FCA Concurrency – what it means and what to expect
Peter Scott, Partner; Caroline Thomas, Senior Associate; Katie Stephen, Consultant; Jamie Cooke,
Associate in the London Antitrust and Competition team
Context
From today, 1 April 2015, the Financial Conduct Authority (FCA) has “concurrent” competition powers,
meaning that in the financial services sector it will have the remit and the tools to enforce competition
law. The FCA has had a primary competition objective since its inception in 2013 which was designed
to ensure that the FCA used its regulatory powers having regard to the impact on competition, but
concurrent powers allow the FCA to take on a full competition enforcement role. These powers are
“concurrent” in that the FCA will become an additional competition regulator, working alongside the
UK’s primary competition regulator, the Competition and Markets Authority (CMA). Specifically, the
FCA will be able to investigate breaches of the Competition Act 1998 (CA98), as well as breaches of
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Articles 101 and 102 of the Treaty on the Functioning of the European Union. Further, the FCA will
be able to conduct market studies under the Enterprise Act 2002 (EA02), to consider if aspects of the
supply of financial services may prevent, restrict or distort competition. Where the FCA has
reasonable grounds to suspect that this is the case, it will now be able to make a market investigation
reference to the CMA, prompting a more in-depth “phase 2” market investigation.
These new powers bring the FCA into line with other sectoral regulators with concurrent powers
(including Ofgem, Ofcom, Ofwat and the Office of Rail Regulation). In some respects, given the
intense scrutiny of competition issues in the financial sector in recent years, it could be said that these
concurrent powers are overdue for the FCA. However, the FCA is on a very different footing from
other sectoral regulators. Concurrent regulators have, in the main, been created to ensure that
competition law is applied within the privatised industries (for example, energy, telecoms, water and
rail) and to encourage the application of competition law rather than over-reliance on sector-specific
regulation. There has been a concern that these competition powers may have been under-used, and
in practice function as an ancillary tool to sector-specific rules designed to deal with these markets.
By contrast, the FCA regulates over 70,000 businesses across the UK’s financial services sector. The
FCA has to been able to conduct its own market studies under the Financial Services and Markets
Act 2000 (FSMA), to consider competition issues, and it already has a range of tools to remedy
problems it uncovers. Indeed, the FCA intends to continue to use “FSMA market studies as one of
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[its] principal tools” to promote effective competition.
Recognising this background, and the dynamics of the financial services sector, the FCA has sought
to adopt the competition law processes of the CMA, but with certain modifications to reflect its existing
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powers. In its January 2015 consultation paper, the FCA proposes draft guidance for the use of its
CA98 and EA02 powers, and a draft amendment to the FCA Handbook. The more controversial
components relate to the “draft reporting requirement”, the operation of settlement, and the use of
market studies. Below we consider how these elements reflect a tension in the concurrency
framework, before offering our view of how we expect the FCA to use its concurrent powers in
practice.
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The FCA will not have criminal competition enforcement powers – the cartel offence will continue to be enforced by the CMA.
CP15/1 infra, Market studies and market investigation references: A guide to the FCA’s powers and procedures, para 2.4.
See also the recent FCA final findings on the cash savings market, a market study carried out under the FSMA regime.
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FCA Competition Concurrency Guidance and Handbook amendments CP15/1 (CP15/1). Our response to the FCA’s
consultation is available at the following link.
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Tensions
Concurrency, with its system of parallel competition jurisdictions, makes the UK competition regime
unusual by international standards. In most countries, sector regulators do not have competition
powers. One reason why most other countries shy away from concurrency is that there may be a
tension between whether a regulator should deploy competition powers or sector-specific rules to deal
with any given issue. As is evident from the consultation paper, the FCA is seeking to balance internal
consistency (coherency between its new competition powers and its other powers and processes),
and external consistency (coherency between the FCA’s use of competition law and the approach of
the CMA and other sectoral regulators).
This tension is perhaps most apparent in the draft reporting obligation. The draft amendment to the
FCA Handbook SUP 15 requires firms to report any possible breaches of competition law to the FCA.
The FCA has explained that the proposed amendment is simply a clarification that competition law
breaches are matters of which the FCA expects to be notified. Indeed, there is, in financial services, a
well-established general obligation to report matters of which the FCA would reasonably expect
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notice. However, the more detailed draft requirement risks cutting across the leniency regime as it
applies in all other arenas. The general rule is that companies can choose whether or not to selfreport competition infringements, and in so doing, earn immunity from penalties. This is predicated on
the basis that self-reporting is voluntary and rewarded. By contrast, the draft reporting obligation
imposes an obligation on the financial institution to report any suspected breach of competition law,
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with no materiality threshold.
The tension is also evident in the proposed guidance on settlement, which is based on existing CMA
guidance but with some apparently minor – but potentially highly significant – adjustments. The
guidance as it stands would provide that the FCA can settle CA98 investigations with the parties it is
investigating (as can the CMA), but would allow the FCA to require the parties to waive their right of
appeal. While this is common practice in FSMA investigations, it is not consistent with the approach of
the CMA, which allows those companies that decide to settle an investigation to later appeal, subject
to the risk that the appropriate level of penalty may be reconsidered and increased. While it may be
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unusual for a settling party to appeal an infringement decision, it has happened in the past. This
provides an important safeguard to settling parties that if an ultimate infringement decision is reached
on a different basis from the settlement agreement, the party has the opportunity to challenge that
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decision.
Finally, there is also a tension in relation to the FCA’s approach to EA02 market studies. As its
guidance stands, the FCA would conduct these in precisely the same manner as the CMA, and so this
appears to be externally consistent. However, unlike the CMA, the FCA can choose whether to use
an EA02 market study or a FSMA market study to support its functions and in pursuit of its competition
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objective. In practice, it is difficult to foresee an occasion where the FCA would not have the freedom
to choose between the two procedures, notwithstanding that there are procedural advantages
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depending on which approach is taken.
The future
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FCA Principle 11. We note in our response to the FCA’s consultation some further problems in the way the draft obligation is
structured. See in particular paragraphs 1.4-1.17.
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Please see Section 1 of our consultation response for further comments.
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See the Tobacco litigation; Asda, a settling party, successfully appealed the infringement decision by the Office of Fair
Trading, the predecessor of the CMA.
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Please see Section 2 of our consultation response for further comments.
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Section 1B(2) FSMA.
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Please see Section 3 of our consultation response for further comments.
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We will have a better understanding of how these tensions are to be resolved – or at least mitigated –
when the FCA publishes its final guidance in the light of the responses to the consultation. However,
in terms of how the FCA and CMA are likely to divide enforcement responsibilities in the financial
services sector in the future, the following points are worth noting:

