Trustbuster launches inquiry into insurance-credit card partnerships
Is it wrong for insurance companies to become the banks' partners in owning the credit card companies?
Spurred by the sudden flurry of activity between insurance companies and credit card companies, the trustbuster is getting nervous. The Israel Phoenix Assurance Company (TASE: http://www.themarker.com/eng/tools/toolsResult.jhtml?application=8&chosen=767012 PHOE) has agreed to buy 25% of Isracard from Bank Hapoalim and Migdal Insurance (TASE: MGDL) http://www.themarker.com/eng/tools/toolsResult.jhtml?application=8&chosen=1081165 is negotiating to buy 10% and later another 10% of Leumi Card from Bank Leumi (TASE: http://www.themarker.com/eng/tools/toolsResult.jhtml?application=8&chosen=604611 LUMI), and Antitrust Commissioner Ronit Kan wants details.
Kan wrote to Isracard, Leumi Card, Migdal and Phoenix demanding information on the tr between Bank Hapoalim and Phoenix, and on the talks between Migdal and Bank Leumi.
Both transactions involve the union of insurance companies as minority partners with banks in credit card companies. Kan wil have to rule whether these transactions are not - in effect - binding arrangements between competitors.
The insurance companies have been considered possible competition to the banks in both the business and consumer credit sectors. The past year has seen a wide-scale introduction of insurance companies into the business credit market, and there have recently been indications that such activity would expand into the consumer credit market.
There is concern that the partnership of insurance companies and banks in credit card companies will destroy competition in the consumer credit market.
That trend would contravene the Bachar Reform, which forced the banks to relinquish their holdings in mutual and provident funds.
The fact that buyers of these provident and mutual funds were insurance companies, and that they now seeking to join forces with the banks in the credit card businesses - could render the Bachar Committee recommendations meaningless and result in credit supply conditions that are worse than those prevailing before the committee's recommendations were implemented.
Kan's objection to a partnership between insurance companies and banks in the field of credit cards is well-founded, but it is unclear whether it has any legal basis. The antitrust law enables the authorities to intervene in cases of a merger involving more than a 25% share in a given company. However, since both transactions in question involve transfer of only 25% and 10% they cannot be prevented based on a requirement for the approval of a merger. As a result, intervention by the Antitrust Authority involves a wide interpretation of the antitrust law, which it can be assumed will be appealed by the banks.