Lloyds TSB Complaints

Lloyds has substantially increased in size and diversity of activities in the last six years as a result of other mergers, including that of TSB. Abbey National was the first building society to convert from mutual to public company limited company (plc) status. It has since developed into a full service retail and wholesale bank with 15 million consumers in 2000, and is now the fifth largest banking group merged in the UK in terms of overall assets.

The proposed horizontal merger between Lloyds and Abbey National qualified for investigation by the CC as it satisfied the Assets Test. Abbey National had total gross assets at 31 December 2000 of £204 billion, which exceeds the £70 million threshold set for the assets test. The share of supply test was excluded from consideration.For an example of this, go to the Lloyds TSB Complaints webpage. The main areas to be investigated were; (i) markets for financial products sold to personal customers, in particular personal current accounts (PCA’s) and (ii) markets for financial products sold to small and middle sized enterprises (SME’s). The possible effects this proposed merger would have on these markets, as well as the overall results of the merger on the public shall be taken into account.

The merger’s largest effects are likely to be seen in the PCA market. This market is of particular importance as PCA’s are also 'gateways’ through which suppliers can sell other financial products. The market share of Lloyds TSB, already the market leader, would rise from 22 to 27% if the merger went ahead, widening the gap between its share and its nearest competitors. For more on this visit the Lloyds TSB Complaints webpage.This marker power could be {exploited by Lloyds at the expense of the public in terms of higher prices.

The theoretical reasoning behind this is that a more imperfect market could lead to a dead-weight loss to society, in which the consumer surplus is decreased and the price increased. The is because Lloyds will be the market leader and will produce where its marginal cost is equal to its marginal revenue, which will be at a lower output and higher price than in perfectly competitive market. As a result consumer surplus is converted into producer surplus, acting against the public interest.

The significant market power that Lloyds would gain from the merger in the PCA market would lead to a lack of Pareto optimality, that is, the market would fail to equate marginal social benefit (MSB) and marginal social cost (MSC). The graph below shows the effect of a firm behaving monopolistically on society:

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