London Metal Exchange: complaint from Spectron Group plc

Office of Fair Trading (OFT) closed Competition Act 1998 case.

Case information

Party: London Metal Exchange (LME)

Issue: Suspected predation and margin squeeze by the London Metal Exchange

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 case.

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 its services).

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 investigation.

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


  1. This investigation has also been closed.
  2. Direction given pursuant to Section 35 of the Competition Act 1998: CA98 London Metal Exchange decision (pdf 213 kb)
  3. See press release 86/06
  4. See press release 146/06

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