Financial sector still in focus of antitrust authorities

 

On 4 February 2015, the European Commission imposed fines of 14.9 million Euros on UK-based broker ICAP. The European Commission accuses the London financial enterprise of having facilitated six Yen interest rate derivative (YIRD) cartels, thereby breaching EU antitrust rules.

Background

Back in December 2013 the European Commission previously imposed fines totalling approx. 670 million Euros on RBS, Deutsche Bank, JP Morgan, Citigroup and on the broker RP Martin for manipulating the LIBOR rate for Japanese Yen (JPY). Another participant in the cartel, UBS, was given immunity from the fine as leniency applicant.

Benchmark rates such as JPY LIBOR and Euroyen Tibor serve as a basis to reflect the cost of interbank lending in JPY and are very common on the international financial markets. These benchmarks reflect an average of the quotes submitted by the relevant panel banks on a daily basis.

Involvement of ICAP

Following additional investigations, the European Commission now accuses the broker ICAP of having facilitated six out of a total of seven bilateral infringements of EU antitrust law. For instance, ICAP is suspected of having submitted misleading “predictions” or “expectations” regarding the JPY LIBOR rate to JPY LIBOR panel banks not involved in the infringements. ICAP thereby allegedly caused those banks to quote JPY LIBOR rates in line with those adjusted “predictions” or “expectations”.

In addition, ICAP allegedly also served as a communication channel between Citigroup and RBS traders, thereby enabling the anticompetitive conduct of the two banks.

Significance

The decision clearly shows that the new Commissioner in charge of competition policy, Margrethe Vestager, will resolutely remain on the same course as her predecessor, Joaquín Almunia, with regard to the prosecution of cartels in the financial sector. Almunia previously announced in the course of what is now known as the LIBOR scandal in December 2013, that the fines will send

“[…] a clear message that the Commission is determined to fight and sanction these cartels in the financial sector. Healthy competition and transparency are crucial for financial markets to work properly, at the service of the real economy rather than the interests of a few.”

It is very likely that the European Commission will continue to adhere to this decision and that fighting cartels in the financial sector will remain a focal point of European Commission practice. The amount of the fine imposed on the broker ICAP also shows that the European Commission is not going to limit itself to imposing sanctions on “large players” of the financial sector, or just on credit institutions. This was already foreseeable back in December 2013 when a fine was imposed on the broker, RP Martin.

Until recently, antitrust law played a minor role, if any, in the banking sector. However, as the pressure increases from the Commission’s investigations and sanctions – the focus of which will probably be a point of reference for national cartel authorities in future – the significance of antitrust law for the financial sector is growing as well. This means that the importance of extensive and effective compliance measures taking into account the requirements of antitrust law also increases, and it should by no means be underestimated.