£28m fine for RBS in price-sharing case underlines tougher competition regime

For years competition policy in the UK seemed to be a case of plenty of talk but little action. But the Office of Fair Trading's (OFT) move last month in fining Royal Bank of Scotland (RBS) a hefty £28.6m for breaching competition law is the latest in a series of recent reminders that the years of hot air are finally translating into a more robust enforcement policy.

As Slaughter and May competition partner Michael Rowe acknowledges: "The OFT is increasingly seen as a robust and effective regulator. In the boardroom over the last few years people have sat up and taken notice. Directors can no longer afford to ignore competition law – the financial penalties and risk of imprisonment are too severe."

The RBS decision was notable for several reasons, marking the first major case against a financial services company, a sector that has been in the regulator's sights for a long time but, until recently, with little to show for it. The case, which began two years ago and involved the illegal sharing of pricing information on commercial loans to solicitors and accountants between two individuals at Barclays and RBS, will be viewed as symbolic.

For one, the high level of the fine has attracted attention, given that the OFT was only pursuing data-sharing rather than a full-blown conspiracy to fix prices. Also significant is the use of the OFT's leniency policy, which saw Barclays gain immunity from action in return for providing the initial tip-off, a tactic that echoes established US-style enforcement.

Competition advisers also see the case as underlining the OFT's desire to achieve an effective deterrent by putting together the kind of high-profile cases that will hit the headlines. This has been particularly evident with anti-cartel activity, most prominently when British Airways (BA) was hit last year by a £121.5m fine for price-fixing fuel surcharges after industry rival Virgin turned whistleblower. A criminal trial involving four BA defendants kicked off in court this week, the first time that the OFT has used powers gained to bring such cases.

Other cartel investigations have resulted in the OFT last year fining 103 construction companies a total of £129.5m for bid rigging activity, while the regulator is due to report its findings on two cartel investigations within the dairy and tobacco industries within weeks. Investigations in this area span an eclectic mix of industries and are perhaps indicative of the commitment from the OFT and Brussels to stamp out anti-competitive behaviour while focusing on issues key to consumers. By consensus, the OFT is as focused on putting pressure on entire industries through high-profile investigations as it is individual regulatory breaches where it can be argued that consumers are suffering.

There is also the expectation that there will be an increasing number of follow-on actions from private companies or individuals seeking redress where there have been regulatory findings of cartel behaviour.

For many competition veterans, this underlying shift towards a tougher enforcement regime looks set to remain regardless of which party wins the general election, with the Conservative Party in recent weeks floating the idea of a new investigation into the financial services industry. As Freshfields Bruckhaus Deringer's Deirdre Trapp comments: "[The OFT] has had a pretty tough agenda for the past three to four years and it seems that in this economic environment they are still keeping in line with that agenda and won't be put off."