The FCA is well-resourced and has a clear mandate to enforce competition law. The FCA has
been busy preparing for its new powers: recruiting around 50 competition experts, including
many former CMA employees and high profile practitioners. Compared to other sectoral
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regulators, the FCA has a relatively large budget. It has already shown its intent, in
launching cash savings and credit card market studies, and programming work in the
wholesale markets. This programme of work perhaps reflects the recent changes to the
concurrency regime which encourage regulators to use their competition powers, or face
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losing them.

The CMA has faced criticism that it has tended to defer to sector regulators. Certainly, in the
concurrency arrangements, sectoral regulators with industry expertise and knowledge of the
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parties and issues are well placed to take on cases , and the CMA’s current annual plan is
explicit in aiming to “encourage a higher level of competition law enforcement activity” by
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concurrent regulators.

However, the same changes to concurrency that encourage concurrent regulators to use their
powers also confirm the CMA’s position at the top of the competition hierarchy. While in
practice regulators are usually in agreement about which of them should take any given case,
the CMA now effectively has a veto right on those discussions, and has the ability to take over
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cases from concurrent regulators. Moreover, the CMA is still the body responsible for market
investigations where a reference has been made and still retains exclusive responsibility for
enforcing the cartel offence.
Over the coming months we expect to see a confident FCA with the means and the motivation to
actively use its concurrent competition law powers. However, recognising that the competition powers
are a new weapon in what is already a formidable armoury, it will be interesting to see what
enforcement option the FCA choses to deploy in any given matter. The range of options available to
the FCA from its regulatory toolkit means that it is unlikely that the FCA will often refer matters to the
CMA for further investigation and so lose control of the eventual outcome. Potentially the greatest risk
from an external consistency perspective is that the financial services sector will be, in effect, subject
to a discrete and potentially more onerous regulatory regime than other sectors of the economy. The
extent to which this materialises will be dependent in large part on the oversight and monitoring role of
the CMA. The irony of the FCA being the last sectoral regulator to gain concurrent competition law
powers is that, while its long established fellow-sectoral regulators have been criticised for failing to
use their competition powers, the early signs suggest that the greatest potential concern is overuse of
the FCA’s concurrent powers.
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For example, in 2013-14 Ofgem’s budget was £83.14 million. In the same year, the FCA raised £435.4 million in fees to form
its budget for the year.
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Enterprise and Regulatory Reform Act 2013, particularly sections 51-53 and Schedule 14.
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Paragraph 3.22 of CMA10 Regulated Industries: Guidance on concurrent application of competition law to regulated
industries.
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Paragraph 5.16 of the CMA Annual Plan 2015/16.
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Regulations 5 and 8 of the Competition Act 1998 (Concurrency) Regulations 2014
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