U.S. and EU Antitrust Enforcement: What Role in a More Heavily Regulated Financial Sector?

Todd Fishman, Olivier Fréget, David Gabathuler, Dec 22, 2011

The global financial crisis has led regulators and legislators in the United States and in the European Union to introduce a number of rules and regulations aimed at addressing market failures and improving regulatory enforcement in the banking and finance industry. The increasing convergence and complementarity of competition law and regulation across many regulated sectors, and the perceived commonality in interest, should mean that the antitrust authorities are strongly positioned to play an active and wide-ranging role alongside the financial regulators. Yet there is no consensus on whether unfettered competition in the banking sector will produce an optimal outcome in terms of financial stability. Some believe that intense competition may be detrimental to stability by causing excessive risk taking, while others argue that too much oversight into the financial industries will chill investment activities and stifle the markets. The apparent conflict between competition policy and a fundamental aim of financial regulation may explain, in part, why there has historically been a resistance to allowing competition policy to intervene heavily in the financial services sector. In particular, there are concerns regarding the ability of antitrust rules to address, quickly and effectively, conduct connected with deficiencies in market structure and transparency. This paper takes a comparative approach and examines how the enforcement of the competition rules in the United States and in the European Union could be constrained-on conflict grounds-by broadly-based rules and regulations addressing perceived market failures in the financial sector. It then briefly details the enforcement action taken by the U.S. and EU antitrust authorities in the financial sector following the advent of the economic crisis. Finally, the paper concludes by discussing whether the apparent differences between the two systems may lead to divergent enforcement outcomes, particularly in terms of the level of scrutiny by the respective antitrust authorities. This discussion also highlights the risk of conflicts arising from the divergent interests of financial regulators and antitrust authorities.