Talking to Competitors: FCA Enforcement Opens a New Chapter

Published On April 20, 2020

In 2019, the UK Financial Conduct Authority issued its first formal decision under its competition enforcement powers. Radar spoke to competition law expert, Satyen Dhana, who was involved in the case for his take on what it means for the future of competition regulation in the UK for financial institutions.


Last year, the UK’s Financial Conduct Authority (FCA) issued a decision that found that three asset management firms had breached competition law. This was the FCA’s first formal decision under its competition enforcement powers.

The firms involved were: Hargreave Hale Ltd; Newton Investment Management Ltd; and River and Mercantile Asset Management LLP (RAMAM). The FCA fined Hargreave Hale and RAMAM as a result of this action. The FCA did not impose a fine on Newton because it was given immunity under the competition leniency program.

The infringements related to the sharing of strategic information between these competing asset management firms during an IPO and a placing in and around 2015, on each occasion shortly before the share prices were set.

The FCA found that the firms disclosed and/or accepted otherwise confidential bidding intentions, in the form of the price they were willing to pay and sometimes the volume they wished to acquire. As a result, this facilitated the understanding between them that allowed one firm to know another’s plans during the IPO or placing process.

This “information exchange” was found to be illegal under UK/EU competition laws.

Separately, on 5 February 2019, the FCA announced that it had fined an individual under the Financial Services and Markets Act 2000 for conduct related to some of the same facts investigated under the Competition Act by the FCA.

Why is this case important?

The FCA has had powers to prosecute competition laws since 2015 and this case represents its first completed enforcement. It is important for a number of reasons:

  1. It shows the FCA’s commitment to this type of enforcement. Whilst this first case took a number of years, the FCA took its time to get this process and case “right” to pave the way for more in the future. It sees these types of prosecutions as important and necessary to enforce competition law.
  2. The subject matter of the enforcement – information exchange amongst competitors – has application across the financial services product range. The case should not be read as an isolated IPO/placing case. Given the nature of the law surrounding information exchange, this case has implications for competitors (and not just asset managers) in financial services and across all products, from equities to fixed income.
  3. The industry is taking competition law seriously. This case has made a large number of financial institutions revisit competition law policy and compliance. This is particularly important in the context of trends in the market currently, whether trading activity, ESG, activism, IBOR transition, which all to a certain extent, lead to competing firms talking to each other. Competition law has come into sharp focus. In addition, competition law compliance has regulatory implications – either under the obligation to self-report serious competition law breaches in Principle 11 or as a conduct risk in the context of SMCR.

What should firms be doing?

No one size fits all. But ignoring competition law compliance does not appear prudent. If firms weren’t on notice before in respect of the FCA’s expectations around this area, they have no excuse now. Further, while similar to market abuse in some sense, competition is different and arguably presents a lower bar; relying on existing market abuse training as a means of trying to cover the same ground risks missing key compliance issues. Compliance teams should consider:

  1. Updating or creating competition law compliance policies.
  2. Training staff on competition law compliance: either as a stand-alone subject or wrapped in with updated market abuse training.
  3. Consider proactively auditing any part of the business that would be particularly vulnerable to competition law violations.
  4. Ensuring senior buy-in to competition law compliance and training and consider competition compliance as a standing item (with others) in the context of general compliance reporting.
  5. Have a protocol set up internally to deal with competition law issues: internal systems of control that can monitor and deal with issues as they arise.

Reflections on this case

Our firm acted on this case and we often get asked to reflect on what we think it means for competition law enforcement. Some thoughts (my own personal views):

  1. The FCA’s approach to this case was careful and considered. It knew that its first case would dictate how seriously stakeholders in the market take competition law compliance. It was no different to other regulators and sought to send a message to the industry, which it did with success.
  2. This is not a one-off, rather the case sets a precedent for more in the coming months and years.
  3. The focus on information exchange is not surprising. From a strict legal point of view, these are easier cases to run for the regulators – the case law puts a significant burden on the parties to prove important aspects of a case (shifting the burden of proof from the regulator to the parties).
  4. The FCA is in a relatively unique position in respect of competition law enforcement: the Principle 11 obligation to self-report competition law violations means that (unlike other regulators) it is likely to have a pipeline of potential cases, where parties have come to them to report issues. This trend isn’t going to go away unless the regulation changes.

Satyen heads the competition, antitrust and trade team at Simmons & Simmons in London and specialises in EU, competition and regulatory law and has extensive experience of their application within a wide range of industries, particularly in the financial services sector. He has advised on both UK (FCA/CMA) and European Commission competition investigations and sector enquiries/market investigations, as well as Phase 1 and Phase 2 UK and EU merger investigations.