UK: The FCA's First Antitrust Decision: "When Market Chatter Becomes Collusion"

Financial Conduct Authority (FCA) officials who were involved in the FCA's first competition decision, Anti-Competitive Conduct in the Asset Management Sector,1 shared their views on the case at a Skadden-moderated Q&A session on July 2, 2019.

Background. The FCA investigated communications between asset managers and their competitors sharing their views on pricing and volume intentions on two initial public offerings (IPOs) and one share placement.

For example, at 8:10 a.m. on 21 September 2015, a Newton Investment Management Limited fund manager sent an email blind-copied to 12 of his asset manager competitors. "Sorry for the out of the blue email," he wrote. "I wanted to urge those considering or in for the [On the Beach] IPO to think about moving to a 260m pre money valuation limit ..." The communications spanned phone calls — to both private and work phones — Bloomberg chats and emails.

The FCA imposed a total fine of £416,900 fine on three asset managers — Newton, Hargreave Hale Limited and River and Mercantile Asset Management LLP — for unlawful collusion. Newton self-reported the conduct and secured immunity.

The FCA also fined one of the employees involved £32,000 for breach of a financial services regulation. The conduct led to the dismissal or departure of several employees.2

Establishing Liability. The FCA applied a four-limb test, finding there was liability where: (i) there was a communication of "strategic" information (ii) between competitors resulting in (iii) subsequent market conduct, and (iv) causation (based on a presumption that could be rebutted). The FCA found that views on the pricing of IPOs or share placements or an investor's buying intentions, when sufficiently close to the closing of the book, were "strategic." The asset managers competed in the supply of investment capital.

Liability for a "by Object" Infringement. The FCA considered this case to be a liability "by object" infringement of the antitrust laws, as the nature of the conduct was regarded, by its very nature, as being harmful to the proper functioning of normal competition.

One of the defendants argued that when IPOs are oversubscribed (i.e., "hot"), no one firm's view can have any impact. If an IPO is undersubscribed (i.e., "cold"), a more realistic view of the share price may help the IPO or placement "get away" successfully. The FCA rejected these arguments. It said it did not draw a distinction between hot and cold IPOs. What matters is whether asset managers are competing, and they compete regardless of whether the IPO is hot or cold. In those circumstances, strategic uncertainty must be preserved between them.

The FCA disagreed with the defendants' arguments that they were only passive recipients of information that the bookrunner would share with investors in any event. According to the FCA, bookrunners would typically not share information specific to any one investor, and there is case law that one-way communications of strategic information is an antitrust violation.


Buy-Side, Rather Than Sell-Side, Information Sharing

An unusual facet of the case is that it related to purchasing information exchange (the purchase of shares) rather than sell-side communications. When cartelists share sales prices or bidding intentions, customers plainly suffer from higher prices or rigged bids. Yet sharing cost (i.e., buy-side) information can be pro-competitive. We might think of group-buying organisations for grocers, hospitals or vehicle manufacturers driving down costs. Did the FCA consider whether buy-side arrangements like this should be subject to a more lenient standard?

The FCA considered sharing of strategic information of this kind sufficiently egregious to be treated as a "by object" restriction. It also considered that the asset managers were competing suppliers of capital to the companies seeking to raise money through share issues.

Strategic Information Versus General Market Intelligence Sharing

The FCA's decision sets out where it finds no case to answer as well as where it finds liability. Disclosing bidding intentions sufficiently far in advance of the closing of the book is not considered anti-competitive. The decision suggests that the following may be permitted by competition law: (a) general views on the company and the accuracy of its marketing claims;3 and (b) high-level views on the credibility of the pricing range sought, provided that this is sufficiently in advance of the book's closing.4 Can companies rely on this aspect of the decision in their compliance assessments?

In the Card Factory IPO, asset managers exchanged views on the range of potential prices for the stock around two weeks before the book closed. The FCA referred to its "no grounds for action" decision in this case, which was an example of when information shared was not strategic. Shared in advance of the books closing, the information disclosed only a range of possible prices, not a specific price or volume. But these are very fact-specific assessments.

Responding to Inappropriate Communications

Two fund managers responded to the Newton email putting Newton on notice of their compliance concerns. One fund manager said they would "think about it," which the FCA deemed was insufficient to defeat liability. That was the case even where the evidence showed that a bid had already been submitted and remained unchanged after the communication. How should companies react when receiving inappropriate, unsolicited email?

The FCA said that contemporaneous evidence was more persuasive than accounts given during the course of an investigation. It would examine on a case-by-case basis whether or not the four-limb test was satisfied (and in particular, if a recipient firm had "accepted" strategic information). It was disappointing that none of the firms involved had, until much later, even considered that competition law might be applicable to the conduct at issue.


Participants discussed the best manner to police compliance in the aftermath of the FCA decision. These included sensitising staff to antitrust compliance and ensuring the competition law policy is effectively implemented and the risks of competitor communications understood. It may be appropriate to curtail risky contacts, such as regular social events with competitors, without a clear business justification.

The FCA case indicates a firm stance on improper communications around capital raisings. We advise that firms should ensure the following:

  • Competition Compliance Programmes: Should be up to date and implemented effectively, tailored to specific business activities. Staff should understand that there can be serious personal consequences for noncompliance, including sanctions and disciplinary measures.
  • Awareness Raising: Staff should be sensitised to and swiftly escalate concerns over inappropriate communications. Passive receipt or half-hearted answers will not escape liability. Staff should understand that firm policy is to escalate suspect communications to the legal department. A suitable response to improper communications should be sent indicating that the company does not wish to receive these communications, and that the information has been deleted and will not be acted upon.
  • Documenting Compliance: Consideration should be given as to how to document internally that improper communications, if received, have not been acted upon. In addition to responding as suggested above, examples include having an uninvolved fund manager make the investment decision and/or demonstrating the internal business case for making an order at the particular volume and price.


1 Case CMP/01-2016/CA98, Anti-Competitive Conduct in the Asset Management Sector.

2 P Stephany v Newton, EAT [2018]; "Named: The Top Managers Who Sparked the FCA's IPO Probe", Citywire, 6 February 2019; Final Notice, PMS01181, Paul Stephany, 4 February 2019.

3 See, e.g., paras. 5.31, 5.66, 11.25.

4 Paras. 15.6-15.9.

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.

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