Competition Law and your FCA Obligations

Competition Law and your FCA Obligations

How does competition law affect how you conduct business as a financial service company?

In the UK, the Financial Conduct Authority is responsible for monitoring financial service companies and ensuring that their practices allow competition between companies and give customers the best choice at the best price.

Their goal, ultimately, is to ensure that the market for financial services and products functions efficiently, without restriction, so that innovation is encouraged, and customers are protected from anti-competitive practices.

The FCA has powers under EU and UK law to intervene if companies use practices that restrict competition.

FCA competition law is designed to:

Promote competition so that consumers get the best services at the best prices.

Encourage rivalry between firms so that innovation is essential for companies to retain customers.

Drive down prices and increase choice in the market for financial services and products.

Reward companies that focus on innovation and, as a natural by-product, make life harder for companies that don’t deliver a great service – without stifling business activity or standing in the way of progress.

Enable new service providers to enter the marketplace and offer new and innovative services and products.

How does the FCA monitor competition?

The FCA works in three ways to improve competition in the financial services market. They:

  1. Monitor the market structure and dynamics and adjust the rules of the game to improve outcomes for consumers
  2. Investigate anti-competitive behaviour
  3. Implement regulation to support competition.

Anti-competitive practices

Competition law forbids:

  • Cartels and other anti-competitive agreements
  • Abuse of a dominant position.

Cartels can take the form of agreements to set prices at a certain rate.

Abusing a dominant position might mean lowering prices to the extent that no other business can compete, and then raising prices once competitors have left the market.

What does a competitive market look like?

The FCA outlines what a healthy financial services market looks like.

Consumers can confidently choose quality services. They have plenty of information and choices to make and nobody is exploited or manipulated.

Firms win business by making the best offer, not by colluding with (or excluding) rivals.

Firms can enter the market and grow without facing undue barriers or costs.

Firms have the freedom to develop new products and services with a regulatory framework that keeps up with the pace of change.

Firms treat customers fairly and recognise the consequences of engaging in anti-competitive behaviour.

Develop your knowledge of competition law with VinciWorks

Want to know more about competition law? Our eLearning packages include a wide range of compliance topics, including competition law. You can either choose our off-the-shelf eLearning courses, or you can customise the learning to suit your specific requirements.

Jail term for VW boss after emission scandal

Since the VW emissions scandal broke in September 2015, observers have been wondering if any of the company’s executives would face jail time for their involvement in the massive fraud.

At the end of last year, Oliver Schmidt was sentenced at a court in Detroit to seven years in jail and a $400,000 fine.

Oliver Schmidt, a German national, played a key role at VW’s engineering office in Michigan. As the head of the environmental compliance team, Schmidt knew that Volkswagen vehicles did not comply to US environmental standards, and that VW was using computer trickery to fool investigators. Schmidt actively misled US investigators and is accused of destroying incriminating documents.

Before receiving his sentence, Schmidt acknowledged his complicity. “I only have myself to blame,” he said, “I made bad decisions and for that I am sorry.”

About the VW scandal

The VW emissions scandal emerged in 2015, when the Environmental Protection Agency (EPA) discovered software in VW cars designed to make the cars seem less polluting. The software detected when the cars were being tested, and then switched the engines into an alternative mode that produced fewer emissions. With this method, VW were able to make investigators believe that diesel VW cars operated within limits set by the Clean Air Act.

This means that VW engines were emitting nitrogen oxide pollutants up to 40 times beyond the quantity allowed by US law.

Learning from VW

Volkswagen’s fraud has cost the company billions, lost them decades of goodwill, demolished trust and lead to resignations, recriminations and now, for Oliver Schmidt, jail time. The total cost of the scandal is difficult to determine because it is so vast, and because some effects will not be fully realised in the short term. Only time will tell how badly this incident affects VW.

What happened at VW is a reminder of how bad decisions at one level can ripple up through an organisation. Even though VW employees are reported to have warned against the fraud before it became company practice, the warnings were not heeded. The executives that gave the green light to the scam were blinded by the bucks; all they could see was the immense earning potential of their supposedly low-emission diesel cars. Profits were prioritised over ethical, environmental and legal concerns.

This highlights a key challenge for all organisations; how do we put compliance and lawfulness above profit? How do we ensure an ethical corporate culture, even when the temptation to cheat is so great?

At VinciWorks, we create eLearning programmes on a range of compliance topics, including Environmental Awareness, Code of Conduct, Competition Law, and Treating Customers Fairly. Because our training is online, it can be easily delivered to all personnel, wherever they are based. VinciWorks training is a practical solution to manage your compliance training requirements. Contact our team to learn more about our eLearning.

Responsive Competition Law eLearning course available now

Competition law exists to prevent monopolies, remove trade barriers, and ensure the marketplace is fair and competitive.

Activities prevented by competition law include:

  • Restrictive agreements between businesses such as pricing agreements, market sharing and dividing up customers
  • Agreements which do not benefit consumers
  • Abuse of dominant market position

Breaching this legislation can lead to fines of up to 10% of worldwide revenue, imprisonment of individuals for up to 5 years, and debarring of company directors for up to 15 years.

Many common business activities carry a risk of competition law being breached inadvertently, such as planning marketing, pricing or distribution strategies, joint ventures, or participation in trade associations.

Our Competition Law eLearning course is designed to provide employees with an overall understanding of competition law and the knowledge to know when situations should be referred to the legal team.

The course is built with the Adapt Framework to be fully responsive and display elegantly on mobiles, tablets and personal computers, so employees can access it whenever the need arises, offering an effective mitigation of the risk of breaching competition law.