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FCA Signals Intention to Make Use of New Competition Powers

An article published in the Financial Times on 3 August 2015 gives the clearest indication yet that the FCA intends to make early use of competition powers it took on in April 2015.

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The FCA will hold these powers concurrently with the Competition and Markets Authority (CMA) and, of note, the FCA’s Director of Competition (Deb Jones) previously spent 10 years at the office of Fair Trading which was previously responsible for enforcing anti-competitive behaviour.

The FCA has made it clear that these powers, which its predecessor the FSA did not have, are aimed at promoting effective competition in the interest of consumers. Competition will not sit as a discrete function but rather will be brought into the thinking process in relation to every decision, rule and action now taken by the FCA.

The powers will allow the FCA to take action:

• under the Competition Act 1998 to enforce against and fine for breaches of domestic and EU Competition law;
• under the Enterprise Act 2002 to make an investigation reference to the CMA. This could result in criminal enforcement action being taken by the CMA.

The FCA is keen to make use of these powers and, in contemplation of having this additional enforcement role, has already:

• completed a market study into general insurance add on products;
• issued an interim report on a cash savings market study;
• launched studies into retirement income and credit cards;
• published a call for inputs on the wholesale sector.

The FCA believes the fact that it did not have powers to deal with anti-competitive behaviour, which had been available to a number of other regulators for some time, was an anomaly and that now having these powers will strengthen its ability to ensure competitive markets for financial services that deliver good consumer outcomes.

Significantly, the FCA will be able to exercise its powers in relation to the provision of financial services generally, and so it will be able to look at firms beyond the regulatory perimeter who are otherwise not regulated or authorised by the FCA.

Anti-competitive behaviour can include:
• agreements between competitors to fixed prices;
• bid rigging;
• market sharing;
• arrangements intended to restrict competition.

In particular, the FCA wanted to ensure that companies who enjoy a dominant position in the market (which is not prohibited) do not abuse that position (which is prohibited).

Of note, the FCA (and other regulators) has primacy obligations which require them to consider whether it would be more appropriate to use competition powers rather than their underlying regulatory powers. If so, they must not exercise their regulatory powers and, for example, if a firm was found to be engaging in an anti-competitive way, the FCA must consider if it would be appropriate to investigate under the Competition Act and issue interim and final directions ordering the behaviour to cease. They could decide it is more appropriate to use its regulatory functions which might enable it to vary or cancel a firm’s permission.

Concurrently, a UK Competition Network (UKCN) has been set up which will involve regular discussions between the regulators including the FCA and CMA. This will facilitate the exchange of information and intelligence between regulators.

The FCA also anticipates that it will obtain assistance from the financial services industry by way of reports. Tellingly it has noted that under Principal 11, the requirement to deal openly and in a cooperative way with the FCA and disclose anything relating to a firm which the FCA would reasonably expect notice of, the FCA expects to be notified of any anti-competitive behaviour.
In recent months, in particular with regard to the FX investigation, the FCA has shown that it is more than willing to impose significant financial penalties on the industry. If investigations using these powers reveal breaches of competition law we can expect that equally large penalties may result.

If your organisation is being investigated by the FCA for any reason you will need expert legal advice. The Business Solicitors at Slater and Gordon can help so call us on freephone 0808 175 7722 or contact us online and we will call you.

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