27/05    11 February 2005

The OFT today announced that it is to consult on whether to make a market investigation reference to the Competition Commission (CC) of the market for personal banking services in Northern Ireland. This is the OFT's response to the super-complaint lodged by Which? (formerly known as the Consumers' Association) in conjunction with the General Consumer Council for Northern Ireland about personal current bank accounts (PCAs) in Northern Ireland. The OFT will decide by the early summer whether or not to make a reference following the consultation.

Download response to the super-complaint (pdf 74kb).
Download consultation paper (pdf 127kb).

In its response to the Which? super-complaint, the OFT has identified features of the PCA market in Northern Ireland which appear to restrict competition, and which may warrant further investigation by the CC.  It has found evidence of behaviour among the four leading providers of PCA services leading to, or demonstrating, weak competition between them:

• they impose a number of charges when customers are in credit and overdrawn which are not found in the rest of the UK (and there are no offsetting advantage such as higher interest payments on positive balances)
• they have stated that their charges are not directly cost-derived
• there is evidence of parallel pricing behaviour among them, and of price leadership (where one firm in a market sets a price which others follow) and possible price signalling (where the price leader reveals its price changes in advance to its competitors)
• they do not actively compete for customers switching accounts.

In addition, there appears to be low levels switching by customers, both between rival banks and to alternative accounts within the same bank.

Sir John Vickers, OFT Chairman, said: 'Our analysis of the super-complaint has identified questions about the effectiveness of competition in the provision of personal current account services in Northern Ireland. We will now consult with the banks that would be affected on the case for a reference to the CC for fuller investigation of the market.'

The consultation will last for five weeks and closes on Friday 18 March 2005.

NOTES

1. The right to submit super-complaints was created by section 11 of the Enterprise Act 2002. A super-complaint is defined under section 11(1) of the Act as a complaint submitted by a designated consumer body that 'any feature or combination of features, of a market in the United Kingdom for goods or services is or appears to be significantly harming the interests of consumers.'

2. On 15 November 2004 Which? submitted on their own behalf and on behalf of the General Consumer Council for Northern Ireland (GCCNI) a super-complaint to the OFT about PCAs in Northern Ireland. It is available on the Which? website.

3. Section 11(2) of the Enterprise Act requires the OFT, within 90 days of receiving a super-complaint, to publish a reasoned response saying what action, if any, it proposes to take. Under section 131 of the Act the OFT may make a market investigation reference to the CC where it has reasonable grounds for suspecting that any feature, or combination of features, of a market in the UK for goods or services prevents, restricts, or distorts competition in connection with the supply or acquisition of any goods or services in the UK or part of the UK.  See guidance on market investigation references.

4. PCA banking services provide customers the means to hold deposits; receive and make payments by cheque, debit card and cash machine facilities; and make regular payments via direct debits and standing orders. Industry sources estimate that the value of deposits held in current accounts in Northern Ireland is in the region of £1.9 billion. It is estimated that 78 per cent of the Northern Ireland population (1.68 million in the 2001 census) have PCAs.  Four banks accounted for around 77 per cent of the Northern Ireland PCA market in 2003.  They are: Ulster Bank, Northern Bank, First Trust Bank and the Bank of Ireland. Four smaller providers have market shares in the range of two to seven per cent. Only five per cent of the Northern Ireland population were estimated to have access to a current account on-line in 2003, compared with 21 per cent in Great Britain.

5. The reasoned response to the Which? super-complaint and the consultation document are available from the super-complaints area of this website.