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Press releases 2002 -

Amended insurance rules not anti-competitive

PN 76/02     13 November 2002

Amended rules to improve standards in the general insurance industry are not anti-competitive, says the OFT.

The OFT decision follows the removal by the General Insurance Standards Council (GISC) of rule F42 which required its members to deal only with intermediaries who were also GISC members.

The Competition Commission Appeal Tribunal (CCAT) decided that rule F42 was anti-competitive, overturning a previous OFT decision clearing the rules. The rules were originally notified to the OFT by GISC for a decision on their compliance with competition law.

Following the CCAT ruling GISC dropped rule F42. The OFT today concluded that the remaining rules do not infringe the Competition Act 1998.

The CCAT also had concerns about a further GISC rule (rule F34). The Tribunal felt that the rule appeared to make it effectively impossible for an undertaking to leave GISC without ceasing trading or passing its business to another member. GISC has dispelled those concerns to the satisfaction of the OFT by clarifying that rule and demonstrating that members have been able to leave without giving up their general insurance businesses.

NOTES

1. A copy of the full decision will shortly be found on the Competition Act public register.

2. GISC is a self-regulatory body for general insurance, which includes motor, household and travel insurance but not life insurance. Members agree to comply with codes of conduct set down in its rules.

3. The rules were notified to the Director General on the 30 June 2000. The OFT originally cleared the rules on 24 January 2001. This ruling was overturned by the CCAT on 17 September 2001.

4. Powers under the Competition Act 1998
The Act gives the Director General powers to investigate suspected infringements of the Act's prohibitions:
i) the Chapter I prohibition prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition in the UK (or a part of it) and which may affect trade within the UK (or any part of it); and
ii) the Chapter II prohibition prohibits conduct by one or more undertakings which amounts to the abuse of a dominant position in a market which may affect trade within the UK (or any part of it).

5. A party to an agreement who thinks that it may infringe the Chapter I prohibition or a person who thinks that their conduct may infringe the Chapter II prohibition may notify the Director General of the agreement or conduct and apply to him for a decision. The summary of notifications for a decision, received by the Director General, is maintained in the Competition Act 1998 public register on the website and a copy is held in paper form at OFT premises for public inspection.

6. In this press release the functions of the Director General of Fair Trading (DGFT) under the Act are for simplicity described as the functions of 'the OFT'. The Enterprise Act will replace the office of the DGFT with the OFT, to which would be transferred the DGFT's functions.




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