In its final report, published today, the CMA found that the deal raises “significant competition concerns” in the supply of retail platform solutions to investment platforms in the UK.
FNZ and GBST are two of the leading suppliers in the sector, powering the majority of UK investment platforms.
The CMA found that if it went ahead the merged business would be by far the largest supplier in the platform ‘engine’ market, holding almost half of the UK market.
Martin Coleman, chair of the CMA inquiry group carrying out the investigation, said: “We have found that FNZ and GBST are two of the leading suppliers of retail investment platform solutions, and that they compete with each other closely and face few other suppliers of similar standing. The merger has substantially reduced competition in this sector.
“This matters to the millions of UK consumers who hold pensions or other investments. This is because competition plays a key role in driving price and quality. Without healthy competition, costs could go up and service quality could get worse.
“FNZ chose to complete its acquisition of GBST without first seeking merger clearance in the UK, which it is perfectly entitled to do. This came with the risk that the CMA could call the case in for investigation and that, if competition concerns were found, FNZ could be required to sell off all of the business it had just acquired.”
Following an in-depth investigation, a group of independent CMA panel members concluded that the loss of competition brought about by the deal could lead to investment platforms, and therefore UK consumers who rely on these platforms to administer their pensions and other investments, facing higher costs and lower quality services.
The CMA’s findings are based on the companies’ own tender data and internal documents, as well as information from customers, competitors and other stakeholders.
While the competition regulator found differences in the firms’ business models - with FNZ providing an integrated software and servicing solution and GBST a software-only provider - the CMA found that they compete closely and face few other significant suppliers at present.
The CMA found no basis to suggest that entry or expansion by other suppliers would mitigate the harm caused by the merger.
The CMA considered a number of remedies, including options put forward by FNZ but found that requiring FNZ to sell the entire GBST business was the only solution that will “properly address” the loss of competition resulting from the merger.
A spokesperson for FNZ said: "We note that the CMA has published its final views on FNZ's 2019 acquisition of Australian software company, GBST. We have no further comment at this stage."