On 4 February 2015, the European Commission fined interdealer
broker ICAP EUR 14.9m for its role in facilitating a cartel amongst
banks trading interest-rate derivatives linked to Yen Libor.
In December 2013, five banks (UBS, RBS, Deutsche Bank, Citigroup
and J.P.Morgan) and RP Martin (an interdealer broker) settled with
the Commission and were collectively fined EUR 670m for their
participation in a cartel relating to Yen interest-rate derivatives
(YIRD). The Commission found that over the period
2007 to 2010, each of the parties had participated in one or more
of seven separate infringements relating to Yen Libor, lasting from
one to ten months. The anticompetitive conduct consisted of
discussions between traders at the participating banks regarding
their Yen Libor submissions, as well as the exchange of
commercially sensitive information on trading positions or future
Yen Libor submissions. UBS escaped a fine of EUR 2.5bn as the
whistleblower (see our Newsletter of December 2013).
ICAP did not participate in the settlement and the Commission
continued its investigation against it. The Commission found that
ICAP facilitated six of the seven YIRD infringements, in particular
by:
- disseminating misleading information to certain Yen Libor panel
banks presented as 'predictions' or 'expectations' of where the Yen
Libor rates would be set (so-called "run throughs"), with the aim
of influencing panel banks not participating in the infringements
to submit Yen Libor rates at a certain level;
- using its contacts with several Yen Libor panel banks not
participating in the infringements to influence their Yen Libor
submissions; and
- serving as a communications channel between traders at two of the
participating banks, thereby enabling the anticompetitive practices
between them.
The Commission's decision is interesting for a number of reasons.
First, it confirms the Commission's existing practice of fining
companies involved in a cartel as a facilitator/organiser. Swiss
company AC Treuhand has twice been fined for such facilitating
activities, in respect of cartels for organic peroxides and heat
stabilisers (see our Newsletter of December 2009). Those fines were
both confirmed by the General Court, although the heat stabilisers
judgment (see our Newsletter of March 2009) is currently on appeal
to the Court of Justice. Unlike AC Treuhand, ICAP did not
merely act as a "secretariat" to the cartel, but was an actor on
the market concerned by the cartel: even though ICAP did not itself
trade YIRD, as an interdealer broker it set up trades between the
banks. This did not lead the Commission to depart from its previous
decisions and it found that ICAP had nonetheless acted as a
facilitator.
Secondly, the Commission normally calculates the fine against an
infringer by reference to its turnover in the relevant market.
However, in the absence of relevant turnover, the Commission
followed its approach in earlier decisions and relied on its
discretionary power to set the fine as a lump sum to "reflect
the gravity, duration and nature of ICAP's involvement as a
facilitator as well as the need to ensure that the fine has a
sufficiently deterrent effect".
Lastly, ICAP lodged a complaint with the European Union Ombudsman,
in respect of the Commission having first announced the settlement
in December 2013 while continuing with its investigation against
ICAP, and then issuing its infringement decision 14 months later.
ICAP argued that this gave rise to concerns about due process and
bias in the Commission's investigation. On 25 February 2015 the
Ombudsman announced that she will not be opening an investigation
into this complaint. The EU Ombudsman previously opened a case (on
31 July 2014) in a similar complaint by Credit Agricole in the EIRD
investigation, which is ongoing.
Please click on the links below for the other articles in
the March 2015 competition newsletter:
