That scrutiny was somewhat delayed since MasterCard originally notified its arrangements to the Commission between and under the old notification regime and therefore benefited from an exemption. The American card payment schemes were not the only ones under the spotlight. In , Groupement des Cartes Bancaires was sanctioned for the fees it charged to some issuing banks whose acquiring activities ie, recruiting merchants to accept Cartes Bancaires payment cards did not meet certain thresholds.
As the Commission focused its efforts on the scrutiny of payment systems providers, the activities of the banks were largely overlooked for much of the s. In the eight years since , the Commission has announced, or there have been reports of, cartel investigations involving banks across a range of asset classes and products, including: credit default swaps CDS ; interest rate derivatives IRD ; foreign exchange FX ; precious metals; and bonds.
The genesis for this surge in enforcement activity was both the financial crisis, which attracted scrutiny of financial products considered to be at the root of the crisis, and the exposure by national financial regulators that traders from multiple banks were involved in the concerted manipulation of LIBOR, a global benchmark for short-term interest rates. First announced in April , the investigation is understood to have started as early as It is perhaps no coincidence that CDS and central clearing of CDS were, at the time, at the centre of the political and economic debate over what caused the financial crisis.
Ultimately, the Commission found no evidence of an infringement and closed its proceedings against ICE Clear and the banks in December , although the Commission had already suspended its investigation in In April , the Commission also announced an investigation into CDS Information Market , which, according to the press release, concerned a possible concerted refusal by 16 banks to provide CDS price data to information service providers other than Markit.
Rather than take action, the DOJ was, perhaps, content to let a class action brought in the US against the banks play out. However, the Commission closed proceedings against the banks in December , after the oral hearing, due to a lack of evidence. As such, the first exchanges between the Commission and the banks were in an area of investment banking that did not hit the headlines in quite the same way as allegations of concerted manipulation of LIBOR and other benchmarks would.
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In , certain industry observers and academics first noted that several large international banks were underreporting LIBOR rates. These regulators did much of the early running, and were the first to impose fines for LIBOR manipulation. There followed three LIBOR-related investigations by the Commission the IRD investigations , which were an early sign of the now common theme of parallel financial regulatory and antitrust investigations into the same or related conduct.
Barclays Bank was the whistle-blower. In response, in FX , the Commission appears to have reverted to its original approach of issuing decisions in such cases in tandem. UBS was the whistle-blower. RBS was the whistle-blower. This early activity made the banks all too aware of the risks and costs of non-compliance with antitrust laws. It is quite likely that the Commission investigations that have followed, including into FX , Precious Metals and Bonds, were prompted by immunity applications brought about by that heightened awareness within the banking community.
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The Commission has also started to probe other areas, raiding Polish and Dutch banking associations in , and publishing a study on EU loan syndication in In any event, the Commission appears to have developed an appetite for investigations into the conduct of investment banks — which may see further scrutiny in this sector. More recently, there have also been reports of another Commission probe into this sector, in particular focused on FX option s trading.
In October , former Commissioner Joaquin Almunia announced that the Commission had opened a preliminary investigation into the possible manipulation by traders at multiple banks of foreign exchange rates. The Commission did not formally announce an investigation into precious metals. However, in August , in response to press enquiries, the Commission confirmed the existence of an investigation into alleged anticompetitive behaviour in precious metals spot trading.
A parallel investigation by the Swiss Competition Authority was also recently closed. The Commission has issued statements of objection in two separate bond-related investigations: USD-denominated sovereign, supra-national and agency SSA bonds, and Euro-denominated European government bonds.
Financial services sector: suspected anti-competitive arrangements
In February , press reports suggested the existence of a Commission investigation into bonds. The reports were based on a questionnaire sent by the Commission to a number of market participants regarding the SSA bond market. In January , the Commission issued a statement of objections to eight banks in relation to Euro-denominated European government bonds. At the time of publication of this article, only UniCredit and Nomura have acknowledged being subject to the investigation, 71 with Bank of America and Royal Bank of Scotland suggested as recipients in a recently-filed US claim.
