Competition considerations in product intervention

With its consumer protection and competition objectives, the FCA's aspirations should be fully aligned with those of the OFT.  In a speech on Competition in the financial services sector this week, Clive Maxwell (Chief Executive designate of the OFT), referred to the combined consumer and competition aspects of the OFT's mission to make markets work well for consumers.

So, it seems that consumers should rest easy - there will be not one but two authorities with their best interests at heart (at least until the demise of the OFT in 2014) – and retail firms should be pleased that their regulators seem to be, at least tasked with, heading in the same direction.   But it's not that straightforward.

In his speech, Mr Maxwell referred to the OFT's forthcoming review into the personal current account market. This will likely result in further changes to the product and the way it is sold. Going forward the FCA would be able to use its much heralded product intervention powers to make rules to the same or similar effect. While this has the obvious disadvantage of possible duplication of effort and the potential for inconsistent findings, one would hope that the FCA and OFT would seek to avoid those risks by deciding between themselves who is best placed to take action in particular circumstances.

But if this is the FCA (who may be able to take speedier action with its temporary intervention powers), how will any competition issues arising be addressed? It  has been publicly acknowledged by the Government that the FCA will need to build competition experience and expertise and that the "ability to draw on the expertise of the OFT is likely to be particularly important in its early years when the FCA will be adjusting to its new responsibilities". 

A neat solution, we suggest, at least in the short term, would be to beef up the existing right of the competition authorities to scrutinise new rules, with a specific duty in the new product intervention powers for the FCA to consult the competition authorities before making the rules.