The Motor Insurance Dawn Raids – A Legal Explanation.
Dawn raids carried out across the business premises of motor insurance providers this week, including its representative body and software companies that hold pertinent databases, marks a seminal moment for both the Irish insurance industry and their consumers.
As reported, officials from the European Commission’s Directorate-General (DG) for Competition and their counterparts from the Irish Competition and Consumer Protection Commissions (CCPC) carried out a series of targeted raids as part of an ongoing probe into alleged anti-cartel practices within the motor insurance industry.
It is understood that the investigation commenced in 2016 following the inordinately high premium increases for motor insurance in recent years, some which have increased by 60% to 70% for certain consumers. These increases coupled with alleged complaints from new entrants to the insurance market of being unable able to access requisite databases that assist such insurance providers in validating drivers claims history, became the dual catalyst for these investigations.
It’s worth highlighting, that the CCPC did state on the day of the raids, that such inspections do not indicate those targeted companies are automatically guilty of anti-competitive behaviour and stressed that the normal due process rules will apply, if proceedings were to be instigated following such investigations.
To comprehend the enormity and seriousness of such allegations, its best to examine the law relating to such matters and the rationale for legislative protections in the first instance.
The EU views competition as a fundamental tenet and safeguard to the single market. It therefore encourages and maintains the regulatory framework to deter the creation of cartels and monopolies that would damage the interests of the consumer and society of each member state and the union as a whole.
Articles 101 and 102 of the Treaty on the Functioning of the European Union, (formally Articles 81 and 82 of the EC Treaty) are the EU rules prohibiting restrictive agreements and abuse of a dominant position by undertakings (companies) operating within the EU.
Article 101 prohibits cartels and anti-competitive agreements, which may involve two or more independent entities price-fixing or market sharing. While Article 102 prohibits abuse of a dominant position which may involve companies charging unfair prices or limiting production of goods to the detriment of its consumers.
The European Commission, together with the national competition authorities, such as the CCPC directly enforce these EU competition rules.
The DG for Competition within the Commission is primarily responsible for direct enforcement powers and is currently headed by Johannes Laitenberger, who gained much notoriety in June this year following record fines of €2.42 billion being imposed on Google for breaching EU competition law. That decision followed a seven year investigation which found that Google had “abused its dominant position by systematically favouring” its own shopping comparison service.
This case demonstrates the power that the European Commission holds on such matters and the ferocity of penalties they can attach for non- compliance. The Commission has the capability to impose fines up to a limit of 10% of a company’s total turnover for the preceding business year; dependant on aggravating factors and the type of infringement per se.
In performing its investigatory role and duties, the European Commission has power to request information from all undertakings (whether or not they are themselves suspected of infringing the legislation) and enter and search such business or domestic premises. The Commission also has powers to take copies and extracts of books or records, seal the business premises for up-to 72 hours if required and interview any members of staff or company representatives who consents, for the purpose of collecting this relevant information.
More importantly and as happened this week, the Commission along with assistance from the relevant national competition authorities can carry out dawn raids without notice to such undertakings, where deemed necessary.
It will remain to be seen what the collateral damage is; if any for the much maligned motor insurance industry, following completion of this pending investigation and whether or not wrongdoing will be attributed to any insurance provider for alleged anti-competitive behaviour. It’s fair to assume little or no sympathy would have generated from their customer base this week following such raids, particularly from those consumers who have had to bare the financial brunt of recent premium price hikes, merited or not.
Given the Google finding from last month, there is little doubt that this is an exceptionally worrying time for those companies implicated in such investigations, which has the potential to seriously alter the motor insurance landscape in Ireland for years to come and possibly to the benefit of the Irish consumer.
Jason O’ Sullivan, is a Solicitor and Public Affairs Consultant at J.O.S Solicitors
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