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Utility Week 16th June 2017

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UTILITY WEEK | 16TH - 22ND JUNE 2017 | 17 Policy & Regulation Market view C oncurrency is the regime under which competition law is applied in parallel in the regulated sectors by the Compe- tition and Markets Authority (CMA) and the sectoral regulators. In the utilities sector, the relevant regulators are Ofgem, Ofwat and the Northern Ireland Authority for Utility Regu- lation (NIAUR). The concurrency arrangements were strengthened in 2014. The CMA's 2017 con- currency report highlights competition enforcement by each of the utility regulators in the last year (see table). The UK's competition prohibitions are contained in the Competition Act 1998 (CA98) and prohibit: • anti-competitive agreements (Chapter I CA98); • the abuse of a dominant position (Chap- ter II CA98). There are equivalent EU prohibitions. Headline points The CMA's general findings include that there was greater co-operation between the CMA and regulators – notably, an increase in staff secondments. There have been 17 secondments in total, including exchanges between the CMA and each of Ofgem and Ofwat. It also said there had been fewer CA98 cases than hoped for. Only two new com- petition cases have been opened in 2016/17, including one case involving utilities opened by Ofgem. (This compares with two cases in 2015/16 and six in 2014/15.) There has been significant market investi- gation work – this includes the CMA issuing its final report in the energy market investi- gation and working with Ofgem on appropri- ate remedies. Promoting competitive outcomes – an example being the regulatory structures put in place by Ofwat for the opening of the new household retail market in England from April 2017. Assessing effectiveness of concurrency arrangements – the CMA undertook a pro- ject to understand the barriers faced by regulators to opening a competition case. It found that there may be less scope for com- petition enforcement in the UK than in other EU member states because of the degree of sector regulation in the UK, the increase in private action, and Brexit. The CMA is con- tinuing to work with regulators to tackle challenges such as efficient case manage- ment and prioritising resources, to help them take steps to deliver "more cases, more quickly". Sector-specific findings Of the three utility regulators, only Ofgem has launched a competition investigation in 2016/17. It has also progressed two other investigations. It opened one new competition investi- gation under Chapter I CA98, in the second part of 2016. The investigation in the energy sector concerns possible anti-competitive agreements and is limited to a small number of (undisclosed) parties. The two other competition cases that Ofgem was already investigating were brought to an end in 2016. They explored: 1. Agreements for paid online search adver- tising. Ofgem launched this case in October 2015 and then transferred it to the CMA in June 2016 (to avoid any possible allega- tion of impropriety by the parties because of contact between Ofgem and the parties before the investigation). The CMA closed the case on the basis that it was no longer an administrative priority. In particular, price comparison websites in the energy Too few competition probes According to a recent CMA report, competition investigations by sector regulators are still thin on the ground, but regulators should be better equipped in the future, says Rebecca Owen-Howes. sector would be affected by the remedies in the energy market investigation and also the CMA's new market study into digital comparison tools. 2. Abuse by SSE in the electricity connections market. Ofgem closed its investigation in November 2016 without making a decision on whether or not SSE had infringed Chapter II CA98. Instead, it accepted com- mitments from SSE that it would offer cer- tain essential services to all parties on an equivalent basis. Ofwat has no active competition cases. In January 2017 it launched a market study into how the market for new appointments and variations is working. It expects to report on the findings and any action it is taking in summer 2017. NIAUR has not investigated any competi- tion cases since April 2015. In August 2016 it received a complaint about a possible breach of Chapter II CA98 but did not launch a for- mal investigation, as the complainant sub- sequently informed NIAUR that it intended to bring a private action in the Competition Appeal Tribunal. According to the CMA's report, much new work has been done to enhance the opera- tion of the concurrency arrangements. This should mean that, in practice, regulators are better equipped to launch a greater num- ber of competition investigations in future, consistent with the CMA's desire. Rebecca Owen-Howes, counsel in the EU and competition team, Dentons CASES UNDER THE UK/EU COMPETITION PROHIBITIONS (APRIL 2016 TO MARCH 2017) Ofgem: electricity Ofwat: water NIAUR: electricity/ and gas and sewerage gas and water/ sewerage Open cases (as at 1 April 2016) 2 0 0 New complaints 4 0 1 Formal investigations launched 1 0 0 Information gathering/dawn raid powers used 1 0 0 Commitments decisions 1 0 0 Case transfer to another NCA 1 0 0 Ongoing cases (as at 31 March 2017) 1 0 0 Source: CMA Annual Report on Concurrency 2017

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