CMA issues provisional findings of anti-competitive behavior in Bloomberg chats

The U.K.’s Competition and Markets Authority has published provisional findings that 5 major banks engaged in anti-competitive behavior through business communications. Global Relay’s Director of Regulatory Intelligence, Rob Mason, unpicks the findings.

26 May 2023 4 mins read
By Rob Mason

In brief:

  • The UK’s Competition and Markets Authority (CMA) has issued provisional findings of anti-competitive behavior by five major banks in online chatrooms.
  • The banks allegedly unlawfully shared competitively sensitive information related to pricing, strategy, and trading of UK bond activities.
  • The CMA stated that this behavior could have denied the benefits of competition and negatively impacted other participants, potentially resulting in lower borrowing costs for taxpayers.
  • Compliance officers in the UK now have an additional regulator overseeing their activities, and market participants need to be more vigilant about the risk of anti-competitive behavior.

0n May 24 2023, the Competitions and Markets Authority (CMA) issued a regulatory first – it published provisional findings that 5 major banks each unlawfully shared competitively sensitive information while participating in Bloomberg chatrooms.

The allegation suggests that at varying times between 2009 and 2013 a number of traders used Bloomberg chats to exchange information, which ultimately broke competition law. The reason for this is that the information shared related to the pricing and strategy for each of the banks’ UK bond trading activities, as well as communications about the buying and selling of UK government bonds.

In a press release issued by the CMA, it said that:

“By unlawfully exchanging competitively sensitive information rather than fully competing, the banks involved in these arrangements could have denied the full benefits of competition to those they traded.”

This appears to be new territory for the CMA and one might ask why they are the body to bring this action. It seems that there is no allegation of market abuse, only that the behavior was anti-competitive and could have negatively impacted other participants, which could then have resulted in lower borrowing costs for the tax payer.

Having said that, the Financial Conduct Authority (FCA) does now have a competition objective, so it may be the case that this was a collaboration between the two bodies, and that the extra powers granted to the FCA a few years ago are now starting to be utilized.

It will be interesting to follow this story as it develops. Fines were mentioned though no amounts were disclosed, and the CMA notes that at this stage there should be no assumption that any of the banks have broken the law.

When it comes to fines, it’s worth noting that the CMA does have the ability to impose fines of up to 10% of annual global turnover for breaches, plus an additional 5% of daily turnover for each day of continued non-compliance in some cases, though it seems unlikely that this behavior will incur huge penalties on this occasion.

The degree to which the CMA’s leniency policy has been applied is also notable. One of the banks alerted the CMA to its participation as per the regulator’s policy which, if they comply with the conditions, could result in discounting or minimizing any fine levied.

Considering the time delay between the behavior which was mentioned as 2009-2013, and the commencement of the investigation in 2018, it will be interesting to understand how this suspicion first came to light.

Key takeaways for compliance

This case of collusion has more than a few similarities LIBOR/FX where information was exchanged between banks in Bloomberg chatrooms.

Anti-competitive behavior is now another risk which market participants need to be more vigilantly aware of. This is likely to result in a further set of controls and policies to identify and flag anti-competition suspicions.

Furthermore, Compliance Officers in the UK now have another regulator looking over their shoulders.

The CMA seem to be generally more active lately, as they were the body who recently blocked the massive Microsoft-Activision deal.

A strong and accurate communications monitoring solution which can effectively identify and flag issues before others means that there is potential for organizations to seek leniency… if they are able to find an issue before their peers!