OFT intervenes to prevent LME squeezing competition

39/06 28 February 2006

The OFT yesterday, 27 February, issued an interim measures direction to the London Metal Exchange (LME) to prevent LME from extending the hours of trading on its electronic trading platform, LME Select. The OFT is currently investigating a suspected abuse of a dominant position by LME and believes that this move by LME would further restrict competition.

The OFT has issued this direction under section 35 of the Competition Act. This is the first time that the OFT has employed these powers (see note 1).

The direction means that LME cannot extend its trading hours as it had planned to do. It has no further implications for the way in which LME operates.

The direction follows a request for interim measures from Spectron Group Plc (Spectron). Spectron argues that, if LME extends the operating hours of LME Select, this would force Spectron's eMetal electronic trading platform, which currently competes with LME Select, to exit the market. The OFT believes it would be very difficult for Spectron to re-enter the market as a competitor in the future. The OFT considers that Spectron is uniquely well placed as an actual competitor to LME, and that its exclusion would harm both the competitive process and the public interest. The OFT also considers that the extension to LME Select's hours could increase the obstacles to effective entry into this sector by other potential competitors to LME.

LME Select currently operates from 07:00 to 19:00 London time and LME has announced its intention to extend those hours to 01:00 to 19:00 London time from 1 March 2006. Under the terms of the direction, LME will not be able to implement this extension before the OFT has completed its investigation into an alleged abuse of a dominant position, under Article 82 of the EC Treaty, or until the direction is withdrawn.

John Fingleton, OFT Chief Executive, said:

'We believe it is necessary to make this interim direction to protect the public interest in maintaining as competitive a market as possible. In addition, unless the OFT grants the interim measures direction, it is likely that serious and irreparable damage to Spectron, and especially its reputation, will arise that cannot likely be subsequently remedied.'

Should further investigation lead to the conclusion that LME has infringed Article 82, the OFT intends to issue a Statement of Objections to LME within six months.

NOTES

1. The OFT may give interim measures directions under section 35 of the Competition Act before it has completed its investigation of a suspected infringement if:

it has begun an investigation under section 25 of the Competition Act 1998 and not completed it, and
it considers that it is necessary to act urgently either to prevent serious, irreparable damage to a particular person or category of persons, or to protect the public interest.

2. Section 25 of the Competition Act 1998 allows the OFT to undertake a formal investigation if it has reasonable grounds to suspect that Article 82 has been infringed.

3. For more information on interim measures directions, download the OFT competition law guideline - Enforcement (pdf 107 kb). This is also available to order in hard copy from the publications section of the site.

4. The LME interim measures direction will be available from the CA98 Public Register section of the site, later today.

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