Platform engine FNZ has submitted its appeal against the Competition and Markets Authority’s order to sell off its recent acquisition and rival GBST.
In its appeal submission filed this week, FNZ said the acquisition of GBST does not give rise to a “substantial lessening of the competition (SLC).”
It also submitted that the market definition in the CMA’s report was fundamentally flawed and the platform allocation errors that have been acknowledged by the CMA were “sufficient in themselves to undermine the SLC finding.”
In January the CMA admitted 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.”
In its appeal, FNZ said the nature of the flaws in the final report from the CMA are “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.
In November 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 the CMA found that the deal raised “significant competition concerns” in the supply of retail platform solutions to investment platforms in the UK.
However, FNZ has said in its appeal that it and GBST do “very different things” and therefore the acquisition “will not harm competition.”
According to the appeal 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 notes 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 appeal document argues that in comparison GBST is a software business and it 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).
The appeal documents also note that over the last 10 years FNZ has participated in over 50 tenders in the UK, and yet has lost only one tender to GBST in 2013.
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