A £3m probe into suspected anti-competitive practices across the City has stalled again, with compliance experts none the wiser as to what has caused repeated delays.
It is now four years since the Competition and Markets Authority begun investigating competition in financial services.
The current timetable on the CMA’s website says further investigations were taking place between April and September this year, but that timeframe has now expired and not been updated since.
Its probe has been extended twice already, and is now likely to have cost at least £3m and taken up some 70,000 man hours, according to a Freedom of Information Act request by Financial News. But the extensions are leaving some in the City uncertain as to how they should move forward.
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A CMA spokesperson declined to provide any further details around the review of the expiry of the latest timetable, but some experts have warned that the delay could mean the review’s outcome could be tougher than previously expected.
Marjorie Holmes, a partner at law firm Reed Smith said: “It is a complete mystery why the CMA’s investigation into anti-competitive arrangements in financial services has been going on for so long without any explanation of the delay. One potential complication could be that the activity being investigated looked illegal at first sight but in fact needs to be understood in a proper context, which could take a long time to untangle.
“However, at least one nugget can be gleaned — the fact that it is the CMA investigating rather than the Financial Conduct Authority suggests that the probe could cover non-regulated, as well as regulated, business. The much-delayed investigation is clearly far from straightforward.”
No further information has been given on the scope of the probe since the start of the exercise, except that it revolves around the Chapter I prohibition of the Competition Act 1998 — a wide-ranging clause banning any activities that affect “the restriction, distortion or prevention of competition within the UK”.
If a breach in the clause is found the maximum penalty is 10% of a firm’s global turnover.
A person familiar with the work said the CMA wanted to ensure a robust investigation was carried out while also completing the inquiry in a timely manner.
The CMA’s review has been run amid a succession of changes at the top of the regulator. Sarah Cardell was appointed interim chief executive in June as Andrea Coscelli’s term ended, with a permanent successor yet to be announced.
Former chair Andrew Tyrie was two years into a five-year term when he stepped down in June 2020. The chair role was filled on an interim basis until former Boston Consulting Group senior partner Marcus Bokkerink stepped into the role in September this year.
“My gut feel with any regulator who doesn’t update their timelines on their website, it would suggest to me it has fallen down the priority list a little,” said one compliance consultant. “My gut feel is they might have bitten off more than they can chew, and there are easier and lower hanging fruit for them to pursue at the moment.”
In the financial services space, the CMA most recently cleared London Stock Exchange Group’s takeover of multilateral compression service Quantile on 26 October.
The watchdog initially said LSEG’s clearing house could potentially disadvantage Quantile’s competitors in providing the services, which help traders reduce their capital requirements and overall regulatory costs, before ruling that the deal will not lead to a “substantial lessening of competition”.
As the CMA’s review has progressed, the FCA, which also has a legal mandate to promote domestic competition to the benefit of consumers, has also had an eye on introducing greater competition through the promotion of sectors such as fintech.
On 25 October, the FCA raised potential competition concerns around major technology firms’ growing interest in financial services.
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