CFPB Scrutinizing Open Banking Rule Standard-Setting for “Anticompetitive” Behavior

On March 13, 2024, Consumer Financial Protection Bureau Director Rohit Chopra delivered remarks at the Financial Data Exchange Global Summit in which he warned financial-service providers that the CFPB is preparing to dial up antitrust scrutiny in connection with the agency’s Open Banking Rule. Chopra said that the CFPB would coordinate with the Department of Justice to root out any attempt to “weaponize[] in an anticompetitive way” the upcoming standards-development process for the Open Banking Rule. And Chopra underscored what he characterized as the twin antitrust risks of that process: financial institutions manipulating it in a way that cements their own dominance or misusing the collaboration to unlawfully collude with competitors.

The CFPB released its proposed “Open Banking Rule” on October 19, 2023. The rule would implement Section 1033 of the Dodd-Frank Act, a long dormant provision of the 2010 law, by providing consumers with the ability to access personal financial data that their financial institution stores. The CFPB envisions that the Open Banking Rule will “jumpstart competition” among financial institutions by lowering or eliminating data barriers that may prevent consumers from switching between those institutions. In his remarks, Chopra predicted that the CFPB would finalize the Rule this fall.

Chopra’s remarks hinged on a section of the proposed rule that calls for industry standard-setting on “indicia of compliance” with the Rule’s substantive requirements. NPRM at 74807. The proposed rule envisions that industry participants will develop those indicia under the auspices of “a fair, open, and inclusive standard-setting body.”  Id.  But Chopra cautioned the industry that the CFPB did not intend to adopt a “hands off” approach to the standards-development process, but instead intended to play an active role in ensuring “that standard-setting does not skew to benefit dominant firms and their prevailing market power.”

Chopra’s warning echoed those that the antitrust agencies previously emphasized in guidance to firms that participate in standard-setting. The Antitrust Division of the DOJ and the Federal Trade Commission recognize that developing collaborative standards under the auspices of a bona fide standard-setting organization (“SSO”) can serve legitimate and procompetitive ends. See, e.g., FTC on Standard-Setting; DOJ on Standard Setting. But because the standard-setting process can also be a fertile environment for anticompetitive conduct, the agencies recommend certain safeguards for organizations undertaking standards-development projects, including:

• An openness to all interested parties;
• Rules that ensure a balance of interests among stakeholders;
• Rules that prevent any one or several participants from dominating the process;
• Use of written procedures and a formalized, impartial appeals process to govern disputes;
• Rules that promote a consensus approach to adopting technology as the standard; and
• Policies and practices to guard against improper collusion among participants on price, output, or other dimensions of competition that standardization does not implicate.

Financial institutions—even when participating in an organization that observes these safeguards—should maintain their own antitrust hygiene. Oftentimes, that means (1) training the employees who will represent the institution during standards-development meetings to spot and avoid antitrust risks and (2) exchanging only the information that is reasonably necessary to achieve the standardization process’s benefits. These best practices apply to participation in standard-setting organizations as well as other legitimate industry collaborations. And companies should keep in mind that antitrust vigilance is needed even when participating in government-sanctioned collaborations: while joint conduct to petition the Government is generally shielded from liability, there is no blanket exemption for antitrust violations that occur as part of a process that involves federal agencies or regulators.    

O’Melveny stands ready to assist clients with the standards-development process, as well as to advise firms on participation in other types of industry collaborations. As the CFPB moves towards final implementation of the Open Banking Rule, O’Melveny offers financial institutions, financial-service providers, and standards organizations the expertise they need to navigate the risks attendant to standard-setting and avoid the spotlight that the CFPB intends to shine on participants in the standard-setting process.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ben Bradshaw, an O’Melveny partner licensed to practice law in the District of Columbia and California; Elizabeth L. McKeen, an O’Melveny partner licensed to practice law in California; Pamela A. Miller, an O’Melveny partner licensed to practice law in New York; Brian Brooks, an O’Melveny partner licensed to practice law in California; Brian P. Quinn, an O’Melveny counsel licensed to practice law in the District of Columbia and Virginia; and Mike Rosenblatt, an O’Melveny associate licensed to practice law in the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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