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FCA set to be granted new powers to enforce competition laws

The Financial Conduct Authority (FCA) drew one step closer to gaining new powers to regulate competition laws in the UK financial services sector after an amendment to an existing bill passed the House of Lords committee stage.

If passed for royal assent, the bill will give the FCA powers to regulate anti-competitive behaviour. The body would be given enforcement powers as well as the authority to ask the courts to depose a director who has breached competition law.

The proposed regulation would give the FCA the same powers to enforce its rulings as the Office of Fair Trading (OFT). These include the ability to demand information, search a company's premises and impose fines of up to 10 percent of turnover.

The FCA requested the new powers to investigate anti-competitive behaviour, such as cartel activity or abuse of a dominant market position.

The regulator's powers would run in tandem with the Competition and Markets Authority (CMA), which will take on the joint role of the OFT and Competition Commission from 1 April next year.

The new powers would be granted in an amendment to the Financial Services (Banking Reform) Bill, which passed the committee stage on 23 October.

If made law, the amendment would grant the FCA powers to regulate competition in a similar way to other market regulators, such as Ofcom in the communications sector or Ofgem in the energy sector, according to legal firm RPC.

Under current legislation, the FCA can only refer concerns about anti-competitive practices to the OFT. The competition regulator then has 90 days to publish a response and state whether it intends to pursue the allegation.

If approved, the amended bill is expected to be implemented in April 2015 once the FCA has had time to put the systems in place to manage the new powers.

"The concurrent competition powers the FCA would exercise in 2015, alongside the newly established CMA, mark the beginning of a new era in terms of competition regulation," said Andrew Maxwell, a senior associate for RPC.

He said the enhanced powers would bring the regulator in line with other UK watchdogs. "It is also hoped these powers will enable the FCA to become a member of the European Competition Network so that it is better placed to engage with regulatory issues at a wider European level."

"The government hopes the FCA's competition powers will increase its credibility and therefore make it easier to persuade companies to alter their behaviour voluntarily," he added.

Legal firm Bird & Bird warned: "Regulated firms which receive FCA enquiries should beware that such enquiries could lead to competition law investigations and that the FCA's information gathering powers are less constrained than those of the OFT under the Competition Act."

The House of Commons has approved the bill but it must pass the report stage and third reading in the House of Lords before the amendments can be approved and the bill made law.

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