On 1 April 2015, the FCA acquires competition law enforcement powers in the financial services sector.
Although it already has the objective of promoting competition, the FCA's remit is set to be significantly extended. Concurrently with the Competition and Markets Authority (CMA), it will be able to:
- investigate suspected competition law breaches
- take enforcement action (including imposing fines); and
- carry out market studies and refer markets to the CMA for a full investigation
The FCA has prepared draft guidance, setting out its new powers and how it proposes to use them. It is currently consulting on these guidelines - interested parties have until 13 March 2015 to comment.
1. Draft guidance on the FCA's powers for enforcement
The FCA's new powers will sit alongside its existing regulatory powers, although the FCA will in certain circumstances be required to give primacy to its competition powers. The draft guidance suggests how the two sets of powers might interact and how the FCA will decide on its choice of powers.
The guidance also sets out the FCA's proposed case handling procedure. Unsurprisingly, this broadly mirrors the CMA's approach. So the FCA will, among other things, be able to:
- conduct 'dawn raids' at a firm's premises
- take interim measures to prevent 'significant damage or to protect the public interest'
- accept 'commitments' from firms to address the FCA's competition concerns
- issue a Statement of Objections in cases where the FCA finds evidence of anti-competitive conduct
- impose fines of up to 10% of group turnover
- enter into settlement negotiations
The guidance also sets out the FCA's proposal to piggy-back on the CMA's leniency programme. Applications for leniency generally should be made to the CMA. Any applications to the FCA will be dealt with in a manner consistent with the CMA's guidance.
2. Draft guidance on market studies and market investigation references
The FCA can already conduct regulatory market studies but will now acquire similar powers under the competition regime. The draft guidance sets out how the FCA will decide which powers to use. The FCA will be able make a market investigation reference to the CMA where it decides that a more in-depth review is required.
3. Changes to the FCA Handbook
The FCA currently requires regulated firms, under Principle 11, to disclose to it 'anything relating to the firm of which the FCA would reasonably expect notice'. It proposes to extend this "self-dobbing" rule to include an infringement of 'any applicable competition law', requiring firms to notify the FCA in writing immediately that they become aware, or have information to reasonably suggest, that an infringement has occurred or may occur.
Given the serious consequences of infringing competition law -- and the potential complexities in establishing whether there is an infringement in the first place -- this provision is potentially onerous for FCA regulated firms. Further FCA guidance as to how precisely firms can comply with this provision would be welcome.
Other regulators such as Ofcom, Ofgem and Ofwat have had concurrent powers for some time so, through no fault of its own, the FCA is relatively late to the party in this regard. The level of enforcement activity from the other regulators has been mixed but the FCA may be different. Certainly the message emanating from the FCA is that it is keen to embrace its new powers. It has been gearing up for the changes for some time, recruiting competition specialists and working hard on honing its internal procedures.
This draft guidance is the most recent evidence of the FCA's intent. It suggests that the FCA is keen to borrow from the well-established approach of the CMA, rather than to develop its own new procedures. Whilst it remains to be seen quite how active the FCA will be (particularly outside the sphere of market studies) its overall approach is to be welcomed.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.