How we promote effective competition in the interests of consumers.
Promoting effective competition
When competition works well, consumers are empowered as well as informed. They can make sense of the information they receive and can take their business elsewhere if they are not happy. In turn, firms strive to win custom on the basis of service, quality, price and innovation. This helps generate better outcomes for consumers. Markets are open to entry and innovation, and successful, innovative firms thrive, while unsuccessful firms change or exit.
There are many ways in which competition can be weakened. For example, firms may exploit consumers’ difficulties in making the right choices about often complex services.
Healthy competition therefore relies on appropriate levels of consumer protection and integrity in the financial system. Consumers need to know they can trust the firms they buy from and are protected if something goes wrong. This gives them the confidence to exercise choice. It also drives firms to compete hard to win their custom.
When the FCA was created in 2013, we were given an objective to promote effective competition in consumers’ interests in regulated financial services. Our competition objective also applies to regulated claims management activity. We also have a competition duty. Together, this mandate empowers us to identify and address competition problems and requires us to adopt a more pro-competition approach to regulation. The mandate also recognises the potential of competition to advance all our operational objectives.
In April 2015, we were given powers to enforce against breaches of competition law, alongside the Competition and Markets Authority, for the provision of financial services generally. In April 2019, our concurrent jurisdiction was expanded to include claims management services provided in Great Britain.
Promoting competition – what we do
We investigate a range of markets, identifying concerns and taking steps to address features that could inhibit effective competition. Find out more about our Market Studies and our published guidance on our powers regarding market studies: FG15/9 – Market studies and market investigation references.
Helping consumers get the information they need
For example, in our Retirement Income market study we found that a substantial proportion of consumers found the information they received from providers was generally difficult to navigate. We are seeking to address this through better information in the ‘wakeup packs’ typically sent to people six months before they are due to retire.
Empowering consumers to assess the best choice for them
We are working with firms to improve how they communicate with consumers. This focuses on how information is presented to consumers, which could empower them to make effective decisions about the products or services they hold or are looking to buy.
Helping consumers to act on their decisions
When looking at retail insurance services, we found that disclosing the premium consumers had paid the previous year was the most effective way of prompting consumers to shop around, cancel or negotiate their insurance policy. Doing so caused the equivalent of 11-18% more consumers to switch or negotiate their home insurance policy.
Seeking to ensure that firms compete fairly
We have powers to address potential breaches of competition law.
Making it easier for new competitors to launch
We have improved our authorisations processes for retail banks and launched the New Bank Start-up Unit to stimulate competition by helping new, prospective banks to enter the market.
Encouraging innovation in financial services
We launched the Innovation Hub. It helps firms that are innovating in consumers’ interests to navigate their journey to becoming authorised.
We have helped over 200 innovative firms, with 20 of those now authorised. Our regulatory sandbox helps create a ‘safe space’ for businesses to innovate.
Firms – what this means for you
You need to comply with competition law
All businesses must comply with competition law and there can be serious consequences for non-compliance, including fines.
If you think we should look at an issue you’ve come across
Please tell us if you feel that your efforts to compete are being unfairly hampered, or that competition in your sector is not working well for consumers.
We would be interested to hear about anything that could be inhibiting healthy competition. For example, this could arise from common industry practices preventing others doing things differently, specific behaviour of one or more competitors that may be preventing other firms accessing consumers or markets, or regulations that you consider unduly burdensome.