Post office challenged over sales of financial services

Date: 14/05/1998

By Chris Johnstone

FRENCH banks and insurance companies are asking the European Commission to block post office sales of rival financial services, claiming that they break EU competition rules.

The combined attack on La Poste's sales of life insurance and savings products has been widened to a complaint about unfair competition and abuse of a dominant position, with consequences which could spill over French borders.

Banking experts point out that post offices in other EU countries, such as Belgium and Spain, have similar arrangements to those in France and warn that they could also come under pressure if the case succeeds.

The Belgian post office, for example, has allied itself with Generale Bank and favoured insurance companies in a bid to branch out into financial services.

In most north European countries, such as the Netherlands and Denmark, the post office's financial services have been privatised, while in Germany the post office and the private sector cohabit satisfactorily.

The new complaint centres on allegations of cross-subsidies between the French post office's monopoly letter delivery and its new financial operations. "There is no clear distinction between its public service and commercial services," said a spokeswoman for the French banking association.

French banks claim that the post office is making a serious attempt to expand its loan business through its 17,000 outlets by means of aggressive publicity. They add that it is also in the running to take over Crédit Foncier, the troubled state-owned bank.

La Poste has already won at least one-third of the life insurance market and is now considering insuring goods, claims the French insurance association. Ironically, the post office's financial products are sold in partnership with GAN, a major player on the French market and member of the association.

The French insurance association, together with brokers, has already launched one abortive attack on La Poste. In 1990, it complained to the Commission about the government offering the post office special tax treatment, which was not available to other financial services companies.

The Commission replied that it had no grounds to act. This was confirmed by the European Court of Justice which found that the issue was not covered by the EU's founding treaty. A further appeal resulted in a ruling in March that the complaint was "not receivable".

The French banking association, which had been waiting for the outcome of this initial case, then approached its insurance counterpart to relaunch a fresh challenge.

The Commission's competition services are already examining other claims of post office cross-subsidies in Europe, with private express companies leading the attack.