UK wealth platform FNZ has criticised the Competitions & Markets Authority (CMA) after the watchdog stopped its merger with fintech firm GBST.
Earlier this month, the regulator said that allowing the two firms to combine would significantly decrease competition in the market, by creating the largest retail wealth tech supplier in the UK.
The CMA added that, combined, the two companies would hold nearly 50% of the market.
But FNZ argued that the CMA’s claims regarding a lack of competition come from its “narrow” view of the retail market, which is “at odds” with the evidence.
The M&A deal between FNZ and GBST was agreed in July 2019 and has been under scrutiny ever since.
FNZ describes watchdog measures as ‘unreasonable and disproportionate’
The wealth tech business claimed that the regulator did not take into consideration firms catering to the non-retail market, as “platform customers are the same or very similar” between the two, with a vast choice of alternative providers.
The firm also rebuked the CMA’s claim that it is a close competitor of GBST’s, and that any loss caused by the merger could only be the “constraint exercised by FNZ on GBST” and the impact on the latter’s clients, rather than on the wider retail wealth tech market.
The watchdog proposed a series of solutions to FNZ, which include selling part or the entirety of GBST.
But FNZ claimed the measures were “unreasonable and disproportionate”.
This is because FNZ believes there are other ways through which it can address the regulator’s concerns that are “less onerous” and “fully effective”.
GBST surprises by siding with CMA
Surprisingly though, GBST sided with the competition regulator.
In its response to the CMA, the tech provider said: “GBST agrees with the CMA’s preliminary view that a full divestiture of GBST would represent a comprehensive and effective remedy to all aspects of the significant loss of competition and resulting adverse effects that the CMA has provisionally found.
“In fact, a full divestiture of GBST is the only appropriate remedy, as this represents the smallest viable, standalone business that can compete effectively on an ongoing basis with FNZ.”
The firm’s reply goes against all the arguments put forward by its acquirer FNZ.
Portfolio Adviser sister publication International Adviser contacted the CMA, but the watchdog did not provide a comment in time for publication.
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