ASSOCIAZIONE BANCARIA ITALIANA
PRESS RELEASE
PRESS RELEASE
THE COMPETITION AUTHORITY AND THE BANK OF ITALY RULE THAT THE ABI CONTRACTS ON IUS VARIANDI AND CONFLICT OF INTEREST RESTRICT COMPETITION,
BUT AUTHORISE THE NEW FORMS ADOPTED BY THE ASSOCIATION
The Competition Authority and the Bank of Italy issued a measure, respectively on 28 October 2004 and on 12 November 2004, resolving to close the investigation that the two Authorities had initiated on 6 November 2003 and on 8 November 2003. The investigations related to the specimen contracts for the provision of a number of investment services and for the use of credit cards which, in the version originally drawn up by ABI (Associazione Bancaria Italiana – the Italian Banking Association), had been considered to be in violation of section 2(2) of the Competition Act. In their rulings, the Competition Authority and the Bank of Italy resolved that the amended version of these specimen contracts were not likely to restrict competition on the relevant markets.
One of the specimen contracts as originally notified and which was examined in the course of the investigation, related in particular to a number of clauses governing the bank's right to unilaterally vary the financial conditions (the so-called ius variandi), the financial transactions performed by the banks when a conflict of interest existed, and the introduction of a artfully contrived linkage between independent services (tie-in).
With regard to the ius variandi, the Authority and the Bank of Italy considered it anticompetitive to give the banks the possibility, according to the specimen contracts originally notified to them, to vary the financial terms and conditions, to the detriment of the customer, without having to explain the reasons for their decision and by notifying the new conditions only indirectly, by publishing them in the Official Gazette rather than by informing the customers individually. It was seen as a form of horizontal coordination of the supply conditions, which was likely to restrict competition by setting a standard that might hamper customer mobility, because customers would not be encouraged to try to find better available conditions, since these conditions could be unilaterally changed by the banks.
As far as the treatment of conflict of interest was concerned, both the Authority and the Bank of Italy considered that the provisions governing this matter in the draft contract for investment services gave customers with information that was wholly generic, and ineffective. Firstly, because there was no obligation on the bank to clearly describe the situations of conflict of interest and, secondly, because it was impossible for investors to withdraw their authorisation to transact operations in the event that a conflict of interest situation were to change. The horizontal coordination resulting from this, which could standardise the conduct of the banks, was deemed to be likely to raise barriers to customer mobility, because customers would no longer be in a position to take rational decisions based on the actual features of the service provided by each bank.
Likewise, the Competition Authority and the Bank of Italy criticised the clauses in the specimen contracts, in the version originally notified, under which customers were necessarily required to use the same intermediary for negotiating, keeping, and managing their security investments and individually managing their savings and current accounts, ruling that this limited the range of consumer choice, reducing their level of well-being and prosperity, and increasing mobility costs.
As indicated above, during the course of the investigation, to obviate the criticisms that the Authorities had raised, the ABI produced a new version of the specimen contracts on 27 September 2004.
In particular, it removed the rules governing the ius variandi right and only retained a warning that any banks wishing, individually, to use this right, were required to take account of the pro-consumer provisions of the Italian civil code.
With regard to conflict of interests, the new form of the contract refers to a separate form to be provided by each bank, and which must necessarily contain specific information regarding the nature of each conflict, in order to provide the customer with all the information needed to issue a proxy to work on behalf of the customer in cases of conflict. Furthermore, the obligation to update the information supplied to the customer in the event of a change in the conditions of the conflict of interests also has to be explicitly set out, while the customer must now be given the possibility to revoke authorisation to act in the event of a change in the conflict of interest arising during the course of the contractual agreement.
ABI also changed the specimen contracts by providing, for both the negotiation service and the management service, the possibility for customers to open a current account and a securities investment account with another intermediary.
Having made these radical changes, the Authority and the Bank of Italy resolved that ABI's new contracts no longer contained provisions that were likely to restrict competition on the relevant markets. The new form of the contracts made it possible, on the basis of the individual initiative of the banks acting separately, to ensure that the bank-customer relations will be based more on the actual capacity of the intermediary to offer customers a competitive service in terms of quality and price.
Rome, 15 November 2004