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Financial services sector remains under the competition law spotlight

Home Insights Financial services sector remains under the competition law spotlight

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Contributed by: Sarah Keene, Troy Pilkington and Bradley Aburn

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Published on: February 22, 2019

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Competition Alert – February 2019

The UK Financial Conduct Authority (FCA) has issued its first ever competition law decision fining asset management firms Hargreave Hale Ltd (HHL) £306,300 and River and Mercantile Asset Management LLP (RMAM) £108,600 for cartel conduct.1  The FCA found that HHL, RMAM and Newton Investment Management Limited (NIML) engaged in cartel conduct by sharing the price they were willing to pay for shares, and sometimes the volume of shares they wished to acquire, in the context of an initial public offering and placing process. 

This case serves as a useful reminder that:

  • Competition regulators are monitoring conduct in the financial services sector closely: This case follows the ACCC filing criminal charges for cartel conduct against three banks for entering into an agreement on one or more of price, timing and volume of a share sell down in the context of an ANZ institutional share placement in August 2015, see here;
  • Competition regulators and financial markets regulators are in close communication with each other: In the UK, the FCA has concurrent powers to enforce competition law in the financial services sector alongside the Competition and Markets Authority, whose competition jurisdiction extends to all sectors of the economy. While New Zealand's Financial Markets Authority  (FMA) does not enforce provisions relating to competition law matters, we would expect that such cooperation with the Commerce Commission (NZCC) would also occur in New Zealand where any conduct in relation to financial products/services had both elements of cartel behaviour and market manipulation (the NZCC and FMA already have a formal MOU allocating responsibilities for misleading/deceptive conduct in relation to financial products/services);
  • The mere receipt of competitively sensitive information from a competitor is sufficient to be liable: We understand that HHL is intending to appeal the FCA's decision on the basis that it "was simply a recipient of information that was provided on an unsolicited basis by another fund manager and did not alter its own bidding behaviour as a result".2  It will be interesting to see what the appeal court makes of this argument. As a matter of practice, if you do receive competitively sensitive information from a competitor there is a presumption that unless you object and distance yourself immediately, an adverse inference will be drawn that you are likely to have used the information when forming your own competitive strategy; and
  • Competition regulators continue to rely on leniency applications: In this case, NIML received full immunity under the FCA's leniency programme for fully cooperating with the FCA's investigation.

If you want to know more about how to mitigate competition law risks in the financial services sector, please contact Sarah Keene or Troy Pilkington.

FOOTNOTES
  1. See https://www.fca.org.uk/news/press-releases/fca-issues-its-first-decision-under-competition-law.
  2. See https://www.ipe.com/news/asset-managers/investment-manager-disputes-regulatory-fine-over-ipo-price-fixing/10029653.article.
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