro&#39s MCA was scrapped in 1988 following the Office of Fair Trading&#39s ruling that it was “significantly anticompetitive.”

Last summer, the idea of the MCA was raised again when Ron Sandler raised the issue of commission bias although he subsequently ruled out a cap. At the time, the OFT said nothing had changed in terms of competition to change its decision.

The CA response says: “Capping commission would allow true-value providers to compete on equal terms as it prevents those with poor products but deep pockets simply buying up distribution and market share.”

LIA director of public aff-airs John Ellis says: “I do not think it is practical. It was killed last time by a European ruling, which said it was a cartel. I do not see how you could bring it back.”

Baronworth Investment Services director Colin Jack-son says: “I can see some merit if a client is dealing with an IFA who takes all the commission. But for IFAs who rebate a degree of commission to their clients, there would be no benefit to capping it.”

Holden Meehan director Amanda Davidson says: “The MCA does not remove product bias unless you have the same level of commission for all products, which does not make sense because some products take more time to service than others and commission levels should reflect that.”

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