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FNZ submits detailed case against merger ban

Platform engine FNZ has submitted a detailed case document against the Competition and Markets Authority’s order to sell off its recent acquisition and rival GBST.

In its latest submission, filed this week and produced by law firm Slaughter and May, FNZ argues that the acquisition of GBST does not give rise to a “substantial lessening of competition (SLC).”

It also submits that the market definition used in the CMA’s original report was fundamentally flawed.

FNZ added that the platform allocation errors that have been acknowledged by the CMA were “sufficient in themselves to undermine the SLC finding.”

In January the CMA said that it had identified “certain potential errors” in its market share calculations. It said this was as a result of the supply of inconsistent information during the CMA’s investigation.

FNZ said that, “the CMA’s finding of an SLC and its decision on remedies have been quashed and must be determined afresh.”

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In its latest submission as part of the ‘remittal’ or ‘second look’ inquiry now under way, FNZ said the flaws in the final CMA report were, “as such that FNZ anticipates that that a significant amount of new evidence will need to be collected as part of the remittal inquiry.” The platform engine added that it intends to make further submissions.

FNZ appealed against the CMA decision in November. Later the CMA asked the Competition Appeal Tribunal (which was considering the FNZ appeal) to refer the matter back to the CMA following the discovery that some data used for the original decision may not have been accurate when supplied.

In its original decision the CMA ordered platform engine provider FNZ to sell rival and takeover target GBST over fears that millions of UK pension savers and investors could face worse service and higher prices as a result of the merger of the two major ‘platform engine’ players. 

In its final report on the merger the CMA found that the deal raised “significant competition concerns” in the supply of solutions to investment platforms in the UK. 

However, FNZ has said in its new submission that it and GBST do “very different things” and therefore the acquisition “will not harm competition.”

According to the remittal documents, FNZ offers a fully-outsourced Platform-as-a-Service (PaaS) solution. This means that it assumes full responsibility and all of the associated operational and regulatory costs and risks, for a wealth management platform’s investment processes along with the supporting software and infrastructure.

The platform engine also noted that it is an FCA-regulated, MiFID investment firm and is permitted by the FCA to hold client money, deal in investments, safeguard and administer assets, and send dematerialised instructions in relation to investment transactions.

The remittal document argues that, in comparison, GBST is a software business and does not offer any of the services that form the core part of FNZ’s proposition. Unlike FNZ, it is not regulated by the FCA, does not need to maintain regulatory capital/liquidity and does not generally charge by reference to the value of assets on the platform, instead charging a licence fee.

Editor’s Note: story updated 5 pm 18.02.21 to make clear that FNZ’s latest case submission is related to the remittal inquiry on why the CMA should reconsider its decision to bar FNZ’s merger with GBST. 

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