On 21 April 2017, five aviation insurance brokers announced that they are under investigation by the FCA on suspicion of sharing competitively sensitive information. This is the first time that details have emerged of the FCA pursuing a case using its competition law enforcement powers.
Under its concurrent competition enforcement powers, the FCA can enforce the prohibitions on anti-competitive behaviour under the UK Competition Act 1998 (CA98) and the Treaty on the Functioning of the EU (TFEU) in relation to the provision of financial services in the UK and it can impose fines of up to 10 per cent of worldwide turnover. The FCA may exercise its CA98 powers either alone or in parallel with its regulatory powers under the Financial Services and Markets Act 2000 (FSMA).
The FCA gained powers to enforce competition law more than two years ago on 1 April 2015. However, despite gathering very considerable competition law enforcement resources in terms of staff and budget, until recently there had been almost no public signs of the FCA's enforcement activity.
With the exception of concerns in the syndicated lending sector, which were resolved through "on notice" letters to the companies involved, the FCA has made no public announcements in relation to any specific investigations, and has typically placed companies subject to investigation under strict obligations of confidentiality. The FCA indicated in March 2016 that it was on the point of opening a competition investigation, but provided no details.
Nevertheless, five insurance brokers (Aon, Jardine Lloyd Thompson, Marsh, UIB and Willis Towers Watson) have issued statements confirming their involvement in an ongoing FCA competition investigation, with two of them indicating that the FCA had conducted an "on-site inspection" at their premises earlier in the month. Such an inspection usually involves an unannounced "dawn raid" by officials with powers to search for and seize evidence.
In its public statement, Marsh said that:
"The FCA indicated that it had reasonable grounds for suspecting that Marsh Limited and others have been sharing competitively sensitive information within the aviation (re)insurance sector."
Under competition law, the exchange of commercially sensitive information between competitors is often found to constitute an anti-competitive agreement or concerted practice "by object", in breach of both the Chapter I prohibition of the CA98 and Article 101 of the TFEU. However, there are special rules in the insurance sector which permit certain types of co-operation and sharing of information between insurers, for example in relation to the compilation of information on risk.
In its 2017/18 Business Plan, published on 18 April 2017, the FCA said that it is pursuing its objective of promoting effective competition in three main ways:
- through market studies, to evaluate how competition is working in certain sectors;
- through enforcement of competition law against anti-competitive practices; and
- through ensuring that regulation does not unnecessarily act as a barrier to competition.
The Business Plan provides few indications of the FCA's current competition law enforcement activity or sectors of potential interest, and notes only that it opened its first enforcement case in 2016/17.
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