Insight

Special Alert | Actions to promote competition and protect consumers

Financial services impacts of presidential executive order

Amy S. Matsuo

Amy S. Matsuo

ESG and Regulatory Insights Lead, KPMG LLP

President Biden signed an Executive Order on Promoting Competition in the American Economy on July 9, 2021. The Executive Order affirms the Administration’s focus on the enforcement of antitrust laws to address excessive concentration of industry, abuses of market power, and effects of monopoly and monopsony, all of which all may pose harm to consumers and small businesses. The Administration states “Economists find that as competition declines, productivity growth slows, business investment and innovation decline, and income, wealth, and racial inequality widen.”

The Executive Order contains many initiatives to promote fair competition across multiples industries and regulatory agencies through:

  • Policing of unfair, deceptive, and abusive (UDAAP) business practices
  • Resisting consolidation and promoting competition within industries through the independent oversight of mergers, acquisitions, and joint ventures
  • Promulgating rules that promote competition, including the market entry of new competitors
  • Promoting market transparency through compelled disclosure of information.

The financial services industry will be directly impacted by the following directives and encouragements suggesting:

  • Federal agencies adopt pro-competitive regulations and approaches to procurement and spending and rescind regulations that create unnecessary barriers to entry that stifle competition.
  • The Department of Justice (DOJ), in consultation with the FRB, FDIC, and OCC review current practices and adopt a plan, within 180 days after the Executive Order, for providing more robust oversight of mergers under the Bank Merger Act and the Bank Holding Company Act.
  • The Executive Order reaffirms the ability of the Administration to challenge previously consummated merger transactions that violate the Sherman Antitrust Act, the Clayton Antitrust Act, or other laws.
  • The DOJ and Federal Trade Commission (FTC) are to review horizontal and vertical merger guidelines.
  • The CFPB proceed with a rulemaking under section 1033 of the Dodd-Frank Act to facilitate the portability of consumer financial transaction data, and also to enforce UDAAP prohibitions under section 1031.
  • The FTC establish rulemakings addressing i) unfair data collection and surveillance practices impacting competition, consumer autonomy, and consumer privacy, ii) unfair tying practices in the brokerage or listing of real estate, and iii) unfair competition in major internet marketplaces.
  • The Federal Communications Commission (FCC) adopt a rulemaking re-establishing Net Neutrality.
  • A newly established White House Competition Council coordinate, promote, and advance the federal agencies’ efforts to address overconcentration, monopolization and unfair competition in or directly affecting the U.S. economy. The Department of the Treasury, FTC, and CFPB will be among the members.

In response, the DOJ and FTC separately released a joint statement indicating they would be launching a review of their merger guidelines “with the goal of updating them to reflect a rigorous analytical approach consistent with applicable law.”

Industry responses highlight the increasing role of nonbanks companies, including fintechs, in the financial services marketplace and their role in merger activities, Community Reinvestment Act considerations, and the formation of de novo institutions. The impact on merger activity is uncertain given timelines to approve mergers and acquisitions activity and anticipated regulatory scrutiny, future rulemakings (and potential to spur activity), and the proposed global corporate tax.

Notably, the CFPB has begun the rulemaking process to give consumers access to their financial records with the release of an advanced notice of proposed rulemaking in October 2020; the Executive Order directive should reinforce this effort. CFPB leadership under the new Administration has emphasized UDAAP enforcement and consumer protections especially for “vulnerable” consumers. Congress is expected to vote soon on the nomination of Rohit Chopra to serve as the new CFPB Director; Mr. Chopra is currently serving as an FTC commissioner, which may strengthen coordination between these two agencies once he assumes leadership of the CFPB.

The Securities and Exchange Commission has similarly heightened attention on investor protections, particularly with regard to disclosures and marketing materials. 

The Executive Order is available here.

A related Fact Sheet is available here.

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