UK: Recent UK Competition Law Developments In Financial Services

Last Updated: 10 June 2010
Article by Niamh Grogan and Dr. Gordon Christian

Originally published on www.complinet.com on June 9th, 2010.

There has been growing concern on the part of competition authorities about the effects of certain practices in the financial services sector on consumers, businesses and markets in the UK. In the current economic climate, financial services companies have become more heavily scrutinised than ever before, making it imperative to ensure full compliance with competition rules. In addition to competition investigations into banking services for SMEs and overdraft charges for consumers, the recent fine imposed on the Royal Bank of Scotland for breaking competition rules and the announcement of several proposed investigations to be undertaken by the Office of Fair Trading in the near future, demonstrate the OFT's determination to tackle issues of concern in the financial services sector.

Powers of the UK competition authorities

The UK competition authorities have extensive powers available to uncover anti-competitive behaviour and agreements as well as a broad range of enforcement sanctions, both civil and criminal. The OFT can conduct dawn raids and send information requests to companies it suspects of breaching competition law. It can conduct market studies and refer whole industries to the Competition Commission for investigation. It can act either on its own initiative, as a result of complaints or leniency applications and in response to super complaints from consumer bodies. The authorities have a wide range of remedies at their disposal to enforce the rules including fines, directors' disqualification (a remedy which expected to be used more and more frequently), declaring agreements void, requiring behavioral change and even structural divestments. In the case of cartel activities, prison sentences, personal fines and appropriation of assets are also available. In this regard, former and existing BA executives are currently defending criminal cartel charges at Southwark Crown Court.

RBS fined for breaching competition rules

Last month, RBS was fined £28.6m after admitting a breach of competition law between October 2007 and February/March 2008. The fine is the first to be levied on a financial services company for anti-competitive behaviour. It follows a two-year investigation by the OFT after Barclays Bank volunteered information on its own role under the OFT's leniency policy. It was discovered that individuals in RBS' Professional Practices Coverage Team had unilaterally disclosed generic as well as specific confidential future pricing information to their counterparts at Barclays, which was taken into account by Barclays when determining its own pricing. Barclays was granted full immunity from fines.

The disclosures by RBS took place on the fringes of social, client and industry events and during telephone conversations, and according to RBS involved only two members of staff. The case shows how the provision of commercially sensitive material to a competitor, even if it occurs only in a few isolated cases (or indeed even once as in the T-Mobile case), can give rise to serious breaches of competition law resulting in fines. It also indicates that competition authorities are continuing to target the financial services sector and will use high-impact enforcement if necessary. Finally, the outcome for Barclays demonstrates that if a company's internal compliance monitoring detects any behaviour that falls below acceptable standards, there is much to be gained (in terms of seeking immunity from fines) from fast and decisive action to ensure that that company is the first to alert the OFT to the inappropriate conduct in question.

Investigation into investment banking fee structures and profits

The OFT's recent announcement of an investigation into investment banking fee practices and profits is a further indication that competition authorities are increasingly targeting the financial services sector. The fees that investment banks charge for their services are generally charged on a percentage of transaction basis rather than on the basis of time spent. These fees are reported to have risen significantly and consequently have come under a great deal of scrutiny in the current financial climate from both shareholders and investors. Philip Collins, chairman of the OFT, stated that the OFT's interests lie in "whether City markets are delivering what business consumers want on competitive terms which represent good value to consumers and, more broadly, to the wider economy". The inquiry is expected to be the first significant investigation into City practices for more than a decade and should include investment fees for merger and acquisition deals and for underwriting share and bond issues.

One note of caution, however, it is possible that the European Commission may assert its right over that of the OFT to investigate given the global nature of the investment banking market. This will have implications for timing and focus of any investigation.

Investigation into the cash ISA market

The OFT is currently also considering features of the £158bn cash ISA market following a super-complaint by Consumer Focus, a designated consumer body. A super-complaint is a complaint submitted by a designated consumer body to the OFT that feature(s), of a UK market are significantly harming the interests of consumers. The OFT must publish a response to such complaints within 90 days, stating how it proposes to deal with the matter. In the first super-complaint to be made this year, Consumer Focus has accused ISA providers of using headlinegrabbing rates to lure savers and then slashing rates after the first year, leaving consumers with uncompetitive returns over the long term. Consumer Focus also alleges that consumers face unfair obstacles due to poor and bureaucratic processes if they want to transfer their account to another provider. In addition, some ISA providers are also said to impose arbitrary rules prohibiting transfers into some of the most attractive accounts. Consumer Focus also claims that ISA providers are using consumer inertia and confusion to drop ISA rates faster than on other accounts. The OFT is now inviting interested parties to provide any evidence which may be useful to the OFT's assessment in determining whether to launch a full investigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions