FCA issues first statement of objections to asset managers

 

FCA issues first statement of objections to asset managers

 

The Financial Conduct Authority (FCA) announced on 29 November that it has issued a statement of objections to four asset management firms alleging infringements of the Chapter I prohibition and/ or Article 101 TFEU.

This is the first time that the FCA has issued a statement of objections in relation to suspected competition law breaches since it obtained concurrent competition enforcement powers in April 2015.  The FCA stated in the annual concurrency report (published in April 2017) that it had opened one Competition Act investigation in March 2016 and another in March 2017

The FCA takes the provisional view that four firms - Artemis Investment Management LLP, Hargreave Hale Ltd., Newton Investment Management Limited/The Bank of New York Mellon Corporation and River and Mercantile Asset Management LLP/River and Mercantile Group PLC - exchanged sensitive information through disclosure of the price they intended to pay in relation to one or more Initial Public Offerings and one placing before the prices were set.  According to the FCA, these practices enabled firms to know each other’s strategies during the placing when they should have been acting in competition.

Any person who can materially assist the investigation may request a non-confidential version of the statement of objections by contacting the FCA no later than 12 January 2018, explaining how they can assist.

Court of Justice rules on application of Article 101 TFEU to setting minimum legal fees

The Court of Justice has ruled on two references from the Bulgarian court seeking a preliminary ruling on the application of Article 101 TFEU to the setting of a minimum level of legal fees by the Bulgarian Supreme Council of the legal Profession.

The court asked whether Article 101(1) TFEU precludes a national provision whereby a professional association has discretion to set down in advance minimum legal fees.

The Court found that Article 101 TFEU (when read with article 4(3) TEU) must be interpreted as meaning that national legislation which does not allow a lawyer and his client to agree fees in an amount less than the minimum amount laid down in regulation, without that lawyer being subject to a disciplinary procedure, and which does not authorise the courts to order reimbursement of fees in an amount below that minimum amount, is capable of restricting competition in the internal market within the meaning of Article 101(1) TFEU.

The Court said that it was for the national court to confirm whether the legislation actually met with legitimate objectives and whether the restrictions were limited to what was necessary to achieve those objectives.

The case illustrates the interaction between rules imposed under professional services regulation and competition law in what is becoming an interesting battle ground.  There are already indications of the readiness of the CAT to consider standalone competition claims and, in particular, in relation to the decisions of an approved regulator.  For example, the CAT has recently found that the requirement under the terms of the Conveyancing Quality Scheme that members of the scheme must obtain certain training courses exclusively from the Law Society breaches the Chapter I and Chapter II prohibition (Case 1249/5/7/16 Socrates Training Limited v The Law Society of England and Wales [2017] CAT 10).

Joined cases C‑427/16 and C‑428/16 - CHEZ Elektro Bulgaria v Yordan Kotsev and FrontEx International v Emil Yanakiev (not yet available in English)

The High Court has banned the Competition and Markets Authority from relying on undisclosed evidence in a challenge by Concordia against a CMA search warrant

High Court prevents CMA from using redacted evidence in Concordia’s challenge to search warrant

The search warrant was issued under section 28 of the Competition Act 1998 and related to documents concerning suspected anti-competitive conduct in the UK Carbimazole and Hydrocortizone markets.

The CMA launched its investigation into the Hydrocortizone market in April 2016.  In March 2017 it issued a statement of objections alleging that Concordia and Actavis UK had infringed EU and UK competition law by entering anti-competitive agreements between 2013 and 2016.

Concordia applied to have the section 28 warrant varied and challenged it on the basis that the additional material relied on by the CMA to justify the use of the warrant be disclosed.  The CMA sought to justify non-disclosure on the basis of the public interest.

The High Court observed that this was the first challenge to a section 28 warrant and it must be determined on a case-by-case basis whether or not information is protected from disclosure.  It ordered that the information be disclosed to the Court, subject to redactions on grounds of public interest and relevance.  The CMA was also required to set out the ‘gist’ of the redacted material in an affidavit.

The case is something of a test case and may make the CMA more cautious in relying on wide public interest claims to justify its warrant process in competition cases. 

The Competition and Markets Authority v Concordia International RX (UK) Limited [2017] EWHC 2911

General Court annuls fine on ICAP in Libor case

The General Court has given judgment in an appeal by ICAP in its challenge against the European Commission’s 2015 decision to fine ICAP EUR14.9 million for facilitating cartel activity in the market for interest rate derivatives denominated in yen.  The Commission had founded that ICAP facilitated six cartels that were the subject of a settlement involving UBS, RBS, Deutsche Bank, Citigroup and JPMorgan.  ICAP decided not to settle.

The General Court did not find any errors of law in the findings by the Commission that the infringements alleged against ICAP represented infringements “by object”, nor that ICAP had infringed Article 101(1) TFEU by facilitating four of the cartel infringements.

However, the General Court found that the Commission had not established to the required legal standard that ICAP was aware of RBS’s role in a bilateral cartel between RBS and UBS and the Commission had erred in the calculation of the duration of ICAP’s role in four of the cartels.  

The General Court also held that the Commission had violated ICAP’s rights of defence and the presumption of innocence and that it had not provided sufficient reasons for its methodology when setting fines.  The General Court therefore annulled the fines imposed by the Commission in the decision.

The judgment is a useful clarification of the application of the test for liability of intermediaries in the facilitation of cartels.  In particular, the Court found that the Commission did not follow the facilitation test set out by the European Court of Justice in AC-Treuhand and that ICAP had not made the collusion between banks possible but had only contributed to it. 

Case T-180/15, Icap plc, Icap Management Services Ltd and Icap New Zealand Ltd v European Commission, judgment of 10 November 2017 (ECLI:EU:T:2017:795)