Summary: The FCA's Competition Report 2013-16 details the key aspects of the FCA’s actions to deliver its competition objective: to promote competition “in the interests of consumers”, including through enforcing competition law breaches and undertaking market studies where it suspects that there may be competition issues.

FCA prioritises competition enforcement

On 12 July 2016, the Financial Conduct Authority (FCA) published its Competition Report 2013-16 (The Report). The Report was published alongside the FCA’s annual report.

The FCA has been active in pursuing its competition law brief. It works closely with the main UK competition regulator, the Competition and Markets Authority (CMA), as well as the European Commission. The FCA is committed to continuing to carry out competition enforcement and market review cases as part of its core regulatory brief.

Competition law – what has been achieved to date?

Market studies

The FCA states that its “long-term goal is to help solve the long-standing problems of competition and consumer choice in financial services.” Since 2013, the FCA has been active in using its market review powers, and notes that market studies are “the most visible aspect of the work we carry out to promote competition.”

During this time the FCA has instigated 10 new market studies or calls for information. The FCA has in all cases relied on its information gathering powers under the Financial Services and Markets Act 2000 (FSMA), rather than exercising competition powers under the Enterprise Act 2002 (EA2002).

In practice, the FCA has benefitted from the ‘best of both worlds’: the ability to pursue competition-focused investigation using extensive data-gathering powers under FSMA, without being bound by tight timetables under EA2002. The FCA states that it could switch investigations between FSMA and EA2002 if it is considered appropriate.

The key market studies to date include:

  1. Retirement Income Market Study (RIMS) – the final report was published in March 2015. The FCA highlighted strong incumbency advantages for existing pension advisers when it came to retirees choosing annuity providers, as well as undue complexity in communications and information. The RIMS report did not reflect the major reforms introduced by the 2015 Budget to allow customers to access their pensions through a range of options. The FCA will undertake a Retirement Income Review in 2016 to assess the competitive impact of these reforms.
  2. Asset Management Market Study – the FCA is assessing how asset managers compete to deliver value, who controls costs and quality along the value chain, and how investment consultants affect competition for institutional investment. The FCA will issue its Interim Report in Q3 2016 with the final report expected in 2017.
  3. Investment and Corporate banking Market Study – the FCA is focusing on cross-subsidies between corporate and investment banking, syndication and reciprocity. The interim findings were published in April 2016 and proposed a number of measures to improve competition (for instance the end of contractual clauses restricting a client’s choice of provider in future transactions). The FCA will publish its final report in Q3 2016, alongside recommendations to remedy competition problems that have been identified.

The FCA has also reviewed, amongst other markets, credit cards, mortgages and ‘Big Data’ in the general insurance market (see ‘What is coming next?’ below for the next steps in these reviews). Finally, the FCA has also been coordinating with the CMA in relation to its investigation into retail banking and published its response to the CMA’s provisional decision on remedies in June 2016.

In all cases, key themes of these studies include customer switching, information asymmetry and relationships between intermediaries and providers.

Competition Act investigations

The FCA opened its first investigation under the Competition Act 1998 in the first quarter of 2016. As previously noted, the details of the behaviour and the firms under investigation, and what prompted the FCA’s investigation, remain confidential. The FCA is also liaising with the EU Commission’s Directorate General for Competition on a number of cases. Again, the details of the investigations in question remain undisclosed.

The FCA’s initial forays into competition enforcement mark an important milestone. The FCA has noted that “the number of cases being considered is not in itself the best measure of activity in, or impact in that sector.” However, the FCA remains committed to active competition enforcement where appropriate.  

In addition, the FCA has been innovative in its use of ‘soft’ enforcement tools. As part of the RIMS, the FCA issued several 'on notice' letters to firms warning them that they may have breached competition law. ‘On notice’ letters are confidential and are similar to ‘warning letters’ used by the CMA. Following these letters, the “firms have since undertaken a number of initiatives to strengthen their competition compliance.”

The FCA has also sent three advisory letters. Advisory letters are educational in nature and designed to enhance understanding of, and improve compliance with, competition law.


Principle 11 requires mandatory notification by regulated firms of “anything relating to the firm of which [the FCA] would reasonably expect notice.” In July 2015, the FCA issued guidance on its competition powers. This included a modification to the FCA Handbook to specify that a regulated firm must notify the FCA where it has been, or may have been, involved in a “significant” breach of competition law.

This notification obligation is separate from the question of competition leniency. The FCA considers that, notwithstanding a firm’s mandatory obligation to notify the FCA of any suspected “significant” breach of competition law, the firm retains the discretion to decide whether or not to apply to the relevant competition regulator(s) for immunity or leniency from any potential competition fine.

It is possible that a firm would notify the FCA under Principle 11, but not make a leniency application. However, in practice the notification requirement for potential competition law breaches under Principle 11 may limit regulated firms’ freedom to decide on leniency questions as compared to non-regulated businesses.

For more information on the application of Principle 11, see our earlier article Trivial Confessions Not Required - FCA publishes final guidance on its competition powers.

FCA’s holistic approach to competition

The FCA sees its role as enhancing competition law holistically, and is “embedding competition thinking across the wider policy, supervisory and enforcement work” that it does. Innovation and new entry is central; the FCA aims to “promote competition to help ensure that markets stay open to new entry and innovation”.

To this end, the FCA, in conjunction with the PRA, launched the New Bank Start-up Unit in January 2016. The intention behind this is to “stimulate competition” by assisting new banks to enter the market, and to support them through the early stages of authorisation.

The FCA also set up the Innovation Hub in 2014 (widened in 2016 to include new market entrants) and the Regulatory Sandbox (which allows firms to test innovative products without having to meet normal regulatory requirements) in May 2016.

The FCA has also sought to improve international cooperation and innovation. It signed agreements with the Australian Securities and Investments Commission in March 2016 and the Monetary Authority of Singapore in May 2016 to ensure Fintech companies have support from financial regulators when entering these markets.

As mentioned above, the FCA has not yet instigated any market investigations under its EA2002 powers. This may be in part because it considers competition in the round and seemingly feels able to do this as part of its FSMA investigations. However, as mentioned above, the FCA has stated that is willing to switch from investigations commenced under FSMA to EA2002 if it finds that this is more appropriate.

What is coming next?

In addition to the forthcoming reports and further reviews in Retirement Income, Asset Management and Investment Banking as noted above, the FCA will also:

  1. Launch a mortgage sector market study in Q4 2016.
  2. Publish a final report of its credit cards market study later this year.
  3. Publish a feedback statement on the use of ‘Big Data’ in the general insurance sector in Q3 2016 (following its call for inputs, published in November 2015).
  4. Continue working with insurers and reinsurers to consider the implications of a potential removal of the Insurance Block Exemption Regulation from 1 April 2017.