The Obligation To Report Significant Breaches Of Competition Law – What Does Significant Actually Mean?

Amendments to the FCA Handbook SUP 15 now mean that a regulated firm is now under the express obligation to notify the regulator if it "has or may have committed a significant infringement of any applicable competition law".

The problem is that the meaning of the word "significant" is heavily dependent on context (for example, a significant amount of dirt on the sole of a shoe and on a surgical scalpel are two very different things), but such context is in short supply. The wording of the obligation mirrors a previous obligation to report breaches of the Handbook's principles that pre-dates the FCA's competition law competence, but competition law has its own, separate, body of jurisprudence. And while the Handbook notes that actual & potential effects on competition, customer detriment, duration and implications for the firm's systems and controls are all relevant to the determination of significance, it does not provide firm guidance on the quantity in which any of these elements must be present in order to ensure significance. Further context can, however, be found elsewhere in the publications and decisions of the longer-established competition authorities, as well as from previous regulatory decisions of the FCA and FSA, allowing regulated firms to come to a pragmatic view.

Who must report and for what?

First, it is worth noting that a "significant infringement" of competition law is not restricted to regulated activity. A much-discussed aspect of the FCA's concurrent competition powers is that they apply beyond regulated activity, to an undefined "financial services" sector. The reporting obligation will have the same issue: while being bound by the Handbook's rules arises from being regulated, the competition issue triggering the obligation does not have to arise from a regulated activity. Only regulated members of a cartel are obliged to report it: the notification obligation is all about who you are, rather than whether the infringing activity is regulated or not.

Competition law infringements also apply to the undertaking (i.e. the economic entity, usually the corporate group) rather than to particular legal persons. This means that, technically, regulated entities appear to be bound to report the breaches of their affiliates (whether regulated or not), given their joint liability for those affiliates' behaviour.

Conduct of minor significance and "accidental" breaches

Failures to abide by the Handbook's pre-existing reporting obligations have tended to be punished alongside the breach that was not...