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Information notes
Competition law in the water and sewerage industry Introduction This information note briefly explains how we apply the Competition Act 1998 ("the Act"), Articles 81 and 82 of the EC Treaty and the relevant sections of the Enterprise Act 2002. It is not a substitute for the relevant legislation. It outlines the powers of the Water Services Regulation Authority (Ofwat) and provides examples of how Ofwat may apply these powers in relation to the water and sewerage sectors. Background The Act, which took effect on 1 March 2000, brought major changes to UK competition law. The Act is based on Articles 81 and 82 of the EC Treaty. It empowers designated competition authorities, of which we are one, to apply and enforce Chapter I and Chapter II of the Act. EC Regulation 1/2003 (1) (the Modernisation Regulation) came into force on 1 May 2004 and changed the framework for the enforcement of European competition law. It enables designated national competition authorities to apply and enforce Articles 81 and 82. We apply and enforce the following prohibitions:
Who enforces the Act and Articles 81 & 82? The Office of Fair Trading (OFT) has the main responsibility for administering the Act. Certain regulators can administer the Act in the sectors they regulate under the concurrency provisions of the Act. We can enforce the Act in the water and sewerage sectors in England and Wales. Only the OFT can enforce the Act in the water and sewerage sectors in Scotland and Northern Ireland. The Authority's powers under the Act and Articles 81 & 82 We can investigate suspected infringements of the Chapter I and Chapter II prohibitions under the powers of investigation provided by the Act. The same powers apply when investigating breaches of Articles 81 and 82. We may carry out an investigation if there are reasonable grounds for suspecting that either one of the prohibitions has been infringed. Where we have reasonable grounds for suspecting that one of the prohibitions has been infringed it may require, by written notice, the production of specified documents or specified information. We also have powers to enter premises with or without a warrant to gain access to documents and information. We have the power to make interim measures directions. We may make a direction before we have completed an investigation if we have reasonable grounds for suspecting that a prohibition has been infringed and consider it necessary to act urgently to prevent serious, irreparable damage to a particular person or class of person or to protect the public interest. We also have the power to accept commitments from an organisation under investigation if we are satisfied that the commitments meet the competition concerns. Commitments are binding. Following an investigation, we may publish a decision setting out our findings. Where we have made a decision that either of the prohibitions have been infringed we have powers to give directions to bring the infringement to an end. Where an organisation has either negligently or intentionally infringed a prohibition we may impose financial penalties. The maximum penalty is 10 per cent of the worldwide turnover. How will the Act and Articles 81 & 82 be applied in the water industry? Our guidance The Competition Act 1998: The application in the water and sewerage sectors summarises our approach to investigations. If a particular case could be dealt with either under the Act or the Water Industry Act 1991, we will use whichever powers we consider are most appropriate. Complaints about potentially anti-competitive behaviour in the water and sewerage sectors may be made either to the OFT or to us. We may also investigate suspected breaches on our own initiative. Issues we have considered in decisions We have considered a number of issues in our decisions to date including:
Compliance All companies have a duty to comply with the law. The consequences of failing to comply with competition law are serious. It is therefore appropriate for companies to have a properly conceived and implemented compliance policy. A compliance policy will:
Companies should seek the advice of a competition lawyer when preparing a compliance programme. Further information can be found in the OFT's guidance How your business can achieve compliance which can be found on the OFT's website www.oft.gov.uk Market investigation references We may make market investigation references to the Competition Commission in the water and sewerage sector where it appears that the structure of the market or the conduct of companies or customers is harming competition. When making a reference we must have reasonable grounds for suspecting that one or more features of the market prevents, restricts or distorts competition in relation to the supply or acquisition of goods or services in the UK (or part of the UK). Competition Appeal Tribunal The Competition Appeal Tribunal hears appeals against certain decisions taken under the Act, with the power to confirm, set aside or vary the decision or remit the matter back to us. The Tribunal has other functions including:
Disqualification of directors The Company Directors Disqualification Act 1986 (as amended by the Enterprise Act 2002) provides us with powers to apply to a court for orders disqualifying directors of companies which have committed breaches of competition law. These orders are called Competition Disqualification Orders (CDOs). Super Complaints Designated consumer bodies can make 'super-complaints' where there are market features that may be harming consumers. The bodies designated include: National Consumer Council, CCWater, Consumers' Association, EnergyWatch and Postwatch. Super-complaints must relate to one or more features of a market as a whole and not the specific behaviour of an individual business. We have 90 days to respond publicly to a super-complaint related to the water or sewerage sectors. The public response will state whether we have decided to take action and, if so, what action we propose to take. How do I complain? If you think you have grounds to complain under the Act it might be helpful to discuss the complaint with us first. Alternatively you can write, outlining the nature of the complaint and including as much relevant information as possible in support of it. Our leaflet A guide to complaining under the Competition Act 1998 explains in more detail how to make a complaint and the type of information we require. Please write to Competition Policy Team, Ofwat, Centre City Tower, 7 Hill Street, Birmingham B5 4UA. What other information is available?
These and other publications can be obtained either from the Ofwat library telephone: 0121 625 1373 or (in the case of OFT publications) the OFT on 08457 224499 E-mail address: enquiries@ofwat.gsi.gov.uk Website: http://www.ofwat.gov.uk April 2006 (1) Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty. Available in the Official Journal number L1/1 of 4 January 2003.  |
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