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OFT to probe anti-competitive effect

The Office of Fair Trading is to review the effects of depolarisation because it is concerned that the new rules could have an anti-competitive effect on the market.

This is despite the fact that it ruled against polarisation in the first place.

In its response to the FSA’s consultation on depolarisation, the OFT says the rules could have an anti-competitive effect where firms use the market average to co-ordinate pricing or commission. Aifa and the LIA say there is a danger that the market average could be seen as the norm, forcing IFAs to cut income.

The OFT says it will be reviewing the rules to ensure that they do not grant exemption from the Competition Act 1998. Aifa says it will be gathering evidence to see if such an effect does emerge.

But the FSA does not believe its rules encourage anti-competitive behaviour, saying the menu and market average combat the risk that competition might be based on securing distribution through higher commission rather than value to consumers.

LIA head of public affairs John Ellis says: “I think it is anti-competitive – the trouble with publishing a market average is that it can easily be seen as a norm.”

Aifa director general Paul Smee says: “Aifa has consistently warned the FSA that the market average could have an anti-competitive effect and we are not surprised at the OFT’s comments. We will be collecting evidence of any such effect.”

FSA director of retail policy Dan Waters says: “The OFT has its own view and I can see where they are coming from but we do not expect this to happen. We will be monitoring the situation.”

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