12 Apr 2007 07:06 AM
PPI market investigation - issues statement

COMPETITION COMMISSION News Release (18/07) issued by The Government News Network on 12 April 2007

The Competition Commission (CC) has today published an issues statement as part of its investigation into the market for the supply of payment protection insurance (PPI) in the UK.

The issues statement identifies the specific questions and areas the CC believes are relevant in deciding whether any feature of the market(s) for PPI products restricts, distorts or prevents competition. It will be used as the basis to guide collection of evidence including the first round of hearings with interested parties during the period May to July 2007.

PPI refers to insurance services supplied for the purpose of protecting a borrower's ability to maintain credit repayments in the event that the borrower becomes unable to maintain the repayments due to circumstances which may include any of accident, sickness, unemployment, and, in some cases, death. This market reference follows a super-complaint from Citizens Advice to the Office of Fair Trading (OFT).

The full statement is available on the CC website at: http://www.competition-commission.org.uk/inquiries/ref2007/ppi/index.htm and identifies a number of issues relating to competition including market definition, understanding the retail and wholesale market(s) for PPI (including competition between providers), the interaction between these markets (vertical issues), the role of intermediaries and indicators of the extent of competition.

The issues statement should not be seen as implying that the inquiry group has identified any competition concerns-the CC has yet to reach any conclusions on this inquiry. The purpose of the issues statement is to inform all interested parties and give them an opportunity to raise any further points with the CC.

The CC will continue to work closely with the Financial Services Authority (FSA) to ensure that its investigation takes into account the FSA's ongoing work to remedy problems relating to selling standards and ensuring that customers are treated fairly, as well as various industry initiatives in response to the FSA's work.

Although the statutory deadline for the inquiry is 6 February 2009, the inquiry group aims to complete its investigation more quickly than that and expects to publish its next publication-the 'emerging thinking' document-in the autumn. A full administrative timetable for the investigation is available on the CC website.

The CC would like to hear views on the issues statement from all interested parties, in writing, by Friday 11 May 2007. To submit evidence, please write to:

The Inquiry Secretary (PPI market inquiry)
Competition Commission
Victoria House
Southampton Row

Or email: PPI@cc.gsi.gov.uk
Notes for editors
1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.

2. The members of the PPI inquiry group are Peter Davis (Group Chairman and CC Deputy Chairman), John Baillie, Christopher Bright, John Cubbin and Richard Farrant.

3. Under the Enterprise Act 2002 the OFT can make a market investigation reference to the CC if it has reasonable grounds for suspecting that competition is not working effectively in that market.

4. In its inquiry, the CC is required to decide whether 'any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom'. If so, then there is an adverse effect on competition. The CC will also consider whether this is resulting in a detrimental effect on customers such as higher prices, lower quality or less choice of goods or services. The CC will then decide whether the CC should introduce remedies to tackle the adverse effect on competition or detrimental effect on customers or whether the CC should recommend that action be taken by other bodies to remedy the adverse effects on competition and, if so, what actions or remedies should be taken. If the CC finds that there is no adverse effect on competition, the question of remedies will not arise.

5. Market investigation references are intended to focus upon the function of a market as a whole rather than the conduct of a single firm in a market. If the OFT has concerns about the conduct of a single firm or firms that have engaged in anti-competitive agreements, it will first consider whether those actions infringe the Competition Act 1998.

6. The OFT's reasons for making the reference are available at: