Party: London Metal Exchange (LME)
Issue: Suspected predation and margin squeeze by the London Metal
Relevant provision: Competition Act 1998, Article 82 EC Treaty,
Financial Services and Markets Act 2000
Summary of work
The Office of Fair Trading (OFT) has closed its investigation under the
Competition Act 1998 (the Act) into the conduct of the London Metal
Exchange (the LME) (the investigation) as it no longer constituted an
administrative priority for the OFT.
The decision to close was taken in light of the new criteria for OFT's
administrative priorities, which were published last year. On the
assessment of available information, the OFT concluded, after
consultation, that no further resources should be committed to this
The OFT's investigation
On 1 July 2003 the OFT received a complaint from Spectron Group plc
(Spectron) about predatory and discriminatory pricing by the LME in the
provision of its electronic trading platform, LME Select. Spectron
provides an electronic platform (eMetals) for trading LME non-ferrous
metals contracts, in competition with LME Select.
In accordance with its duties under section 304 of the Financial
Services and Markets Act 2000 (FSMA 2000), the OFT initially commenced
an investigation pursuant to section 305 of FSMA 2000 (see note
1). The OFT subsequently launched an
investigation of the LME under section 25(5) of the Competition Act 1998
for a suspected infringement of Article 82 of the EC Treaty.
The suspected grounds of the investigation were that the LME was
dominant in the provision of platforms for the exchange-based trading of
non-ferrous metals contracts, and it was abusing its position through
predatory behaviour and through price discrimination which allowed zero
margin for a competitor (that is, a competing platform could in effect
only match the price LME Select's customers pay by charging nothing for
Over the course of the investigation, the OFT sent a number of
information requests to the LME, Spectron and their customers (LME
members). The information requested included financial data relating to
the revenues and costs of LME Select and the original documents relating
to the development, introduction and operation of LME Select. The OFT
also met with the LME and Spectron to discuss the responses to
information requests and to seek additional information.
On 27 February 2006, the OFT issued an interim measures direction (IMD)
to the LME, pursuant to section 35(2) of the Act (see note
2). This prevented LME from extending the hours
each day when LME Select was available, and thereby further displacing
Spectron eMetals from the market. On 15 May 2006 the IMD was
withdrawn (see note 3), although the
investigation of the LME continued.
The LME appealed the OFT's decision to impose the IMD to the
Competition Appeal Tribunal (CAT) on 26 April 2006. Following withdrawal
of the IMD, the LME sought its costs of appealing. The CAT heard
arguments on costs on 28 June 2006 and handed down its costs judgment on
8 September 2006.
Outcome and closure on administrative priority grounds
Following consultation, in April 2007 the OFT closed the investigation
on administrative priority grounds. In assessing this case against its
published prioritisation criteria (see note 4), the OFT reached the view that it was no
longer an appropriate use of its resources to continue with the
As investigation was incomplete on closure, the OFT had not reached a
concluded view as to whether the LME had infringed Article 82 either
through predation or exclusionary price discrimination.
In terms of the prioritisation criteria, owing to the small value of the
market and the lack of customer concern, the OFT viewed as low the
likely consumer benefit from intervention. As regards the other
criteria, the OFT did not identify anything to suggest this
investigation should receive administrative priority.
Case reference: CE/4778-04
- This investigation has also been closed.
- Direction given pursuant to Section 35 of the Competition Act 1998:
(pdf 213 kb)
- See press release
- See press release