Antitrust Commissioner Launches Inquiry Into Insurance-credit Card Partnerships

Antitrust Commissioner Ronit Kan has issued a letter to Isracard, Leumi Card, Migdal Insurance and The Phoenix Assurance Company, demanding information on the sale of 25 percent of Bank Hapoalim subsidiary Isracard to The Phoenix, as well as negotiations being held for sale of 10 percent of Leumi Card to Migdal by Bank Leumi.

Kan seeks to consider whether the transactions, both involving the union of insurance companies as minority partners with banks in credit card companies, 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 some concern that the partnership of insurance companies and banks in credit card companies will destroy competition in the consumer credit market.

Such a trend is seen to be in contradiction with the Bachar Committee, which recommended that provident funds and mutual funds be separated from the banks. The fact that the main acquirers of the provident and mutual funds were insurance companies - 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 percent share in a given company. However, since both transactions in question involve transfer of only 25 percent and 10 percent 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.