Competition law and the financial sector

The financial sector continues to be a particular focus in the world of antitrust, both at EU and national level.

EU

The investigation into precious metals spot trading, started by the European Commission in August 2015 (and subsequently by the Swiss Competition Authority) is ongoing. The European Commission has yet to complete its investigation into Crédit Agricole, HSBC and JPMorgan, the parties which refused to settle in the Euro interest rate derivatives (EIRD) case. Its investigation into the manipulation of foreign exchange benchmarks also continues - alongside those of the US Department of Justice (which settled with a number of banks in May 2015) and the Swiss Competition Authority.

The European Commission remains alert to the antitrust risks associated with benchmarks in other fields. On 07 December 2015, it formally opened an investigation into three producers in the biofuels sector for alleged manipulation of ethanol benchmarks, although dropping from the investigation major producers such as Shell and Statoil. The EU Benchmark Regulation is also due to be published in final form in early 2016.

UK

In the UK, the Competition and Markets Authority (CMA) is pursuing its in-depth market investigation into personal current accounts and SME banking, which will complete in May 2016.

We anticipate that in 2016, the Financial Conduct Authority (FCA) and the Payment Services Regulator (PSR) will begin to exercise their concurrent powers to investigate anti-competitive agreements and abuses of dominance under the Competition Act 1998. These powers were assumed on 01 April 2015. On 22 December 2015, the CMA signed memoranda of understanding with the FCA and the PSR which set out the arrangements for allocating cases, sharing information, dealing with confidentiality constraints, and pooling resources in relation to these powers.

In May 2015, the FCA launched a market study into the investment banking and corporate banking markets. The FCA is using its Financial Services and Markets Act 2000 powers to conduct the market study and not its concurrent competition powers under the Enterprise Act 2002. However, the aim of the market study is to explore whether competition for investment banking and corporate banking services is working well. The FCA aims to publish an interim report in early 2016 and a final report in spring 2016. It will be interesting to see where the FCA comes out on matters such as syndicated loans and practices of bundling and cross-subsidisation of services. The FCA has been notably active in exercising its competition mandate, and this trend shows every sign of continuing, particularly given the FCA’s new concurrent powers, which include the ability to refer a market for in depth investigation directly to the CMA.

Private litigation

Given the large sums of money involved, the resolution of the ongoing investigations into the financial sector is likely to give rise to further and larger private actions for damages being bought, potentially in the English High Court or UK Competition Appeal Tribunal (CAT). The far reaching changes to the UK private actions for damages regime which came into effect in 2015 may encourage this development, although, as discussed below, opt-out collective claims will be subject to the old CAT rules, and can only be brought when the infringement decision is final (ie when all appeals against the infringement decision have been resolved or the time for bringing an appeal has lapsed).

Appeals against European Commission decisions

In terms of appeals, ICAP, the cash broker, has challenged the European Commission’s decision to fine it as a facilitator in the Yen interest rate derivatives (YIRD) cartel. A hearing is to be expected in 2016. However, following the October 2015 ECJ judgment in the AC Treuhand appeal, which confirmed that a facilitator need not be active in the same market as the other infringing parties, at least one plank of the ICAP appeal now looks untenable. However, ICAP is adducing other arguments, including, for example, that the European Commission did not provide proper evidence that ICAP either facilitated or knew of the infringement, and that it had breached its fining guidelines when calculating the fine and treated ICAP differently from another broker accused of facilitation. Whether these additional arguments will be sufficient to secure either an annulment or a reduction in fine remains to be seen.

A further appeal with financial services dimensions is that by Goldman Sachs against the Commission’s decision to find it jointly and severally liable with its portfolio company Prysmian for Prysmian’s alleged role in the underground power cables cartel. We anticipate that the General Court will hear the appeal sometime during the first half of 2016, although there will then be a delay before the judgment is handed down.