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