IB 08/14 Ofwat continues investigation into Anglian’s pricing to ‘Fairfield’

Ofwat has issued a Supplementary Statement of Objections as part of its continuing investigation into whether Anglian Water behaved in an anti-competitive way in its pricing conduct at the ‘Fairfield’ development in Milton Keynes.

The ability to provide water and sewerage services to new developments is open to competition and is a key strategic market for Ofwat as the sector moves toward market opening and greater competition in 2017. Potential new entrants must generally obtain ‘upstream’ off-site supplies from the surrounding appointed monopoly company, which in the case of the Fairfield site was Anglian.

Previously, Ofwat set out in a Statement of Objections that Anglian’s pricing for the Fairfield site may have resulted in a margin squeeze and excluded competition. Ofwat has reviewed its case in light of representations from parties and still has significant concerns in relation to Anglian’s pricing conduct at the site at Fairfield.

Therefore, Ofwat will continue its investigation though no assumption should be made at this stage that there has been an infringement of competition law.

Philip Marsden, an independent director sitting on Ofwat’s Board casework committee, said:

“This is another step in the process of investigation before making a final decision. If there is anti-competitive behaviour in any sector it is customers who lose out. If competition rules have been broken, Ofwat will take action.”

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Notes to editors

 

  1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them.
  2. Water and sewerage services in England and Wales are delivered by appointed private companies who hold a monopoly position for regulated supplies within defined geographical boundaries.
  3. A Statement of Objections or Supplementary Statement of Objections gives notice of a proposed infringement decision under the Competition Act 1998 to the party involved. It sets out the facts on which Ofwat relies, the objections raised by Ofwat, the action it proposes to take and the reasons for it. The document is not a decision document and will not be published. The party has the opportunity to make written and oral representations in response to the alleged case set out by Ofwat. Such representations will be considered by Ofwat before any final decision is made.
  4. Under Chapter II of the Competition Act 1998 the abuse of a dominant position is prohibited. A margin squeeze is a type of abusive conduct by a dominant company which infringes Chapter II. The Supplementary Statement of Objections sets out the view that an equally efficient competitor could not have matched Anglian’s offer to the developer and covered its costs, while paying the input prices set by Anglian.
  5. Commercial negotiations for the Fairfield site took place during 2007-2008, with Anglian and the developer signing an agreement in August 2008. Ofwat commenced the investigation after being contacted by a potential alternative supplier to the site, Independent Water Networks Limited.
  6. The new appointments and variations regime (‘NAVs’,formerly referred to as insets) in sections 6 to 10 of the Water Industry Act 1991 allows certain customers to procure the services from a company other than the existing regional provider. This facilitates competition and creates the possibility for customer or site-specific exceptions to the standard regional monopoly approach.
  7. A business found to have abused a dominant position could be fined. Should Ofwat make an infringement decision and impose a penalty, Ofwat would have regard to the CMA’s guidance as to the appropriate amount of a penalty, and relevant judicial decisions.
  8. Media enquiries to Ofwat Press Office on:
    Benedict Fisher 0121 644 7642 / [email protected]
    Harbinder Babra 0121 644 7616 / [email protected]