FCA warns businesses on competition law compliance

FCA warns businesses on competition law compliance


Author: Simon Barnes

Applies to: UK wide

The Financial Conduct Authority (FCA) has taken steps to require various businesses to implement competition law compliance programmes, in light of concerns that came to light in a broader review that it was conducting into the pensions sector.

The FCA's intervention serves as a timely reminder to businesses in the financial services sector that the FCA has the power to enforce competition law, that it is actively on the look-out for possible issues and that it will take steps to ensure compliance where necessary.

The FCA's announcement gives a clear indication that it expects financial services businesses to have competition law compliance programmes in place, so that they (and their staff) are able to assess the lawfulness of their commercial arrangements and to avoid conduct that infringes competition law.

The current announcement comes as a follow-up to the market study into Retirement Income that the FCA reported on last year. On 11 March 2016, the FCA issued a press release saying that it had contacted various firms regarding competition law compliance. Its market study had uncovered various issues that gave the FCA course for possible concern. In particular, the FCA's review of the distribution arrangements and strategies of pension providers had identified certain arrangements that it wanted to understand better.

It is unclear precisely what the FCA's concerns are, although they appear to relate to meetings in which pension providers discussed the performance of distribution arrangements, without any competition compliance protocol to prevent the disclosure of commercially sensitive information. It is likely that the FCA's concern was that such arrangements and meetings could lead to a flow of commercially sensitive information between competitors, which could be unlawful as a matter of competition law.

The FCA has written to the companies involved to 'warn' them of their obligations under competition law. It has asked them to confirm what action they plan to take, and by when, to address the concerns it has identified. It has specifically asked them to implement competition compliance protocols and to train staff on competition law compliance.

It is implicit from the FCA's announcement that it is not currently planning to use its formal competition enforcement powers against the pensions companies involved. However, it reserves the right to do so in the future, should its concerns not be addressed or should it identify further issues that merit investigation.

This development should be noted by all businesses operating the financial services sector for a number of reasons.

First, the FCA's intervention is a timely reminder that, since April 2014, it has had the power (concurrently with the Competition and Markets Authority (CMA) to enforce competition law in relation to financial services. This includes the power to impose fines of up to 10% of group turnover.

Second, it is notable that the FCA's concerns in this case came out of a market study, of which the FCA conducts many. Businesses involved in market studies should beware 'skeletons in the closet' that can prompt a different (and potentially more serious) sort of investigation.

Third, the FCA's announcement confirms its expectation that all businesses should have competition law compliance arrangements in place. Indeed, in many respects, having compliance arrangements in place is key to businesses protecting themselves against potential enforcement action by the FCA (or, for that matter, the CMA). Precisely what a business needs to do in this regard will depend from case to case - e-learning and compliance manuals are popular options, but there is no one-size-fits-all and what steps it is appropriate to take will depend on the precise circumstances of the business in question.


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.