On 1 April 2015 the Financial Conduct Authority (FCA) will acquire powers enabling it to enforce competition law alongside the UK’s primary competition law regulator, the Competition & Markets Authority (CMA). These powers will complement its existing statutory duty to promote effective competition. Whilst the FCA and CMA will co-ordinate their work (as set out in a Memorandum of Understanding between the two organisations), we expect the FCA to undertake a greater number of the competition investigations in the financial services sector (whether or not they relate to regulated activities).

It is clear that the FCA will look proactively to use its new competition powers. Entities that operate in the financial services sector need to be aware of the scope of these new powers, in particular the ability to investigate markets in which there is no suggestion of wrong-doing.


The concurrent powers that the FCA will assume under the Competition Act 1998 cover agreements and practices that distort, restrict or prevent competition (including cartels), as well as abuses of dominance by companies that have market power. The powers also extend to the ability, under the Enterprise Act 2002, to refer markets to the CMA for a detailed investigation even if, in the absence of anti-competitive practices, features of a market are considered to lead to sub-optimal competitive outcomes.


Firms subject to FCA supervision will not be faced by yet more regulation and oversight as the FCA will simply gain powers that the CMA already has, and has used – e.g. launching in-depth market investigations into retail banking (specifically personal current accounts and lending to SMEs) as well as into payday lending. However, financial services firms can expect a greater number of competition investigations given the FCA’s significant resources and narrower focus.


The FCA’s willingness to look into competition matters was made clear in its recent announcement that, following its review into competition in the wholesale sector, it will launch a market study into investment banking and corporate banking services in spring 2015 – i.e. at around the same time as it acquires its competition powers. The focus of the market study will be the impact of transparency and bundling on competition for investment banking and corporate banking services. Preliminary concerns which have been highlighted are that there is limited transparency over price and quality making it difficult for clients to assess value for money, and that bundling and cross-selling of banking services lead to low levels of transparency and may make it difficult for new entrants to compete in the relevant markets.

Whilst one outcome of the market study may be that competition is effective and no action is required, another outcome is a further, more detailed, 18-month investigation which could lead to enforced changes (as proposed last week in connection with the payday lending market – see https:// www.gov.uk/government/news/cma-finalises-proposals-to- lower-payday-loan-costs).

The FCA has also identified asset management as an area worthy of investigation in the future.