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EU warning to financial services industry to keep its house in order

16 May 2011

EU Competition Commissioner Joaquin Almunia today warned that ex ante regulation of the financial services industry is no substitute for competition compliance.

In a speech to the Cass Business School, Almunia delivered a stark reminder to the financial services industry that compliance with the obligations of the financial regulators does not obviate the need for continued vigilance as regards general competition laws. Almunia argues that competition authorities and financial regulators need to work together to "promote fair, stable and efficient environment for financial markets across Europe", drawing on the dual and mutually enforcing approach of an ex ante regulatory regime, coupled with the power of the competition authorities to undertake ex post investigations into suspected breaches of competition law.

Of course the financial services industry is no different from other regulated industries within the UK – for example OFCOM has statutory powers under the Communications Act both in respect of ex post competition and ex ante regulatory enforcement. In his speech, Almunia shines a light on the regulatory measures taken by the European Commission to increase transparency and prevent future accumulations of untoward risk, but also highlights the role of competition policy to regulate actual behaviour of market participants. There is a particular focus in this regard on access to and control of key market data, including the dangers inherent where too much key proprietary information is controlled by a single (or relatively few) entities; Almunia makes reference to a number of ongoing competition cases, including those against Standard & Poor's in respect of allegations of excessive pricing for access, Thomson Reuters in respect of restrictions imposed on the use of Reuters Instrument Codes and Markit , the leading provider of financial information in the CDS market.

The speech is a timely reminder that the long arm of competition law reaches into all sectors, including those subject to intensive sector specific regulation and that the competition authorities will not hesitate to prosecute cases of collusion or abuse of dominance to ensure that markets develop and operate efficiently and above all to ensure long term stability and effective growth.