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European Commission brands bundled products “anti-competitive”

Bundled products could be banned after the European Commission branded them “anti-competitive” and “unfair”.

In a little-noticed consultation paper published last month, the commission says some cross-selling practices, such as packaging two or more products together, are unfair because they impede consumers being able to switch between products or make accurate price comparisons.

It says potentially harmful bundles include mortgages cross-sold with life insurance and current accounts, as well as current accounts sold with investment services, loans, credit or debit cards and life insurance.

“Tying” is defined as two or more products packaged together where at least one of the products is not sold separately while “mixed bundling” occurs when products are packaged but are also available separately. The UK is listed as one of the countries with unfair and anti-competitive tying.

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 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.”

Lansons director of regulatory consulting Richard Hobbs says: “Authorities are paying close attention to these practices and it will be increasingly difficult to implement new initiatives.”


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There are 13 comments at the moment, we would love to hear your opinion too.

  1. paolo standerwick 3rd February 2010 at 3:51 pm

    Banks have been using this practice for years. So here we go again the banks causing problems once more…………………

  2. Mortgage Broker N3 3HP 3rd February 2010 at 4:06 pm

    I would like to see Banks and BS response to this and how they would ever be able to ban bundled sales.

    Bundling, cross selling and pushing products that are unsuitable have been the mainstay of many lenders. A lot of new marketing by Santander, Woolwich, RBS etc is all based around ‘do a mortgage with us and benefit from ….xxx and yyyy.’ Unfortunately, consumers do not seek independent advice and certainly dont want to pay for it either.

  3. This is common if not bank mandatory practice in the large EU countries France Germany Spain if you take out a mortgage they insist that life insurance is taken out to cover it. It is all tied and so “bundled”.
    This is excellent news and is the start perhaps of competition in the major EU economies. The UK is without doubt the most competitive bar only USA.

  4. Oh, what a surprise! So-called ‘normal banking sales practices’ being called into question…again.
    When will authorities get to grips with the rogues in this industry and do something about it? Banks will be laughing with impunity at this report.
    This report will take several years and end up being so diluted as to have no affect whatsoever.
    In the meantime the FSA will continue to batter the small IFA and mortgage brokers whilst the banks get away with paying lots more bonuses for successfully crippling the rest of the world.

  5. Would this put an end to offset mortgages?

  6. Offset mortgages wouldn’t necessarily fall foul of this…they can be set up as an ‘interest-bearing account with a massive overdraft secured on an asset’.
    Where I think this should hopefully be targeted is lenders insisting on life-cover…in some countries they are still pushing endowments!
    It should also mean the deletion of the ASU and General Insurance pages on a mortgage prop.

  7. It will be interesting to see how Santander & Leeds BS in particular will fare with this – they have been “offering” savings products with beneficial interest rates for some time as long as another investment for at least the same amount is set up at the same time. Hopefully this practice will end – how many people have ended up with investment bonds they don’t understand or that aren’t suitable as a direct result of this type of marketing?

  8. David McCabe you have hit the nail squarely on the head. I regularly see or speak to clients that have been offered a too good to be true interest rate on their savings (let’s say 7%) provided that they invest the same amount into something else (usually an investment bond with a 5 year tie in). On occassion I have met clients for a review only to find out that their contingency fund, which I recommended as part of an overall financial plan, has been placed into such an arrangement because they thought both parts were cash. In other words, no consideration has been given to the client’s needs, it was just all about a product sale based on the high headline rate and the customer’s ignorance of what he/she was buying.

  9. Plenty of mention here of Banks and Building Societies, but any thoughts on the menu style products isssued by many Product Providers where one policy can contain Life, CI, IP and even Unemployment? Will these be targeted too? Afterall, the ability to compare and switch is certainly impeded.

  10. Offset mortgages wouldn’t necessarily fall foul of this…they can be set up as an ‘interest-bearing account with a massive overdraft secured on an asset’.
    Where I think this should hopefully be targeted is lenders insisting on life-cover…in some countries they are still pushing endowments!
    It should also mean the deletion of the ASU and General Insurance pages on a mortgage prop.

  11. I would have thought combined Life/CI wouldn’t be a problem but combining them with IP/ASU might be pushing it.
    The main gist of this is hopefully the ‘you can have this loan as long as you take the insurance out as well’ or ‘you can have this current account without charges as long as you take this credit card’.

  12. This is all a bit silly. Whatever happened to product differentiation? Why must all products be exactly the same? As long as there’s an alternative product with choice, why not bundle, if the end result is a better deal? Ultimately, you can always go to an alternative provider if you don’t like the deal.

  13. What about computer OEMs (Original Equipment Manufacturers) like HP, Dell, Samsung (etc) bundling Microsoft Windows with new PCs? I just bought a laptop, it came pre-installed with Windows 8. Windows 8 is terrible, I want to “downgrade” to Windows 7 or try Linux. Samsung will not provide me with a refund for the Windows 8 license that was part of the laptop purchase price. It stinks.

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