Out-Law Guide 5 min. read
28 Apr 2016, 10:15 am
This guide was last updated in July 2018.
The changes give the FCA and PSR similar powers under the 1998 Competition Act (CA98) and 2002 Enterprise Act (EA02) to enforce against infringements of competition law, additional powers to conduct market studies and powers to refer financial markets to the CMA for in-depth investigation.
On 22 December 2015 the CMA and FCA, and the CMA and PSR, published new Memoranda of Understanding (MoUs), most recently updated in April 2018, which shed more light on the authorities' joint working arrangements in markets in which they now both have competition law powers. Although these documents are not legally binding, they set out useful information covering issues including:
Importantly, the MoUs also set out the circumstances in which the authorities can discuss leniency information with each other in cartel investigations.
The CMA and FCA have also established an MoU for dealing with consumer protection issues. However, this guide focusses solely on the competition law aspects of these arrangements.
The CMA and the FCA/PSR will meet regularly at all levels to discuss matters of mutual interest, both through the UK Competition Network (UKCN) and bilaterally. The MoUs confirm that each authority will appoint a relationship manager to take responsibility for this relationship.
The authorities will always consult each other in relation to financial services or payment systems matters:
Where permitted by law, the FCA and PSR also intend to inform the CMA of super-complaints that they receive. When the CMA exercises its power to advise the FCA /PSR that regulating provisions or practices of the FCA or Prudential Regulation Authority (PRA), or of the PSR, may distort competition, the CMA has also committed to consult with the FCA/PSR before officially publishing such advice.
In cases where the authorities have concurrent powers, they have agreed to engage openly and share relevant information not only in specific cases but also, as appropriate, generally to promote competition to the extent permitted by law. This may include attendance at each others' internal meetings in order to discuss cases. Although the supporting authority will not generally attend the investigating authority's decision-making meetings or meetings with external parties, such as those under investigation or those complaining of anti-competitive behaviour, requests to attend meetings should be considered by the investigating authority in the spirit of cooperation underpinning the new concurrency regime.
Cooperation in antitrust cases
The MoUs also set out how cooperation will be carried out in relation to enforcement of the Chapter I and II prohibitions under CA98 and articles 101 and 102 of the Treaty on the Functioning of the EU, reinforcing and supplementing the 2014 Competition Act 1998 (Concurrency) Regulations (Concurrency Regulations).
The framework for deciding which authority will be best placed to act in any given case is set out in the Concurrency Regulations, along with further guidance issued by the CMA. The factors to consider in this decision include knowledge of the relevant sector, and experience dealing with similar issues.
Sharing information and pooling resources
In addition to the information that the authorities are required to share with each other under the Concurrency Regulations, the MoUs make it clear that they may also share other information believed to be relevant at the appropriate time, and the investigating authority will also keep the other authority up to date on the progress of a 'concurrent' case. All such disclosures of information are governed by law - for example, Part 9 EA02 - and, in most cases, there is no legal requirement to inform the parties concerned.
Information from leniency applications in cartel cases is particularly sensitive. This information could, for example, be relevant to the FCA; not just in relation to competition law enforcement but also potential breaches of FSMA.
When leniency information is to be shared between the authorities, the transmitting authority must therefore inform the applicant's legal adviser first. Sharing also remains subject to significant use restrictions. In particular, the receiving authority will not be permitted to use it for any other purpose, including for investigations under FSMA. In addition, in cases where the provision of leniency information has resulted in the applicant or its employees receiving protection from sanctions, the receiving authority must give the applicant no lesser protection - although that protection does not go beyond CA98 to give protection from, for example, sanctions under FSMA.
However, these use restrictions are subject to an important exemption. As also noted in the FCA's competition guidance, the FCA can use this information if it was obtained from other sources, including disclosures to the FCA under Principle 11 of the FCA's Principles for Business (PRIN11). In other words, although leniency information cannot be used in an FSMA investigation, relevant information from PRIN11 disclosures can be used for such investigations alongside, or after, the CA98 investigation. Similarly, information from PRIN11 disclosures by cartel participants could be used against participants that failed to make a PRIN11 disclosure. This is reflected in the PSR's competition guidance as well. It is worth noting in this context that the FCA will have due regard for the need for appropriate handling of such contacts to minimise prejudice to the conduct of any ongoing or subsequent investigation.
It has also been confirmed that where a leniency application to the CMA is made by a UK financial services firm or a participant in a PSR-regulated payment system, the CMA will remind the applicant that it may have obligations to notify the FCA or the PSR. Notification obligations may arise under PRIN11, Principle 4 of the FCA's Statements of Principle for Approved Persons or the PSR's General Direction 1.
The authorities will also pool resources efficiently as far as practicable - for example, by supporting each other through secondments of staff.
In April 2017 the FCA carried out its first dawn raids on a competition law enforcement case, launching against aviation (re)insurance brokers into potential infringements of competition law. It is understood this related to alleged sharing of competitively sensitive information within the aviation (re)insurance sector, including between brokers and the FCA was also examining whether information, which should have remained confidential to brokers, was passed between brokers and underwriters.
As of July 2018, the FCA had initiated two competition law enforcement cases, one of which was subsequently transferred to the European Commission.
In February 2018 the PSR opened its first competition law enforcement case, following dawn raids carried out across the UK in close cooperation with the CMA.