The Competition and Markets Authority has announced that it is launching an in-depth investigation into the market(s) for personal current accounts and small business banking. The full decision is here.
This is not a massive surprise given that the CMA was only confirming the provisional decision it made in July (you can find all the papers from the ‘Phase 1’ market study on the CMA’s investigation page) although, as the BBC notes, some banks had responded to the consultation on that decision to argue that a full investigation would be unnecessary. While the investigation will proceed, the CMA has made some tweaks to its terms of reference based on the consultation responses, to keep it focused “more squarely on core banking products, such as business current accounts and lending to SMEs”. The Telegraph highlights the potential consequences of the investigation for the ‘big 4’ banks, which potentially include a forced break-up.
The in-depth investigation process replaces the old ‘Phase 2’ market investigation that was carried out by the Competition Commission, before the Commission and the OFT were merged to form the CMA. The new process is carried out by a specially-appointed ‘Market Reference Group’ made up from the CMA’s expert panel of independent members, with the intention that the investigation will take the same de novo approach the Commission took (i.e. with no presumption that the ‘Phase 1’ conclusions are correct). Once appointed, the Group can be expected to set about seeking documentary, written and oral evidence from banks and other interested parties.
The Group will also set the timetable for its investigation, though it must be it be completed within 18 months (e.g. by 5 May 2016). That’s per the procedural requirements of Part 4 of the Enterprise Act 2002, as revised by the Enterprise and Regulatory Reform Act 2013 which established the CMA (unfortunately legislation.gov hasn’t consolidated the changes in its version of the EA02 yet!). That deadline can be pushed back by up to 6 months, but only if the CMA considers there are “special reasons” for doing so per s.137 EA02.
The orders the CMA can ultimately make are set out in Schedule 8 (which has also been amended, so there are other potential outcomes in addition to those listed at that link).
These provisions are all explained in the CMA’s markets guidance, though unfortunately (like on legislation.gov) the previous OFT and Commission guidance has not yet been consolidated with the guidance on the new powers, so juggling them can be quite a task!
If you have any queries on what happens next, or if you expect to be participating in the investigation and require any assistance, please feel free to get in touch.
On November 6, 2014