Yudu - Journey to the FCA

THE CREATION OF THE FCA

But the more consumers can be empowered, the greater buyer power they can exert, for example through shopping around and seeking the best deal.

• No single firm (or small group of firms together) dominates the market or can limit opportunities for competitors to grow market share. The nature or business model of potential competitors is also important for shaking up established patterns of competition and acting as a catalyst for change.

• Firms’ conduct is focused on meeting consumers’ genuine needs. We expect firms to focus their efforts on meeting these needs and attracting new customers; not seeking new ways to exploit weaknesses in consumer behaviour (for example, through the use of hidden charges).

• The regulatory framework minimises or limits other distortions to competition, such as those that may arise if firms can exploit their greater knowledge and understanding of products and markets. Such advantages in information may, for example, lead to consumers simply accepting what they are offered rather than shopping around and seeking out a better deal.

Embedding competition in our regulatory approach To fulfil our competition objective, we will need to expand our analysis of markets. When this raises concerns about whether competition is effective in delivering value or quality or whether consumers are getting a fair deal, we will conduct a sound and thorough study of the market and, where possible, design pro-competitive remedies.

A market study will require different information from firms than the FSA currently collects, and must consider consumers’ and firms’ behaviour, the structure of the market, and pricing. To do this we will need to develop our skills and expertise in competition.

Our competition duty means that whenever we are working out how to advance our operational objectives we will consider doing so through promoting competition. We will weigh up the impact on competition of new measures we propose for dealing with a particular problem, using an enhanced approach to our market failure analysis.

When considering how to improve consumer outcomes, we will look at whether improving competition could get the same results as other action we could take instead. Our approach will recognise that while regulation that corrects underlying market failures is necessary for competition to deliver good outcomes for consumers, ill-designed or disproportionate regulation can prevent competition working well. We will look out for such regulation when carrying out post-implementation reviews and seek to replace it with pro-competition alternatives where appropriate.

If we decide to intervene to improve competition, we will be able to use the existing range of tools, including rule-making powers. Interventions in relation to competition are likely to be market-wide, covering suppliers of competing/substitute products. Our actions will be bold and wide-reaching, involving packages of measures that take account of the full range of problems in a market.

Where some causes of poor consumer outcomes fall outside our remit, or where a more radical remedy is required, we will use our power to refer problems to the competition authorities for review and possible action.

Our relationship with the Office of Fair Trading We will strengthen the way we work with the Office of Fair Trading (OFT) and the future Competition and Markets Authority. Early next year, the FSA intends to publish a draft Memorandum of Understanding that sets out how the FCA and the OFT will develop our respective roles and how we aim to achieve a complementary and consistent approach.

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Foreword by John Griffith-Jones

Introduction by Martin Wheatley: Our vision for the Financial Conduct Authority

Chapter 1: The creation of the FCA: Spotlight on some of our new powers

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Chapter 2: Protecting the perimeter

Chapter 3: Ensuring firms continue to meet our standards

Chapter 4: Taking action against firms that do not meet our standards

Chapter 5: Building our understanding of the markets

Chapter 6: Maintaining effective relationships

Chapter 7: Accountability, transparency and measuring our success

Annex A: Specific questions for consultation

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