The UK's Financial Conduct Authority has opened its first case - against four asset management firms - with the aid of its powers under the Competition Act 1998. The firms are Artemis Investment Management, Hargreave Hale Ltd, Newton Investment Management Ltd and River & Mercantile Asset Management.

The FCA's opening salvo - mandated by the Act - is to be found in a "statement of objections" that it has just issued. This is a document that sets out why and how it thinks that this-or-that firm might have broken the law. It is supposed to relate the facts on which the FCA relies, the objections it raises, the action it proposes, and its reasons for proposing that action.

In this realm the FCA does not reign supreme: the Competition and Markets Authority is also empowered to open cases in accordance with the Act, and indeed specialises in doing so. The Act prohibits conduct between firms that may damage competition in the UK. Chapter I prohibits anti-competitive agreements and concerted practices between businesses which have as their object or effect the prevention, restriction or distortion of competition within the UK. Article 101 of the Treaty on the Functioning of the European Union (TFEU) covers equivalent agreements or practices which may affect trade between EU member states. Any business found to have infringed the prohibitions in the Competition Act 1998 or Article 101 of the TFEU can be fined up to 10% of its annual worldwide group turnover. This is part of a growing trend towards extraterritorial punishments that is most famously evident in the upcoming General Data Protection Directive, itself an EU initiative.

The FCA believes that in 2015, Newton Investment Management, Hargreave Hale and River & Mercantile Asset Management disclosed and/or accepted information about the price they intended to pay for shares in relation to one initial public offering (IPO) and a placing. It also believes that in 2014 Artemis and Newton shared information about the price they intended or were willing to pay for shares in relation to another IPO. It remains to be seen whether the FCA finally reaches an "infringement decision," a phrase which also presumably comes from the Act. The route by which the FCA obtains information will remain opaque to the public, but it will announce its final decision in due course.

Only people who are "in a position materially to assist the FCA’s assessment of the case" may ask for a redacted copy of the statement of objections by contacting the FCA no later than 12 January. They must do so with an explanation of any help they might offer.

The usual procedure

The FCA is likely to follow the same procedures that the CMA does. When a source comes up with some information, the Act obliges the CMA to consider the issues in brief and gather some informal evidence. In deciding whether to proceed with a formal investigation, it has (according to s25 of the Act) to adhere to some so-called 'prioritisation principles' which take into account the likely effect of the investigation in the form of direct or indirect benefits to consumers, the strategic significance of the case, the risks involved in taking on the case, and the resources required to carry out the investigation. Once it has decided to open a formal investigation, it can publish a case-opening notice, issue written requests for information, conduct information, visit and search premises and analyse the evidence.

It then decides where there is enough evidence to go further. If there is, it issues a statement of objections in the same fashion as the FCA. This sets out its provisional findings, supporting evidence and proposed action. The parties then can exercise their right to replay, also guaranteed by the Act. At this stage the regulator might issue a draft penalty statement.

Then the regulator will decide whether, in view of the parties' statements, there is enough evidence of an infringement for it to proceed further. There might be no grounds for action, in which case it will issue that decision in written form to the parties and publish a 'non-confidential version,' to use the Act's phrase. On the other hand, it might reach an 'infringement decision,' in which case it will inform people in the same manner. The parties have the right to appeal - not to a real court but to a tribunal set up for the purpose.