Platform technology provider FNZ has launched an appeal against the Competition and Market Authority’s decision to block its merger with fellow tech firm GBST.
In December last year, FNZ submitted a notice of application to the Competition Appeal Tribunal to challenge the competition watchdog’s ruling which instructed FNZ to sell off GBST.
FNZ acquired GBST in November 2019 after getting the go ahead from the Australian supreme court of New South Wales. The deal was worth around £150m.
The deal was first announced in July of the same year and was set to bolster FNZ’s position in Australia and the UK.
But here the purchase raised competition concerns and the CMA launched an in-depth investigation, which was conducted in two phases.
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FNZ sits behind the likes of Aviva and Standard Life, while GBST provides technology for platforms including those of Aegon and Novia.
The watchdog suggested the acquisition could lead to “higher prices, fewer options and less innovation” in the UK platform tech space.
The CAT noted it had received an application for review from FNZ on 2 December 2020.
FNZ has called for the CMA’s decision to be quashed and gave four grounds for review. It has suggested the CMA failed to “properly define the relevant market”.
The competition watchdog has since admitted it has “identified certain potential errors” in its market share calculations.
On Christmas Eve 2020, it said it will ask the CAT to send the case back to it so it can reconsider its view.
Money Marketing understands the potential errors in its final report are in relation to “inconsistent sources of evidence” about which customers were supplied by which supplier.
The CMA will ask CAT to set aside the watchdog’s “substantial lessening of competition” finding.
The next step will be for the tribunal to issue an order making the remittal.
James Hay, Interactive Investor and Fundscape were among those to respond to the CMA’s provisional findings and possible remedies, which included paths such as FNZ selling all or part of GBST.
In its final report the CMA decided the appropriate remedy was a “full divestment” of GBST.
FNZ is being represented by lawyers Slaughter and May, who previously outlined that the CMA had misunderstood the market by defining it “too narrowly”.
In its appeal application FNZ is described as a “global provider of transaction and custody services to support the investment platform sector”.
FNZ was established in 2003 in New Zealand. Since 2007, it has been based and headquartered in the UK.
GBST is an Australian software company which was listed on the Australian Stock Exchange before being acquired by FNZ. In the UK, it operates through four entities. “GBST offers a software only solution and does not offer services”, the CAT summary document states.
FNZ acquired the whole issued share capital of GBST on 5 November 2019 following a competitive bidding process. Exactly a year later the CMA published its final report about the deal.
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Prior to its acquisition, GBST had received a £94m bid from fellow Australian platform technology provider Bravura Solutions.
It had also been in discussions with SS&C Technologies.
The CMA would have had until 4 January 2021 to file a defence. But it requested longer and the independent judicial body published an order which extended the deadline to 15 January 2021, to reflect the Christmas period.
In tribunal proceedings, if the CAT quashes whole or part of the decision being challenged it can refer the matter back to the original decision maker with a direction to reconsider and make a new decision.
With the case ongoing, both the CMA and FNZ declined to comment.
FNZ claims that:
- The CMA erred in law by reaching an unreasonable determination of the counterfactual. It had no reasonable basis for:
- concluding that an acquisition of GBST by SS&C Technologies was materially the same as the continued independence of GBST;
- not selecting an SS&C merger as the most likely counterfactual; and
- not addressing the likelihood and importance of a Bravura/GBST merger.
- The CMA erred in law and/or acted irrationally by failing to properly define the relevant market, by:
- failing to carry out an appropriate market definition exercise as required by the Merger Assessment Guidelines,
- ignoring the fact that even on its own definitional basis there are three categories of customer, not two: Retail, Non-Retail and Borderline (mixed retail/non-retail), and
- the market definition was inadequately reasoned, incoherent and unduly vague.
- The CMA erred in law and/or acted irrationally by finding an actual or expected lessening of competition without investigating the magnitude of the subset of the market affected by the alleged weakening of competition in relation to the size of the market as a whole.
- The CMA made an error of law in directing the full divestment of GBST.
Source: Competition Appeal Tribunal summary of FNZ application
