Antitrust Law Daily Wrap Up, ANTITRUST NEWS: UK currency broker facilitated cartel in market for yen interest rate derivatives, EC charges, (Jun 10, 2014)

By John W. Arden, J.D., LL.M.

The European Commission has informed U.K.-based broker ICAP that it may have breached EU antitrust rules by facilitating several cartel infringements in the market for interest rate derivatives denominated in the yen currency, the EC announced today. ICAP received a statement of objections, which provides the EC’s preliminary view but does not prejudge the final outcome of the investigation.

Interest rate derivatives are financial products that are used by banks or companies for managing the risk of interest rate fluctuations. These products are traded worldwide and play a key role in the global economy, according to the EC. They derive their value from the level of a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR) or the Tokyo Interbank Offered Rate (TIBOR) for the yen.

The EC has concerns that ICAP may have been involved in cartels concerning yen interest rate derivatives as a facilitator.

EC action in the sector. In December 2013, the EC imposed fines totaling €669,719.000 on five banks and one cash broker active in the same sector. These six companies had admitted their involvement in cartels in the yen interest rate derivatives sector, which allowed the EC to settle the case with them. In return, their fines were reduced by 10%.

The EC opened proceedings against ICAP in October 2013. That investigation is continuing under the standard (non-settlement) cartel procedure. On May 20, 2014, the EC also sent statements of objections to suspected participants in a cartel for Euro interest rate derivatives.

Procedural background. A Statement of Objections is a formal step in EC investigations into suspected violations of EU rules on restrictive business practices. The EC informs the parties in writing of the objections raised against them and allows the companies to examine the documents in the investigation file, to reply in writing, and to request an oral hearing to present their comments on the case before representatives of the EC and national competition authorities.

If the EC eventually finds sufficient evidence of an infringement, it can issue a decision prohibiting the conduct and impose a fine of up to 10% of a company's annual worldwide turnover.

News: Antitrust