League of Credit Unions wins Supreme Court appeal

The Irish League of Credit Unions has won its Supreme Court appeal against claims by the Competition Authority that some of its activities are anti-competitive.

In a decision with far-reaching implications for credit unions North and South, the five-judge Supreme Court yesterday overturned a High Court finding that the league had abused an alleged dominant position in what it said were distinct "markets" for credit union representation and savings protection.

The authority had claimed the league abused an alleged dominant position in the "market" for savings protection by tying access to that service to membership.

However, the Supreme Court ruled that, because the savings protection service was not a "distinct product" for which there was a distinct product "market", the authority's claim must fail.

Given that finding, the court said it was unnecessary to address the issue of whether the league had a dominant position or had abused any alleged dominant position. There could also be no question of an abusive refusal to supply savings protection.

Mr Justice Nial Fennelly, giving the unanimous judgment, said the authority had failed to provide a convincing analysis of the league's activities as being anti-competitive.

The case arose after the authority brought proceedings against the Irish League of Credit Unions when the league proposed in 2003 to disaffiliate or expel credit unions that sought loan protection and life savings insurance from outlets other than through the ECCU Life Assurance Company Ltd, a company controlled by the league.

Credit unions that did not take out this insurance cover with ECCU 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 league'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. While there was no statutory obligation on credit unions formed before August 1st, 2001, to participate in a SPS, it was extremely important that they did so.

In the High Court in October 2004, Mr Justice Nicholas Kearns held that the league 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 the Supreme Court judgment, Mr Justice Fennelly said an essential precondition to the case for the Competition Authority was a finding that credit union representation services and SPS be considered as distinct products in different relevant product markets. If they were not, issues relating to whether the league enjoyed, or abused, a dominant position in the market for either of those services, especially SPS, did not arise.

The judge said he had reached the clear conclusion that SPS was not a distinct product and that the authority had also failed to show SPS was in a separate product market. It had been shown that not only did no such service exist on the insurance market, no insurer was willing to provide it.

He said the essential case of the authority was that SPS was the alleged "tying" product and the league was alleged to be dominant in the market for its supply.

SPS must be an independent product before the tying theory could be applied but the evidence showed there was no market for SPS.