Water industry regulator Ofwat has signed a Memorandum of Understanding with the Competition and Markets Authority – an important development for the water sector in the run-up to the introduction of retail competition in 2017.
Recent changes to the United Kingdom’s competition law system designed to improve the effectiveness of competition law enforcement in the UK include provisions to enable closer working between the CMA and sectoral regulators.
The CMA has competition law powers which apply across the whole economy. Sectoral regulators such as Ofwat may exercise the competition law powers to enforce the prohibitions on anti-competitive agreements and on abuse of a dominant position, and to make market investigation references, concurrently with the CMA in those sectors for which they have responsibility.
The move follows the establishment of the UK Competition Network (UKCN) by CMA and the sectoral regulators - an enhanced forum for cooperation aimed at enabling closer working with the objective of more consistent and effective use of competition powers across all sectors.
The new Memorandum represents a further stage in the process of co-operation between the CMA and the regulators, setting out more practical detail on how the CMA and Ofwat will work together within the framework of competition law.
The main purpose of the MoU is to establish an understanding between the CMA and Ofwat as to how this closer working will work in practice - including a bilateral commitment to look for opportunities to work together to promote competition for the benefit of consumers.
The MoU states:
“Water and sewerage markets are in the process of liberalisation, with the aim of fostering more competitive markets for the benefit of current and future customers. As markets evolve, competition enforcement under the Competition Act 1998 and review of markets under the Enterprise Act 2002 will be increasingly important tools to enable the development of effective competition in the sector.”
The MoU sets out working arrangements between the CMA and Ofwat in relation to their concurrent powers to apply the prohibitions on agreements that prevent, restrict or distort competition and on the abuse of a dominant position.
Importantly, it also sets out the working arrangements to undertake market studies, and to make market investigation references to the chair of the CMA for the constitution of a CMA group to conduct an in-depth market investigation into single or multiple markets for goods or services in the United Kingdom under the Enterprise Act 2002.
One of the strategic goals of the CMA is “to extend the frontiers of competition into new areas, including by working with sectoral regulators to ensure fuller use of competition law and policy in sectoral markets.”
The Government’s strategic steer to the CMA, issued in October 2013, says that “the CMA should engage in a broad strategic dialogue with the regulators and look for opportunities to promote effective competition.”
Although the MoU is not a legally binding document, it does have teeth. Significantly, it also sends a clear signal to the water and sewerage sectors that Government policy will strongly support the introduction of a competitive marketplace to deliver benefits to consumers.
Click here to read the MoU
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