FCA will require firms to report potential 'significant' competition law infringements at an early stage

Since 1 April 2015, the FCA has had the same powers to take action against competition law breaches to the extent that they affect the UK's financial services markets as the Competition and Markets Authority (CMA). These include the ability to enforce against infringements of competition law, additional powers to conduct market studies and powers to refer markets to the CMA for in-depth investigation. It has now published its final guidance on its use of these powers, along with associated changes to the FCA handbook which take effect on 1 August.

Competition law expert Robert Eriksson of Pinsent Masons, the law firm behind Out-Law.com, and a former secondee to the FCA's Competition Division, said that "the FCA's new powers to enforce competition law promised a major change for UK financial services providers as regards how competition law is enforced in their sector but the clarification that authorised firms' obligation to deal with the FCA in an open and cooperative way also covers competition law infringements is perhaps an even more important change".

"Whilst the new Rule covers any type of competition law infringement, it is reasonable to expect that it will particularly serve as an important means through which the FCA will be notified of cartel activity", Eriksson said. "Importantly, the FCA has now also clarified that approved persons have an equivalent obligation to be transparent with the FCA as regards competition law infringements."

The self-reporting duty stems from authorised firms' obligation to deal with the FCA in an open and cooperative way, as set out in Principle 11 of the regulator's supervisory handbook (SUP). The requirement to notify also arises from Principle 4 of the FCA's Statements of Principle for Approved Persons.

Responding to consultation feedback, the FCA said that the intention behind the rule change was intended to "reinforce what we consider has always been the case: that firms or individuals who are aware of possible infringements of competition law that they may have committed should bring them to our attention, just as they should bring possible breaches of other requirements to our attention". However, it said that it was "sympathetic" to some of the concerns raised by respondents; particularly in relation to self-incrimination and materiality.

"We are keen that firms approach this obligation in a sensible and proportionate way for possible competition law infringements, just as they do for possible breaches of other requirements," it said in its response. "We have no intention of re-introducing pre-notification and fully support self-assessment by firms of their own compliance with competition law."

"The process of self-assessment also alleviates concerns around firms that are approaching a dominant position. Such firms should conduct internal assessment of their commercial agreements and conduct to ensure they do not infringe competition laws. A reporting obligation does not change the process of self-assessment that firms ought to undertake," it said.

Eriksson said that, whilst the FCA does not think that there is any conflict between Principle 11 and the CMA leniency regime, the new handbook rule does raise important issues for firms and individuals that intend to apply for leniency by self-reporting cartel-related activities. The FCA can accept leniency applications made in accordance with the CMA’s leniency policy but has not developed its own separate procedures for such applications to the FCA and cannot grant immunity for the cartel offence. The FCA therefore expects leniency applications to be made direct to the CMA in most cases.  Leniency information which the CMA passes to the FCA would be subject to significant use-restrictions but these do not affect the FCA’s use of information obtained from other sources, such as through Principle 11 disclosures.

"The new handbook rule thus clearly raises significant issues, particularly for actual and potential leniency applicants, which will require very careful consideration," Eriksson explained. "Firms that are considering this duty to disclose should seek external legal advice, in particular as regards how to coordinate a Principle 11 disclosure with any parallel leniency applications."