UK competition regulator blocks merger of FNZ and GBST

Maria Nikolova

The Competition and Markets Authority has provisionally found that FNZ’s purchase of GBST could result in a substantial lessening of competition.

Following an in-depth investigation, the UK Competition and Markets Authority (CMA) has provisionally blocked the merger of suppliers of retail investment platform solutions FNZ and GBST.

FNZ purchased GBST in November 2019. Both companies have a significant presence in the UK.

Following its in-depth ‘Phase 2’ investigation, the CMA has provisionally found that FNZ’s purchase of GBST could result in a substantial lessening of competition. This could lead to UK consumers who rely on investment platforms to administer their pensions and other investments facing higher costs and lower quality services.

The merged business would be by far the largest supplier in the UK, holding close to 50% of the market. Although there are differences in the business model that the 2 companies use, with FNZ providing an integrated software and servicing solution and GBST being a software-only provider, the CMA provisionally considers that they compete closely in a concentrated market in which there are few other significant suppliers.

In particular, the CMA’s investigation found that FNZ and GBST have competed consistently against each other in recent tenders to supply major investment platforms in the UK and that customers view them as close alternatives.

The investigation provisionally found that the merged business would face limited competition, with only one other supplier (Bravura) offering similar capabilities. Switching retail investment platform solutions is an expensive and complex process. The reluctance of customers to change suppliers, as a result of the risks involved, can make it difficult for smaller or less well-established firms (including suppliers active outside the UK) to enter or scale up in the UK.

In reaching this provisional decision, the CMA analysed a wide range of evidence looking at how closely these firms compete, including tender data and the companies’ internal documents. It also engaged with customers, competitors, and other stakeholders to inform its findings.

The CMA has set out potential options for addressing its provisional concerns, which include requiring FNZ to sell all or part of GBST.

Views are invited on the provisional findings by August 25, 2020 and on the notice of possible remedies by August 18, 2020.

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