13.10.2 Has the Commission consistently taken into account these relevant characteristics?

The analysis of the Commission decisions reveals that of all the bank State aid cases, only in 13 cases a price leadership ban was imposed.1 In most of the other bank State aid cases, the beneficiary bank was subject to other pricing restrictions. The table in Annex XI gives an overview of the cases that are characterised by a price leadership ban or other pricing restrictions.

What is most striking, is that there are only 16 decisions in which the Commission assessed the need for a price leadership ban: in 13 cases, a price leadership ban was imposed; while in 3 cases, a price leadership ban was contemplated.2 Why only in these 16 cases?

As to the question why a price leadership ban was needed, most of the 16 deci-sions contain some very general considerations. These considerations usually entail that the price leadership ban prevents the bank from growing at the expense of its rivals3, or that it ensures that the aid is not used to finance a pricing strategy which cannot be met by other market players competing on their own merits4 and that it ensures that the bank can only attract new customers on the strength of the quality of the products and services it offers.5 In some decisions, a more specific reason for the price leadership ban can be found. These will be discussed below.

The decision on AEGON contained some interesting considerations with respect to the price leadership ban. The Commission noted that AEGON had been one of the price leaders on the Dutch mortgage and savings market in the period after the capital injection by the State. The Commission also observed that AEGON increased its market share in mortgages throughout 2009. The Commission considers that past pricing practice of AEGON amounted to aggressive commercial behaviour. Against this background, the Commission considered that a price leadership ban seemed to be an appropriate measure to avoid in the future distortions of competition on the Dutch mortgage and savings markets.6

The argument concerning the (aggressive) market behaviour of the beneficiary bank was also used in the Opening Decision in the case of Proton Bank. Since Proton Bank was a very small bank, the distortions of competition could be considered as limited. However, the market behaviour of Proton Bank was characterised by offering interest rates on deposits which were much higher than the interest rates offered by most competitors. The Commission therefore took the view that a price leadership ban had to be contemplated.7

Another decision that contained some interesting considerations was the decision on the Austrian OVAG. The price leadership ban of OVAG was due to the specific circumstances of that case. As touched upon in section 11.6.3.2, OVAG was heavily reliant on wholesale funding. The acquisition of Livebank by OVAG gave OVAG access to EUR 470 million of retail funding. The Commission noted positively that the acquisition reduced OVAG’s past reliance on wholesale funding.8 However, in order to prevent that State aid would be used to fund anti-competitive behaviour, a price leadership ban was deemed necessary. In footnote 64 of the decision, the Commission added that Livebank was the only part of OVAG’s business that was taking deposits. Hence, the price leadership ban was only necessary with respect to that market segment and not to other markets.

The price leadership ban in the case of the Danish bank FIH had a very specific background. The Commission noted that “FIH intended to aggressively enter the internet retail deposit market by pursuing a ‘price leadership’ role. That entry into the internet retail deposit market was a core component of FIH’s strategy to address its funding problems”.9 In the Opening Decision, the Commission expressed its doubts. Denmark therefore provided a commitment that FIH would adhere to a price leadership ban for deposits if the market share of FIH exceeded 5%. The Commission welcomed this commitment, because it allowed FIH to further improve its funding position by raising deposits on the market while at the same time establishing a threshold preventing excessive practices.10

An interesting aspect of the price leadership ban of the Belgian bank KBC was that it did not apply to Belgium. As set out in section 13.5, KBC had committed to divest Centea and Fidea. The Commission concluded that these were structural remedies which would lead to improved competition on the Belgian market.11 The Commission considered that a price leadership ban may not be necessary in markets where significant pro-competitive structural commitments have been provided.12 Thus, to some extent, structural measures and behavioural restrictions are ‘communicating vessels’. In this context, it should be stressed that the structural remedies in the case of KBC were pro- competitive. Centea and Fidea were to be divested with the aim of creating challenger banks.

Sometimes, an outright price leadership ban can give rise to implementation problems. This was the case with Ethias, an insurance company. The Commission noted that insurance products are standardised only to a limited extent and that a price leadership ban would be too difficult to implement.13 A price leadership ban was therefore not imposed. However, Ethias was subject to a different type of pricing restriction.14

Can the absence of the price leadership ban be justified by the presence of other pricing restrictions? This is only the case if the price leadership ban and the other pricing restrictions are alternatives (or substitutes) to each other. Whether this is the case depends on the way how the price leadership ban and the other pricing restrictions are elaborated. To that end, the modalities of the price leadership ban are discussed in subsection 13.10.3, while the other pricing restrictions are set out in subsection 13.10.4.