On 15 July 2015 the FCA published its final Competition Concurrency Guidance along with a policy statement setting out its responses to feedback received during the consultation, which was launched in January of this year. Whilst the Guidance and policy statement deal with a number of issues, this update focuses on one of the key contentious issues, namely the Principle 11 self-reporting duty.
The Financial Services (Banking Reform) Act 2013 (FSBRA), which amended the Financial Services and Markets Act 2000 (FSMA) introduced new concurrent competition powers for the FCA with effect from 1 April 2015 in relation to the provision of financial services. These concurrency powers are in addition to the FCA’s ability to use its Financial Services and Markets Act 2000 (FSMA) powers in pursuit of its objective to promote effective competition in financial services markets.
One of the key concerns raised during the consultation related to the extension of Principle 11 to a duty to report actual or possible competition law infringements to the FCA. Concerns were raised as to the timing, scope and nature of this duty, and the possibility that it conflicts with the privilege against self-incrimination and the CMA’s competition leniency policy.
Scope of the duty
Some respondents suggested that such a duty could weaken firms’ incentive to audit their affairs, or may expose firms to potentially unmeritorious and costly private damages actions on the basis of nothing more than something which ‘may’ constitute a breach of competition law.
In light of these responses, the FCA has agreed to qualify the self-reporting obligation so that it only captures ‘significant’ infringements, and has provided guidance on the meaning of ‘significant’. The FCA has also urged firms to take a sensible approach to the wording ‘may have infringed’. Although the inclusion of a materiality threshold is helpful, there still must be a degree of uncertainty as to when the duty arises.
Interaction with leniency
Concerns were also raised that the obligation to report infringements ‘as soon as’ the firm has information is too broad, and may conflict with the voluntary nature of leniency applications redundant, thus undermining the leniency regime. There was a concern that parties may not be eligible for full immunity from the CMA if they have already notified the FCA under Principle 11.
The FCA noted the conditions for immunity (known as ‘Type A’ leniency) are that there is no pre-existing investigation and that the applicant is the first to apply. The FCA’s view is that notification under Principle 11 does not in itself remove either condition. It further noted that if Type A leniency was not available, Type B discretionary immunity may be available.
This may not be the degree of assurance that firms are looking for, and a concern remains that notification under Principle 11 essentially forces a firm’s hand in terms of making a leniency application. It would be interesting to understand the CMA’s view on this issue and whether they are able to provide any further comfort.
The FCA emphasised that the two procedures were independent; Principle 11 applies across all types of infringements, and cannot be ‘tied’ to the voluntary leniency regime which applies only to cartels. In the FCA’s view, firms can meet the requirements of both regimes if they act promptly.
More generally, the FCA confirmed that it can accept leniency applications itself in accordance with the CMA’s leniency policy. However, given the experience of the CMA and the fact that the FCA cannot grant immunity for the criminal cartel offence, it expects the applications to be made directly to the CMA in most cases.
Other notable points include:
- The FCA has said that information properly obtained under one power for one function can be used as regards another function (i.e. information gathered in the context of competition law powers can be used in enforcement outside of competition law. However, in order to preserve the incentives for firms to apply for leniency, the FCA and the CMA have agreed that leniency information which the CMA passes to the FCA may only be used in the enforcement of competition law. However, the FCA has said leniency information “can also be used to remind a regulated firm of any obligations it may have to the FCA under Principle 11”.
- Despite concerns raised during the consultation, the final guidance includes a settlement procedure whereby the FCA may ask parties wishing to settle Competition Act 1998 (CA98) cases with the FCA to waive their right of appeal to the Competition Appeal Tribunal (CAT). This is not a requirement in the CMA’s own settlement procedures.
- Further guidance has been included as to how the FCA will decide to use its concurrency powers, given that it is subject to an obligation of primacy which requires it to consider whether the use of its concurrent competition powers is ‘more appropriate’ before taking enforcement action using its FSMA powers.