The FCA announces its first competition law infringement decision

The FCA has decided that three asset management firms infringed competition law. This follows a three-year investigation into conduct in relation to UK primary market events. The FCA had set out its provisional findings (Statement of Objections) in November 2017.

The Case

Run by the FCA as one case, the investigation in fact related to three separate market events; two IPOs and one placing. The FCA’s concern was that asset management firms – who the FCA considered to be competitors to one another – may have disclosed or received information between themselves, relating to bidding intentions in the context of an IPO or placing. The FCA took the view that this could undermine the process by which prices are set and that the firms should, instead, have ‘competed’ for stock allocations.

The FCA’s decision

The FCA concluded that Newton, River & Mercantile and Hargreave Hale infringed competition law by sharing information as to their bidding intentions shortly before share prices were set. This, for example, included disclosures regarding views as to valuation of the floating / issuing company. The FCA considered that this was ‘strategic’ information, capable of reducing uncertainty as to the firms’ future behaviour on the market.

In light of the infringement finding, the FCA has imposed fines on Hargreave Hale and River & Mercantile £306,300 and £108,600 respectively. Newton received immunity from fine under the FCA’s leniency rules, having alerted the regulator to the conduct under investigation.

The FCA had, as part of the investigation, also reviewed conduct involving Newton and Artemis in relation to the 2014 Card Factory IPO. Following detailed investigation, the FCA has determined that the conduct did not breach competition law and Artemis was not party to any infringement.

Comment

This landmark decision marks the conclusion (subject to appeal) of the FCA’s first competition law case. The FCA has, since 2015, held concurrent competition law enforcement powers in relation to the financial services sector. The application of competition law in relation to exchanges of information between competitors is a grey area. This is particularly true in relation to asset management, where information flows can provide important market colour and contribute to the efficient functioning of the market. The case reflects a global trend of antitrust enforcement in relation to information sharing in financial markets. It also provides a helpful indication as to how the FCA will assess information exchange issues, and the circumstances in which it may decide that firms have crossed a line into ‘anti-competitive’ territory.

Having concluded this investigation, we expect the FCA to take on further cases where it is able to identify behaviour that might amount to an infringement; even where these are entirely one-off, isolated incidents.

See FCA release here

Simmons & Simmons, with a team led by Satyen Dhana, represented a party in this process. As of 20 February 2019 the non-confidential version of the FCA’s full decision has not been published.

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