Court holds credit union body abused dominant position

In its ruling the High Court has upheld a claim by the Competition Authority that the Irish League of Credit Unions unjustifiably abused its dominant position in the markets for credit union representation and savings protection.

In the first case of its kind where the High Court sat both as a court and a designated "competition authority" as provided for in the EU Treaty, Mr Justice Kearns held that certain rules of the credit union league were anti-competitive, not in their object, but in their effect, and that the credit unions had breached both provisions of the Competition Act, 2002, and of the EU Treaty.

The judge was referring to rules under which the league had proposed last year to disaffiliate or expel credit unions who sought Loan Protection and Life Savings Insurance (LP/LS) other than through the ECCU Life Assurance Company Ltd, a company controlled by the Irish League of Credit Unions. Those who did not take out LP/LS cover with ECCU consequently faced loss of access to the league's Savings Protection Scheme (SPS).

The SPS is worth up to €90 million and provides maximum compensation of some €12,700 to individual members where a credit union experiences financial difficulties.

The credit union's SPS is the only such scheme in the State.

The requirement for an SPS for credit unions was voluntary until the Credit Union Act, 1997, provided that all credit unions formed from August 1st, 2001, must participate in an SPS.

However, the judge said, while there was no statutory obligation on credit unions formed before August 1st, 2001, to participate in an SPS, it was accepted it was extremely important that they do so. Participation in such a scheme created consumer confidence in a credit union and provided reassurance for savers and depositors.

Mr Justice Kearns held that Irish League of Credit Unions had breached the Competition Act, 2002, and Article 82 of the EU Treaty in tying access to its SPS to membership of the league on the one hand and also in its refusal to supply the SPS on an open non-discriminatory basis.

In terms of being an abuse, he explained that tying involves leveraging off market power in one market (in this case, the savings protection market where the league is the only supplier) into a related market (the credit union representation services market) where the body concerned expects to meet competition, thereby weakening the competitive structure of the related market and limiting the opportunity for competitors to compete successfully.

He found the tying-in in the case was "pernicious" and enabled the credit union league, if not to eliminate the breakaway credit union representative body, CUDA, in the short term, to seriously weaken competition in the market for credit union representation services and threaten foreclosure of that market.

The difficulty was that the sanction imposed on any credit union disaffiliating from the Irish League of Credit Unions was disproportionate. A credit union which sought insurance other than from ECCU could be expelled under the rules of the league and lose all the value of contributions it had made to the SPS, he said.

It then had the additional burden of trying to set up an SPS, which was an extremely difficult thing to do.

Under the existing conditions, a newly formed credit union would hardly join a rival credit union representation services body since it would not have access to savings protection, he said.

The judge was handing down his 170-page detailed decision upholding proceedings taken against the league by the Competition Authority and heard over 11 days earlier this year.

When the judge said that, given his findings, he proposed to grant a permanent injunction restraining the Irish League of Credit Unions from disaffiliating credit unions which had been threatened with disaffiliation and consequential loss of access to the SPS fund because those unions had sought LP/LS cover other than through ECCU, Mr Michael Collins SC, for the league, asked that the judge make no orders at this point.

He said the league would continue its undertaking not to disaffiliate the unions involved.

Mr Collins added that there were "significant issues" arising from the decision in relation to the sort of reliefs to be granted by the court.

The judge said he would adjourn the case for three weeks.