The Financial Conduct Authority (FCA) has now published its:
- guidance on its competition enforcement powers;
- guidance on its market studies and market investigation references;
- views on the responses to its consultation on earlier drafts of its guidance; and.
- final amendments to Chapter 15 of the FCA’s Supervision Manual and Handbook, including new notification requirements for infringements of competition law, which will take effect from 1 August 2015.
The FCA has clarified several issues arising from its earlier consultation:
Compulsory disclosure of competition infringements
- Firms will now be obliged to self-report to the FCA only “significant” infringements of competition law, not any infringements of competition law. We welcome this change, which we proposed in our response to the FCA’s earlier consultation, so that firms are not obliged to report trivial or technical breaches. In determining whether a matter is “significant”, a firm must have regard to the actual or potential effect on competition, any customer detriment, the duration of any infringement and implications for the firm’s systems and controls;
- The obligation to disclose infringements of competition law will apply only to infringements by regulated firms, so firms will not need to notify the FCA of infringements by other group companies unless such breaches affect the regulated firm;
- The disclosure obligation applies to “any applicable” competition law, not just UK or EU competition law, as breaches of competition law of other jurisdictions “may be relevant” and are “potentially within the scope” of the disclosure obligation.
Interaction with leniency applications
- The FCA expects leniency applications to be made to the CMA in most cases, as the CMA can (unlike the CMA) prosecute and grant immunity for individuals from the criminal cartel offence.
- The FCA says it seeks “neither admissions nor confessions as part of a disclosure under Principle 11. We expect to be notified of the facts and circumstances that indicate that an infringement has or may have occurred.”. The FCA requires “prompt notifications under Principle 11 regardless of whether a firm is considering applying for leniency.”
- In contrast, leniency is a voluntary process; the FCA says firms can “meet the requirements of both regimes if they act promptly”. If firms are concerned about the interaction of notifications under Principle 11 and the CMA’s leniency regime, they should contact the CMA and FCA, who will “work together and discuss how to proceed” based on the circumstances of the case.
Use of information received by the FCA
- The FCA and CMA have agreed that leniency information passed by the CMA to the FCA may only be used by the FCA to apply and enforce competition law, unless the leniency applicant agrees otherwise. The FCA can however use that information to “remind” firms or approved persons of their disclosure obligations under the FCA’s Handbook.
- The FCA says: “there is nothing to prevent us from using information properly obtained under one set of powers for our functions under another”. So, for example, disclosures to the FCA of infringements of competition law could be used by the FCA to take action under FSMA.
Timetable for market studies
- The FCA will retain an “indicative timetable” of 12 months for a competition based market study conducted under FSMA, rather than adopting the statutory timetable which applies to market studies conducted under the Enterprise Act 2002.
- Firms must now bear in mind that their obligations under Principle 11 will include disclosure of significant infringements of competition law. Fortunately, the FCA’s changes and comments address many of our largest concerns about its original proposals.