A more recent area of EU enforcement and regulatory focus in the financial services sector has been a renewed interest in financial technology fintech. While fintech is not new, recent innovations and regulatory developments have created fertile ground for new business models that pose a threat to incumbents and the status quo. From an antitrust enforcement perspective, the development of new technologies and services creates compliance risks for both the innovators and the incumbents.
To the extent that the new technology involves collaboration between competitors, there are the usual coordination-related risks, such as related to information exchange or the development of industry standards. For incumbents, whose traditional business models might be under threat, there could be the temptation to engage in unfair, exclusionary conduct to hinder the development of new technologies.
At the Member State level, bank associations had already come under scrutiny for rules restricting third-party access in Germany in From a regulatory perspective, at the EU-level, the introduction of the Payment Services Directive II 80 and the Markets in Financial Instruments Directive II MiFID II 81 has facilitated access to customer account information and increased transparency and standardisation of trade reporting, in order to promote the development of new services and technologies and to open up the market to new entrants.
Whilst antitrust law recognises the pro-competitive benefits of syndication ie, to enable efficient financing and risk management for large deals or projects , antitrust risks are still present and banks must take care to distinguish stages at which they may cooperate with each other from stages at which they are expected to compete against one another.
As a result, syndicated lending and joint underwriting have attracted antitrust scrutiny in a number of jurisdictions. In recent years, investigations have been launched and have led to fines being issued against banks in Spain 88 and Turkey, 89 warnings being issued to banks in the UK, 90 and criminal charges being brought against banks and their senior executives in Australia.
However, the report identified a number of situations where risks of anticompetitive conduct arise and set out proposed safeguards to mitigate these risks. The report could frame a future EU sector inquiry or antitrust and regulatory investigations into the activities of lenders, should they arise.
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In addition, whilst the existence of the above investigations is known or suspected, there may be others under the radar. The steady flow of antitrust investigations involving banks is set to continue going forward. In addition to a general proliferation in antitrust investigations by the Commission, it is notable that investigations in this sector often involve parallel financial regulatory investigations.
The main reason is that conduct that breaches antitrust laws will typically also breach financial regulatory laws. That is understood to be so with many of the cases mentioned above. In FX, alongside the antitrust investigations, the FCA, the German financial regulator Bafin , and the Swiss financial regulator Finma , also launched their own investigations. Likewise, financial regulators including the FCA have investigated suspected manipulation of trading in SSA 97 and government-issued bonds.
The interplay between antitrust law and financial regulation in this setting is perhaps most clearly demonstrated by the dual role of the FCA. In February , the FCA exercised these antitrust powers for the first time when it fined asset management firms for sharing price-sensitive information about two initial public offerings IPOs and one share placement.
This increases the likelihood of more antitrust investigations to come, and in parallel more financial regulatory investigations. Parallel investigations, concerning the same or related conduct, are therefore a recurrent theme that advisers must be alive to. A recent trend in the context of investigations in the financial services sector in Europe has been an increased focus on prosecuting individuals involved in infringements.
While previously the threat of criminal enforcement against individuals mainly stemmed from the US, individuals now also risk pursuit by European prosecutors, in particular the UK. Lastly, an increasingly important area of EU antitrust law enforcement, particularly following the adoption of the Damages Directive, is private actions for damages. The UK Court of Appeal ruled that the MIFs restricted competition and were unlawful, but remanded those cases to the CAT for reconsideration on the issues of the possible application of article 3 and quantum of damages.
Banks too are now starting to face private antitrust litigation in the EU. Following the imposition of fines in the IRD investigations, there were reports of imminent related private claims, and at least one such case has come to light: In January , the United States FDIC filed a stand-alone claim in the UK alleging that traders at a number of banks colluded on and misrepresented their LIBOR submissions.
The Report is the Commission's first comprehensive assessment of syndicated lending. However, there has been significant interest in this topic at a national level.
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For example:. The Report will be of significant interest to the industry.
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It remains important for financial institutions in this market to ensure they have up to date and appropriate competition law compliance programmes in place, which are fully understood by all employees who engage in origination and syndication activities, and that such programmes are implemented effectively. Ashurst has advised numerous clients on competition investigations and competition law compliance in relation to syndicated lending.
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