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The strength of weak signals

This article explores the use of ex-officio investigations in the banking sector, highlighting the role of substantiated complaints and leniency applications as triggers for these investigations. It also discusses detection tools such as market studies, circumscribed complaints, and requests for information.

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The strength of weak signals

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  1. The strength of weak signals Ex-officio cartel investigations in the banking sector in Italy Rosella Creatini and Renato FerrandiItalian Competition Authority Cartel Working Group SG 1 Teleconference on Ex Officio Cartel Investigations October 14, 2014

  2. EX-OFFICIO INVESTIGATIONS News Market intelligence SUBSTANTIATED COMPLAINTS LENIENCY APPLICATIONS triggered by the agency prompted by the market

  3. In the banking and insurancesectors You can hardly rely on leniency applications • Oligopolistic markets, big companies with long experience • Increasing concentration (consolidation process and new requirements) • Strong interaction among competitors, also through trade associations Or substantiated complaints by consumers • Highly technical sectors

  4. EX-OFFICIO INVESTIGATIONS News Market intelligence SUBSTANTIATED COMPLAINTS LENIENCY APPLICATIONS

  5. EX-OFFICIO INVESTIGATIONS News Market intelligence What is there in between? SUBSTANTIATED COMPLAINTS LENIENCY APPLICATIONS

  6. EX-OFFICIO INVESTIGATIONS News Market intelligence DETECTION TOOLS SUBSTANTIATED COMPLAINTS LENIENCY APPLICATIONS Market studies Circumscribed complaints Requests for information

  7. Market studies • Provide a better understanding of the sector • Help to identify anomalies and competition concerns • Raise consumer and public administration awareness and attention

  8. Circumscribed complaints • Each consumer has a limited view of the market situation • A public administration may point out suspicious outcomes of one or more tenders only …but several complaints may draw a pattern

  9. Requests for information • Expand circumscribed complaints • In space (other suspicious tenders in different territories) • In time (evolution over a certain period) … to draw the pattern

  10. Market studies (examples) • Costs of bank accounts and services • Price increases, mainly focused on old clients of big banks • Low churn rate, due to poor transparency, bound with other bank services, time and cost of account closure

  11. Market studies (examples) • Car insurance • High and fast-growing insurance premiums • Low availability of quote comparison websites and multi-firm agents

  12. Cases • General cashier services for INAIL (2008) • Complaint from public administration INAIL on suspicious tender for provision of general cashier services • One only bid by the four biggest banks in a temporary grouping • RFI about tenders over the years • Temporary grouping already in place since 1996 • 3 failed tenders with no bids, successful tender when one only bid was allowed

  13. Dawn raids • Relevant market: cashier services for INAIL • Information exchange about the tenders, economic model showing no need for temporary grouping • Unique and continuous agreement aimed at sharing the market

  14. Cases • Healthcare liability coverage in Campania (2011) • Following a market study highlighting increasing prices for health insurance… • Local health unit complained about anomalous increase in price for insurance services • RFIs to other 8 local health units about tenders over the past 10 years

  15. Dawn raids • 3 insurance companies coordinated their bids for 18 tenders from 2003 to 2008 • Contacts and information exchange, sharing of contracts and lots, co-insurance agreements

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