UK: Two-Headed Monsters: Regulators With Competition Powers And Lessons For The FCA

Last Updated: 3 August 2015
Article by Richard Jenkinson

On April 1, 2015, the Financial Conduct Authority gained concurrent power to enforce competition law in the financial sector, as opposed to merely in regulated activities. On 15 July 2015, following a consultation, it published the final Guidance on these powers, together with a policy statement reacting to the comments received during the consultation.

This was a novel development both for the financial sector and for competition enforcement, and one which does not have the most promising track record. No other developed economy has given a financial sector regulator competition powers. This is not to say that competition law infringements are not tackled by financial regulators. Indeed, the FCA Handbook's Principles for Businesses have a great deal of overlap with the competition rules, to the point where Libor rigging has been regarded by different regulators as a simultaneously a breach of financial sector regulations and competition law.

Indeed, ICAP Plc's appeal against the  fine imposed by the European Commission for alleged Libor activities is based on the idea that the overlap is so great that the principle of double jeopardy has been engaged, and that it has been convicted twice for the same infringement, by regulators and by competition authorities.

A unique regulator

Not only is a financial sector competition regulator unique, but the concurrency model, whereby a sector regulator enforces competition law in its sector, is for the most part a British beast. While there are some scattered sector regulators with competition powers around the world (for example, the Irish and Greek telecoms regulators), there is no other major economy where concurrency is the rule in regulated sectors, rather than the exception.

Even so, the UK's concurrent regulators have had a patchy record in applying competition law. To date, there have been only two competition infringements decisions by UK concurrent regulators, one in the rail sector and the other in the energy sector, both of which involved abuses of dominance. Indeed, the concurrent regulators often take pains to avoid enforcing competition law.

Regulation 1/2003 restricts the findings that national competition authorities (including the concurrent regulators) can make, to ensure that competition law is applied consistently across the EU (or at least in a way that precludes the possibility of a difference of opinion between a member state's authorities and the European Commission and courts) and to ensure the European Commission's primacy as top competition authority. This can be something of a straitjacket, preventing sector regulators from making the rulings they wish to make, unless they make it explicit that they are pursuing regulatory ends, rather than facilitating competition.

The UK government attempted to address this paucity of concurrent competition enforcement in 2013 by imposing a requirement for concurrent regulators to consider using their competition powers where they have a choice between using competition or regulatory powers. There have been very few cases, however, possibly due to a lack of dedicated competition specialists within regulators, as well as the more stringent standard of review to which competition findings are subjected, compared with regulatory decisions. (The Competition Appeal Tribunal can impose its own finding for the former, whereas the latter are subject to the High Court's much weaker judicial review mechanism.)

The FCA may be able to avoid the pitfalls that continue to bedevil the other concurrent regulators because it has more firepower. By the end of 2014, the regulator had recruited 50 competition staff. To put this number into context, the CMA has only 500 staff in total, who must enforce competition law across the entire UK economy, as well as fulfil the CMA's other functions such as consumer protection and merger control.

Enforcing behavioural commitments

The FCA's competition enforcement capacity is likely to be quickly absorbed by behavioural undertakings, however. One way in which a competition authority protects or boosts competition in a market is to extract behavioural commitments from participants. These commitments might be agreed in lieu of a fine in a competition enforcement case, or as a remedy at the end of a market study (a power enjoyed by UK competition authorities, including the FCA). They are often seen as win-win for both participants and authorities: the issues of concern are corrected and no one is fined or forced to sell off assets.

These commitments do come at a price for authorities, however, as they must be policed. Behavioural remedies which follow a competition case or market study, although technically competition enforcement, look and behave much like regulation. Decades of behavioural commitments have meant that the CMA has become  something of a miscellaneous sector regulator, spending increasing amounts of its resources on the supervision of behavioural undertakings and orders from historic cases. It has therefore tried to avoid imposing them (and increasing its burden) where possible.

The CMA has already seen the potential for the FCA to lighten the CMA's load in this area. The  payday lending market carried out recently by the CMA recommended that the FCA should impose further regulations, which would free the CMA from the follow-up.

Indeed, the FCA may actually welcome the chore of supervising undertakings and orders following an investigation or case. Behavioural remedies offer a mechanism for the FCA to supervise unregulated activities. As noted above, the competition enforcement powers of the FCA go beyond regulated activity into an undefined "financial sector", where there has hitherto been no day-to-day regulation by the FCA. Concurrency opens the door to mission creep.

Competition authorities have sometimes appeared to take a back seat to sector regulators when it came to enforcement in the financial sector, given the relatively low number of competition cases before the Libor scandal. Perhaps reflecting a need for more information on how competition works in financial services, the FCA has not used its competition powers to investigate suspected cartels and abuses of dominance from day one.

Rather, it has launched a series of market studies, a power it can use to establish whether competition is working well in a particular market. If it is not, remedies can be ordered or extracted through voluntary undertakings to rectify the situation (albeit after extensive consultation). This power can be controversial, as behavioural and divestment orders can be extracted in situations where addressees are not breaking any competition laws per se.

For example, the forced divestment of Stansted and Gatwick Airports by BAA in the early 2010s was ordered following a market investigation reference to the former Competition Commission. BAA's ownership of Heathrow, Gatwick and Stansted, and the resulting high market share it enjoyed in the South East, had not broken any laws, nor had it been obtained through bypassing merger control rules. Nevertheless, the airports had to be sold.

BAA fought the divestment order vigorously, and would have taken the case all the way to the UK Supreme Court had it been given permission to appeal it that far. Given their draconian nature (and the resulting resistance put up by those on the receiving end, not least because of the destruction of shareholder value), divestment orders are seen as a last resort, and the FCA may instead choose to agree behavioural undertakings by consensus where it can, even though such undertakings can accumulate and become unwieldy.

More than a pretty face?

Concurrent regulators can behave as two-headed monsters, and the additional competition "head" can sit awkwardly alongside the regulatory, not doing very much. Used effectively, however, competition powers can provide a regulator with the ability to extend considerably their supervision over a sector. The FCA's competition powers, and the resources it has gathered to enforce them, suggest that it intends to buck the trend set by the UK's other concurrent regulators and use its competition head as something other than a pretty face.

This article was originally published by Compliance Complete.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions