Corporate report

Promoting competition in services we rely on - The annual concurrency report 2022

Published 27 April 2022

Introduction

This is the eighth annual concurrency report to be published by the Competition and Markets Authority (CMA) in accordance with its statutory obligation (set out in section 25(4) of the Enterprise and Regulatory Reform Act 2013, read together with paragraph 16 of Schedule 4) to assess the operation of the concurrency arrangements which came into effect on 1 April 2014.^{[footnote 1]} Under these arrangements, competition law is applied in the regulated sectors not only by the CMA, the UK’s primary competition authority, but also by the relevant sector regulators.

This year’s report is issued against the background of increasing concerns about the cost of living – and in particular the impact on vulnerable consumers – following the economic shocks caused by the global coronavirus (COVID-19) pandemic and the Ukraine crisis (in particular, price pressures in the energy sector). 

These make it all the more important that value for money and affordability should be secured for the public who depend on the essential services provided by the regulated sectors (which account for an estimated 25% of GDP and cover services on which almost every household and business in the UK relies, from basic utilities like heat, light, broadband and water to financial services such as banking and insurance); ensuring effective competition in those sectors is an essential component of this. 

Table 1: Sector regulators and their responsibilities

Civil Aviation Authority (CAA)	Airport operation and air traffic services
Office of Communications (Ofcom)	Broadcasting, electronic communications and postal services
Gas and Electricity Markets Authority (Ofgem)	Electricity and gas in Great Britain
Financial Conduct Authority (FCA)	Financial services in the UK and the provision of claims management services in Great Britain(*)
Payment Systems Regulator (PSR)	Participation in payment systems
NHS Improvement (NHSI)(**)	Healthcare services in England
Office of Rail and Road (ORR)	Railway services
Water Services Regulation Authority (Ofwat)	Water and sewerage services in England and Wales
Northern Ireland Authority for Utility Regulation (NIAUR)	Electricity, gas, water and sewerage services in Northern Ireland

(*)The FCA has had concurrent competition powers in relation to the provision of claims management services in Great Britain since 1 April 2019. It has had concurrent competition powers in relation to financial services since 1 April 2015.

(**)In July 2021, the Health and Care Bill was published, setting out proposals to remove NHSI’s specific competition functions and its general duty to prevent anti-competitive behaviour to better support NHS England’s role as an improvement agency. The CMA and NHSI have worked closely together on the development of these proposals.

The concurrency arrangements form a key part of the UK’s competition regime and have an important role in enhancing competition and making markets work more effectively in the regulated sectors, with a view to achieving more competitive outcomes for consumers.

Like the CMA, the sector regulators can, in the sectors for which they are responsible:

• apply the UK prohibitions on undertakings engaging in anti-competitive agreements or on the abuse of a dominant market position (respectively, Chapters I and II of the Competition Act 1998)

• conduct market studies and, if appropriate, make a market investigation reference under which the CMA conducts an in-depth investigation into whether any feature, or combination of features, of a market in the UK for goods or services prevents, restricts, or distorts competition (see Part 4 of the Enterprise Act 2002)

The concurrency arrangements provide for cooperation between the CMA and the sector regulators in relation to their concurrent powers.

This report covers the period from 1 April 2021 to 31 March 2022. The first part of the report sets out the competition enforcement work that has been undertaken in the regulated sectors during this period, while the second part outlines the markets work that has been carried out. The report then provides an overview of the wider cooperation between the CMA and the sector regulators.

Overall, this reporting period has seen a return to relative normality following the disruptions caused by the COVID-19 pandemic. However, new challenges have arisen as the global economy has started to revive. In particular, shortages and shipping bottlenecks have caused significant price rises and raised questions about how to ensure more resilient markets. These challenges have had, or have the potential to have, an impact on competition and consumers (particularly those in vulnerable circumstances) and raise questions for competition regulators as to how best to respond (see Resilience and Competition Policy: Economics working paper for a more detailed discussion on resilience and competition).

The most significant and serious example of this in the regulated sectors is the massive increase in energy prices which has a particular impact on the cost of living (especially for low-income families), given that utilities form a large part of the household budget.

The unprecedented rise in wholesale gas and electricity prices – a result both of demand spikes as the global economy reopens following the pandemic and the impact of the Russian invasion of Ukraine – has had a knock-on effect at the retail level. In particular, the retail price cap has quickly become increasingly unreflective of wholesale costs. While consumers were protected in the short term from price rises, ultimately the combination of the price cap and rising wholesale costs has led to a large number of energy retailers exiting the market during 2021.

As a result, Ofgem has been engaged in extensive work to manage retail exit through the supplier of last resort process (whereby the customers of exiting retailers are transferred to remaining incumbents), while the government put one large firm, Bulb, into the Special Administration Regime (the first energy company subjected to this since privatisation in the 1980s). These measures, which were required to maintain continuity of supply for customers, will lead to additional costs for billpayers and probably taxpayers.

Ofgem is now putting in place a programme of work to address strengthening suppliers’ financial resilience so that existing and future suppliers will better be able to cope with these high and more volatile energy prices.

In addition, the rise in wholesale costs has meant that under its existing methodology Ofgem has had to raise the price cap to better reflect those costs. The government has stepped in to attempt to mitigate the increase in costs for consumers (for example, through council tax rebates). Ofgem has now launched a consultation on changes to the price cap methodology which seek to reduce the costs and risks facing suppliers so that energy bills can be kept low, while still offering a measure of protection for consumers.

The rise in energy prices has effects beyond just retail energy markets. For example, the rise in wholesale gas prices has led to a shortage of CO2 used in a range of markets, in particular the food industry. This resulted in the Department for Business, Energy and Industrial Strategy (BEIS) granting a temporary exemption from the Competition Act 1998 for the purpose of sharing information and optimising supply (making it easier for the industry to avoid supply disruption and prioritise deliveries).

Despite these issues and the ongoing need for regulators to address issues still thrown up by COVID-19, regulators have nonetheless been able to deliver on concurrency and other competition work, including taking forward much of the work previously paused or complete projects that were delayed (for example, the FCA’s work on credit information and ORR’s signalling market study).

With respect to investigations, at the start of this reporting period there were 8 open Competition Act 1998 investigations. During this period, 5 cases were closed – 1 infringement decision by the PSR, 3 commitments decisions, by Ofgem, the CMA and Ofwat respectively (ORR also announced a commitments decision just after the end of the reporting period), and 1 case closed on the grounds of administrative priorities by the FCA. 4 new investigations were launched (into the financial services sector, electric vehicle charging, and the social media or digital advertising markets respectively). This compares favourably to previous years.

The fact that 6 of the open cases were carried out by 4 different competition authorities is a positive sign that 1 of the objectives of introducing an enhanced set of concurrency arrangements as introduced under the Enterprise and Regulatory Reform Act 2013 (see footnote 1), namely to encourage more proactive enforcement of competition law in the regulated sectors is now being met.^{[footnote 2]} The maturing of the concurrency regime that came into effect in 2014 is further symbolised by the PSR recently completing its first Competition Act 1998 investigation into cartel behaviour affecting pre-paid card services used by public sector bodies to distribute welfare payments to some of the most vulnerable members of society, resulting in an infringement decision and fines.

Of additional note this year is that 3 cases, all from different authorities (Ofgem, the CMA, and Ofwat), have been closed on the acceptance of commitments (furthermore, ORR published a commitments decision in 1 further case just after the end of the current reporting period). Each case was at a different stage when commitments were considered, demonstrating the flexibility of the UK’s competition regime and the scope that it affords the CMA and the regulators to address concerns in the most effective way.

Also apparent is the continued high level of collaboration between the regulators which the concurrency regime, through initiatives like the UK Competition Network, aims to facilitate. The Digital Regulation Cooperation Forum is another forum that facilitates cooperation between the CMA, Ofcom, the FCA and ICO to ensure a consistent and coherent approach to digital regulation. As well as the more formal cooperation that occurs in line with the concurrency arrangements, there have also been examples of more informal ad hoc engagement with regulators assisting each other on specific issues. For example, the PSR shared technical specialist knowledge with the CMA to assist its work in the mobile ecosystems market study; the FCA and NIAUR provided advice to Ofgem as it considered how best to deal with issues caused by the energy crisis; and the CMA and Ofgem worked together to ensure that the supplier of last resort process was managed in a way which had as limited an impact on competition as possible.

As noted above, the COVID-19 pandemic continued to have an impact on regulators during the period covered by this review, although the impact– as with the rest of the country – was reduced compared to the initial outbreak in 2020 tp 2021. In general, regulators did not need to pause work to the same extent and were able to resume work that had been delayed, although some projects remained on hold (for example, the CAA’s market power determination for Manchester Airport and Ofgem’s collective switch and consumer engagement work in response to the CMA’s energy market investigation), while regulators like Ofcom continued to signal a pragmatic approach where it emerged that the pandemic prevented compliance with certain obligations or where complying prevented businesses from supporting critical services and vulnerable consumers.

Additionally, some of the regulators continued with their work specifically aimed at monitoring the ongoing impact on competition arising from the pandemic. For example, the CMA provided advice to the government on PCR tests and maintained guidance on cooperation; the FCA monitored how the competitive dynamic was and is likely to change across financial service markets; ORR supported the Department for Transport in helping train companies understand their risks and obligations with respect to competition law as they work together to restore passenger numbers; Ofgem continued collecting data to assess the impact on the financial position of suppliers and customers; Ofwat temporarily increased business retail price caps; and the NIAUR continued monitoring key market metrics to assess the impact of the pandemic on consumers.

This reporting period also saw important steps in the reform of the competition regime in the UK that is of relevance to the sector regulators as the proposals for reform involve changes to functions that the regulators exercise as well as the CMA. In July 2021, the government consulted on its proposals for Reforming Competition and Consumer Policy – Driving Growth and Delivering Competitive Markets That Work for Consumers, which set out steps to bolster the UK competition regime and consumer rights, as well as ensuring that those consumer rights are robustly enforced.

In its response to the consultation, the CMA stated that the government had identified a compelling package of legislative reform proposals, as well as areas for further consideration. Many of the proposals are aimed at strengthening powers for the CMA and regulators under the Competition Act 1998, including the ability to take interim measures (to ensure competition authorities can intervene to prevent harm while investigations are still ongoing) and powers to obtain information and sanction businesses which refuse to cooperate or comply the CMA or regulators’ Competition Act 1998 investigations and remedies.

Taken together, the CMA considers that these proposals will promote fair, open and competitive markets, protecting the interests of consumers and assisting fair-dealing businesses to grow, enter new markets and compete with incumbents. In this way, the government’s proposals can also be expected to support innovation, growth and economic recovery throughout the UK.

At the same time, the government conducted a separate consultation on the UK’s new pro-competition regime for digital markets to tackle the unique challenges of fast-moving digital markets and the powers of the new Digital Markets Unit, already operating in non-statutory form within the CMA. In its response to that consultation, the CMA expressed strong support for the government’s proposals and committed to providing practical support to the government as the work to develop the regime progresses.

The CMA will continue to assist the government as necessary in developing the proposals for reform and for digital markets.

Competition enforcement in the regulated sectors

This section of the report sets out the competition enforcement work that has been carried out by the CMA and the regulators during the current reporting period. It also highlights the use they have made of softer enforcement tools, such as advisory and warning letters.

Competition prohibitions

Table 2: Use of powers by the CMA and sector regulators under the Chapter I and Chapter II prohibitions in the Competition Act 1998 (or relevant EU prohibition) for the period 1 April to 31 March in the regulated sectors

	2021 to 2022	2020 to 2021	2019 to 2020	2018 to 2019	2017 to 2018	2016 to 2017
Number of cases ongoing at start of reporting period	8	9	9	7	5(*)	6
Number of new complaints(**)	25(***)	18	14	16	18	9
Number of investigations formally launched	4(/)	3	3	5(//)	4	2
Number of those cases in the year to date in which:
-     information gathering powers and powers to enter premises/conduct dawn raids were used	5	3	8	5	7	3
-     a Statement of Objections was issued		3	2	3	1	1
Number of those cases in the year to date that resulted in:
-     an infringement decision	1	2	2	3		1
-     the giving of commitments	3		1			1
-     an exemption or clearance decision (or equivalent)
-     case closure without full resolution	1	2			2(*****)	1
Number of cases that are ongoing	7	8	9	9	7	5
Number of cases in the year to date in which the decision was appealed to the CAT		1		1
Decisions taken to use direct regulatory powers instead of competition prohibition powers where those competition prohibition powers could have been exercised		2

(*)While the Chapter I element of the CAA’s investigation into access to car parking facilities at East Midlands International Airport resulted in an infringement decision in 2016, the Chapter II element of the case was closed in June 2017

(**)Complaints under the Chapter I and Chapter II prohibitions in the Competition Act 1998 (or equivalent EU prohibitions) refers to evidenced complaints received by the sector regulators which they regarded as raising competition law issues under those prohibitions and met their guidelines for the submission of formal complaints.

(***)This figure includes one complaint that the NIAUR received in February 2021 alongside a Dispute submitted under Art 26 of the Electricity (NI) Order 1992. The complaint referral was not considered further until the determination of the Dispute in September 2021 and is therefore included in the figures for the current reporting period.

(//)The 5 cases include an investigation opened by the FCA under Chapter I of the Competition Act 1998 and Article 101 TFEU where formal powers had not been exercised as at 31 March 2019. Similarly, they include an investigation opened by Ofcom under Chapter I of the Competition Act 1998 and Article 101 TFEU just before the end of the reporting period but where Ofcom had not yet formally launched the investigation as at the date of the 2019 report.

(*****)The FCA’s investigation into conduct in the aviation insurance sector was closed, as the European Commission took the matter over.

(/)This figure includes an investigation opened by the FCA under Chapter I of the Competition Act 1998 in which formal powers were not exercised. The case has since been closed.

At the start of the reporting period, there were 8 open cases in the regulated sectors:

• Ofcom had one investigation open into the provision of equipment and related services in the electronic communications sector

• Ofgem had one open investigation into the provision of over-the-counter energy prepayment services in Great Britain

• There were 2 investigations open in the financial services sector, one being conducted by the FCA, and the second by the CMA

• There were 2 investigations open relating to participation in payment systems, one being conducted by the PSR and one by the CMA

• Ofwat had one open investigation into the business retail market for water and sewerage services and associated markets for value added services

• ORR had one open investigation into the rail services sector

During the reporting period:

• four new investigations were launched in the regulated sectors:

  • the FCA opened an investigation into the financial services sector (but did not exercise formal powers under the Competition Act 1998)

  • the CMA launched an investigation into the supply of electric vehicle chargepoints

  • the CMA launched an investigation into potential abuse of dominance in the social media or digital advertising market

  • the CMA launched an investigation into header bidding services

• one investigation in the regulated sectors resulted in an infringement decision:

  • the PSR’s investigation relating to participation in payment systems

• three investigations were closed with commitments:

  • Ofgem’s investigation into the provision of over-the-counter energy prepayment services in Great Britain

  • the CMA’s investigation into the supply of electric vehicle chargepoints

  • Ofwat’s investigation into the business retail market for water and sewerage services and associated markets for value added services

• one investigation was closed on the grounds of administrative priorities:

  • the FCA closed one of its Chapter I investigations on grounds of administrative priorities

In addition, ORR closed its investigation into the rail services sector with commitments just after the end of the reporting period. While outside the reporting period, given that the announcement occurred before publication of this report we have noted it for completeness.

Further details on the cases listed are included in the section below. As some of the investigations are currently ongoing, the information disclosed is limited to what is publicly available but relevant updates have been provided where possible.

Some of the cases listed were also opened under Articles 101 or 102 of the Treaty on the Functioning of the European Union (TFEU). Following the end of the Transition Period in December 2020, these no longer apply to UK competition investigations and the investigations were continued solely under the Competition Act 1998.

Communications

Chapter I investigation into the provision of equipment and related services in the electronic communications sector in the United Kingdom

In October 2020, Ofcom issued a Statement of Objections to Motorola Solutions UK Limited, its ultimate parent company Motorola Solutions Inc., and Sepura Limited (together, the Parties). This set out Ofcom’s provisional view that the Parties infringed Chapter I of the Competition Act 1998 by exchanging competitively sensitive information relating to their pricing intentions for a procurement exercise run by the Police ICT company in 2018 covering devices, accessories and related services used on the Airwave radio network (a private radio network, based on terrestrial trunked radio, or TETRA, standards, used by emergency services in Great Britain for two-way radio communications). Ofcom is considering representations made in response to the Statement of Objections and expects to make a final decision on whether there has been a breach of UK competition law later in 2022.

Chapter II investigation into collection and use of advertising and single sign-on data

In June 2021, the CMA launched an investigation into suspected breaches of competition law by Meta Platforms Inc (Meta). The CMA is considering whether Meta has abused a dominant position in market(s) relating to the collection and/or use of data in the context of providing online advertising services and its single sign-on function. In particular, the CMA is investigating whether Meta has unfairly used this data to benefit its Facebook Marketplace and Facebook Dating services. The investigation is ongoing, with the CMA currently gathering, analysing, and reviewing information.

Chapter I and II investigation into header bidding services market

In March 2022, the CMA launched an investigation into suspected breaches of both Chapters I and II of the CA98 by Alphabet Inc (also known as Google) and Meta.

The investigation relates to an agreement between Google and Meta (internally codenamed ‘Jedi Blue’ by Google) concerning Meta’s use of Google’s header bidding product. Header bidding services allow sellers to offer their online advertising space to multiple buyers at the same time and compare multiple bids simultaneously. The investigation will also consider whether Google’s conduct, including its agreement with Meta, may have affected the ability of other firms to compete with its header bidding product (and thus infringe the Chapter II prohibition).

Energy

Chapter II investigation into an undertaking providing services to the energy industry

In September 2020, Ofgem issued a Statement of Objections setting out its provisional view that PayPoint plc had breached UK competition law by abusing its dominant position in the market for the provision of over-the-counter (OTC) top-up services to prepayment energy customers in a way that is likely to have distorted or restricted competition. PayPoint included exclusivity clauses in most of its contracts with energy suppliers and retailers, often applying for several years at a time. Ofgem had provisionally concluded that this limited the ability of energy suppliers and retailers to use rival services, and therefore excluded PayPoint’s competitors from the market.

During the current reporting period, Paypoint offered commitments to address the competition concerns that Ofgem had identified. Paypoint proposed removing the relevant exclusivity provisions from current contracts and those signed during the next 5 years with energy suppliers and with retailers, as well as offering separate contracts to energy suppliers for the provision of OTC and non-OTC energy prepayment services. These steps would free energy suppliers and retailers to contract with other payment service providers and use other providers’ equipment for processing OTC and non-OTC payments for their prepayment energy customers. Paypoint also committed to donate £12.5 million to Ofgem’s Energy Industry Voluntary Redress Scheme.

Following consultation, Ofgem accepted these binding commitments in November 2021, meaning that the investigation closed with no decision made on whether competition rules were infringed. 

Chapter I and II Investigation into the supply of electric vehicle chargepoints on or near motorways

In July 2021, the CMA opened an investigation into long-term exclusive supply arrangements relating to electric vehicle chargepoints on or near motorways between The Electric Highway Company Limited (recently acquired by Gridserve EH Ltd) and Ecotricity Group Limited, and 3 motorway service area operators: MOTO Hospitality Limited, Roadchef Limited and Extra MSA Holdings (UK) Limited. The investigation was opened under Chapter I of the Competition Act 1998, and Chapter II with respect to the Electric Highway Company Limited and Ecotricity Group Limited.

Following an initial investigation period, in November 2021, the CMA published its notice of intention to accept commitments offered by the parties. The CMA formally accepted these commitments in March 2022 and closed the investigations with no decision having been made on whether competition rules were infringed. The commitments will see Gridserve cease to enforce the relevant long-term exclusive arrangements with the motorway service area operators after 2026 and will also reduce exclusive rights in current contracts with MOTO and Roadchef by 2 and 4 years respectively. Gridserve will also cease to enforce exclusive rights at any of the relevant sites that have been granted funding under the government’s Rapid Charging Fund (RCF), which will launch in early 2023. All parties made further commitments related to compliance.

The CMA also published an open letter to the sector reminding motorway service area operators and electric vehicle chargepoint operators of their obligations to comply with competition law. Throughout the case, the CMA worked closely with Ofgem, particularly with regards to Ofgem’s Green Recovery Scheme.

Financial services

Both the FCA and the CMA have carried out investigations in the financial services sector. The FCA’s 2 investigations are set out first, followed by the CMA’s.

Chapter I investigation into financial services

The FCA is continuing its investigation into suspected anti-competitive arrangements under Chapter I of the Competition Act 1998 in the financial services sector (launched in September 2020). The FCA used formal information gathering powers during this period.  

Chapter I investigation into financial services

In August 2021, the FCA opened a new investigation into suspected anti-competitive arrangements under Chapter I of the Competition Act 1998 in the financial services sector. The FCA did not exercise formal information gathering powers and closed the case on grounds of administrative priorities. 

Chapter I investigation into financial services

The CMA is continuing to progress an investigation into suspected anti-competitive arrangements in the financial services sector which was opened in 2018. In the period covered by this report, the CMA has gathered and analysed additional evidence and information.

Payment systems

Chapter I investigation relating to participation in payment systems

In January 2022, the PSR issued an infringement decision concluding its first investigation under the Competition Act 1998, which related to market sharing of customers in the prepaid cards market in Great Britain. 

The prepaid cards in question operated on the Mastercard card scheme and were used by local authorities to distribute welfare payments to vulnerable members of society, such as the homeless, victims of domestic violence, and asylum seekers.  

The decision is addressed to 5 parties (collectively, the Parties):

• Mastercard, the operator of a 4-party card scheme

• allpay, Advanced Payment Solutions (APS) and Prepaid Financial Services (PFS), 3 programme managers who were licensed as card issuers by Mastercard

• Sulion, which provided services to Mastercard

Sulion’s mandate was to promote the use of prepaid cards in the public sector. This was achieved through the setting up of the National Prepaid Cards Network (the Network), which, but for a brief period, was wholly funded by Mastercard. The Network brought together the programme managers with public sector bodies who were potentially interested in prepaid card services.

The PSR found 2 cartels, both involving market sharing of customers:

• The first cartel involved all 5 Parties and lasted from 2012 to 2018 (although some of the Parties participated for shorter periods of time). In the context of the Network, the 5 parties arranged for allpay, APS and PFS not to target or poach each other’s public sector customers while a contract or pilot programme was running. In the early days of the Network, the Parties also allocated contacts of potential new public sector customers obtained from Network promotional events between programme managers.

• The second cartel involved APS and PFS, who between 2014 and 2016 agreed not to target each other’s public sector customers when a contract was up for renewal, including through a public tender.

These cartels resulted in less competition and choice for local authorities interested in prepaid cards. As a result, local authorities may have missed out on cheaper or better-quality products.

During the course of the investigation, all 5 Parties settled and admitted breaking the law. The PSR imposed fines totalling more than £33 million.  

Chapter II investigation into payment systems

In March 2021, the CMA launched an investigation into suspected breaches of competition law by Apple in the UK. The investigation concerns Apple’s conduct in relation to the distribution of native apps on iOS and iPadOS devices in the UK, in particular the terms and conditions governing app developers’ access to Apple’s App Store. The CMA has used its formal information gathering powers to obtain evidence and the investigation is currently ongoing.

Water and sewerage services

Chapter II investigation into the business retail market for water and sewerage services and associated markets for value added services

In June 2019, Ofwat launched an investigation into a potential abuse of a dominant position by Thames Water. In particular, Ofwat suspected that Thames Water’s approach to installing digital smart meters, which affects retailers and third-party providers of data logging services and their business customers, may be anti-competitive and infringe the Chapter II prohibition of the Competition Act 1998.^{[footnote 3]}

In May 2021, Ofwat consulted on whether to accept an initial set of commitmentsformal commitmentsformal commitments offered by Thames Water. As a result of responses to this consultation, Thames Water modified the proposed commitments to clarify the actions it would take, in particular:

• details of planned changes to its metering policy for 2022, including in relation to when it will replace meters that have logging equipment attached to them and the circumstances in which it will install loggable meters

• free replacement of meters that had logging equipment removed from them with loggable smart meters as they become available

• payment of compensation for lost or damaged logging equipment in certain circumstances

• removing the ongoing subscription charges for digital data services

Following a further consultation in February 2022, Ofwat concluded in March 2022 that it was appropriate for it to accept the revised commitments offered by Thames Water and has closed its investigation with no decision made on whether competition rules were infringed. 

Rail services

Chapter I investigation into testing services in the passenger rail transport sector

In March 2021, ORR opened an investigation into suspected infringements of Chapter I of the Competition Act 1998 by the Railway Assessment Centre Forum (RACF).

ORR’s concern was that the RACF’s processes and rules for admitting new members may prevent or restrict new entry into the market for the provision of train driver psychometric testing services in Great Britain. In particular, RACF membership was required to offer psychometric assessment, but membership rules were not based on objective, transparent, publicly available criteria (including, for example, a requirement to have a mentor without any criteria for that mentor or any guarantee that one would be provided) and membership applications were determined by actual or potential competitors of the applicants (which raises further concerns regarding the requirement for the applicant to share a business plan containing commercially sensitive information).

In November 2021, RACF offered commitments to ORR that it would introduce:

• objective, transparent and publicly available membership rules

• an application process which does not require applicants to provide commercially sensitive information

• revised timescales and process for the appointment of mentors

• a revised appeal process, allowing the rejected applicant a right to appeal to an independent barrister

Following a consultation on accepting the commitments in January 2022, ORR announced in April that it had accepted the commitments and closed the investigation with no decision having been made on whether competition rules were infringed. While this is just outside the reporting period, given that the final decision to accept commitments was made before the publication of this report, we have included it for completeness.

Other relevant competition enforcement work

Water and sewerage services

Bristol Water commitments

In November 2020, Ofwat gave notice of its intention to release Bristol Water Plc from commitments made under the Competition Act 1998 in 2015 following an investigation into a potential abuse of dominance in the self-lay market for new connections and invited representations on its proposals. Having considered the representations received, Ofwat decided that it was appropriate to release Bristol Water from its commitments as it had reasonable grounds to consider that its competition concerns no longer arose and that the structural and cultural changes required by the commitments appeared to have been embedded in Bristol Water’s usual operational behaviours. A final decision was published in April 2021, confirming the removal of the commitments.

Cases appealed to the Competition Appeal Tribunal

Chapter II investigation into bulk mail delivery services

In August 2018, Ofcom issued its decision that Royal Mail had infringed the Chapter II prohibition of the Competition Act 1998 and Article 102 TFEU. Ofcom found that Royal Mail had abused its dominant position in the market for bulk mail delivery services in the UK by introducing discriminatory pricing. Specifically, Ofcom found that lower prices for wholesale bulk access were not available to access operators that operated their own delivery services.

In October 2018, Royal Mail appealed Ofcom’s decision to the Competition Appeal Tribunal (CAT). The CAT dismissed Royal Mail’s appeal in November 2019, upholding Ofcom’s decision on all grounds, including the financial penalty. Royal Mail sought permission to appeal the judgment to the Court of Appeal. In January 2020, the CAT refused Royal Mail’s application for permission to appeal. Royal Mail was subsequently granted permission by the Court of Appeal to appeal part of the CAT’s judgment. The Court of Appeal dismissed Royal Mail’s appeal in May 2021. Royal Mail has sought permission to appeal to the Supreme Court.

Chapter I investigation into the use of certain retail most favoured nation clauses by a price comparison website in relation to home insurance products

In November 2020, the CMA issued an infringement decision to BGL (Holdings) Limited, BGL Group Limited, BISL Limited (BISL), and Compare The Market Limited (collectively, Compare the Market). The CMA found that, between 1 December 2015 and 1 December 2017, Compare the Market infringed the Chapter I prohibition of the Competition Act 1998 and Article 101 TFEU by using wide ‘most favoured nation’ clauses (wide MFNs) in its contracts with several home insurance providers selling through its price comparison website (PCWs), ComparetheMarket.com.^{[footnote 4]} The CMA imposed a penalty of £17,910,062 on Compare the Market.

The CMA found that Compare the Market’s network of wide MFNs prevented the relevant insurers from offering better prices on rival price comparison websites, which had the effect of:

• reducing price competition between PCWs

• restricting the ability of Compare the Market’s rival PCWs to expand, enabling Compare the Market to maintain or strengthen its market power

• reducing price competition between home insurers competing on PCWs

In February 2021, Compare the Market appealed the CMA’s decision which found that it had infringed Chapter I of the Competition Act 1998 and Article 101 TFEU in its use of MFN clauses in relation to home insurance products to the CAT. Compare the Market’s appeal challenged the CMA’s decision both on the finding of liability and on the penalty imposed. Hearings took place in November 2021 and judgment is pending.

Use of advisory / warning letters

The CMA and regulators can issue advisory and warning letters in situations where there are concerns that certain practices may be restricting competition, but for which a formal investigation has not been launched. Both advisory and warning letters are softer enforcement tools that are designed to increase awareness of competition law and encourage compliance.

During this reporting period:

• The FCA issued 14 ‘on notice’ letters to firms, all related to Chapter I of the Competition Act 1998.^{[footnote 5]} The types of behaviour which led to the ‘on notice’ letters included potentially anti-competitive coordination between competitors.  

• ORR issued an advisory letter in response to a complaint relating to training for Load Examiner competency, where the alleged conduct prevented third parties from undertaking Load Examiner competency training which could mean that third parties would be unable to offer Load Examiner services to freight operating companies. 

Decisions taken since April 2021 to use direct regulatory powers instead of competition prohibition powers

Under Schedule 4 to the Enterprise and Regulatory Reform Act 2013, the CMA has a duty to report on any decision taken by a regulator, in which the regulator is satisfied that its functions under Part 1 of the Competition Act 1998 in a case are exercisable, but that it is more appropriate for it to proceed by exercising functions other than those that it has under Part 1 of the Competition Act 1998.

During this reporting period, none of the regulators took a decision that its functions under Part 1 of the Competition Act 1998 were exercisable but that it was more appropriate for it to proceed by exercising functions other than its Part 1 functions.

In addition to the above, the sectoral regulators have a duty to consider whether, before exercising certain specified powers under their respective sector-specific legislation, it would be more appropriate to proceed under the Competition Act 1998.^{[footnote 6]} During this reporting period:

• There have been 19 occasions where Ofgem proceeded to exercise its powers under the Gas Act 1986 and the Electricity Act 1989 having first considered whether, as required under Sections 25(4A) and (4B) of the Electricity Act 1989 and 28(4A) and (4B) of the Gas Act 1986, using its competition powers would be more appropriate. All cases related to Renewables Obligation (RO) or Feed-in tariff (FIT) non-payment and or non-provision of information under standard licence conditions (SLC). In all of these cases, Ofgem did not identify any competition concerns and therefore decided to proceed under the powers conferred by the Gas Act 1986 and the Electricity Act 1989 rather than the Competition Act 1998.

• There have been 4 occasions where the PSR proceeded to exercise its powers under Part 5 of the Financial Services (Banking Reform) Act 2013 rather than exercising its competition powers. 

  • In July 2021, the PSR published its decisions on lowering risks to delivery of the New Payments Architecture (NPA) programme. It required the scope of the NPA central infrastructure services contract to be narrowed, while maintaining the requirement for the contract to be secured through a competitive tender. Following a consultation in December 2021, the PSR gave Specific Directions 2a and 3a to Pay.UK, varying previously issued directions, to implement its decisions. Having regard to the fact this was a variation of existing directions and to the nature of those variations, the PSR decided that its regulatory powers were the most appropriate tool. In October 2021, the PSR consulted on its proposal to give a new specific direction to LINK (the UK’s largest cash machine network) once Specific Direction 8 (concerning access to cash) expired in March 2022. Following the consultation, the PSR issued Specific Direction 12 to LINK in March 2022 to maintain a broad geographic coverage of free-to-use cash machines in the UK by requiring LINK to have in place and maintain appropriate and effective policies, measures, and reporting obligations. The PSR decided to use its regulatory powers because it was of the view that competition concerns were not raised, therefore regulatory powers would be the most appropriate tool.

  • The PSR has been working to combat Authorised Push Payment scams, which occur when someone is tricked into making a push payment (where a person authorises their bank to send money to a payee’s account) to a fraudster. As part of this, the PSR gave Specific Direction 11 in February 2022 to facilitate wider adoption of the Confirmation of Payee service (which checks that the name of the account to which a payer is sending money matches the name they have entered; an alert is issued in the event of a mismatch). The PSR consulted on these changes following publication of a consultation paper in December 2021. The PSR proceeded to give a specific direction because its regulatory powers were the most appropriate tool to achieve a targeted and timely wider implementation of Confirmation of Payee.

• Ofwat decided in November 2020 that it was more appropriate to investigate a complaint relating to the accuracy of data about customers in the business retail market for water and sewerage services using its powers under the Water Industry Act 1991. Ofwat considered that its sectoral powers allowed a more targeted approach with wider relevance to strategically significant issues in the business retail market regarding data quality. Ofwat concluded this investigation in December 2021 by issuing a penalty notice under the Water Industry Act 1991. 

The FCA and Ofcom indicated that there were no cases during this reporting period in which Competition Act 1998 powers could have addressed the relevant concerns such that they needed to consider whether it was more appropriate to proceed by using their competition powers rather than their regulatory powers. ORR, NIAUR and the CAA indicated that there were no cases in which the primacy obligation was triggered.

Market studies and market investigations

The CMA and the sector regulators also have powers to conduct market studies and to make market investigation references to the CMA under the Enterprise Act 2002. This section focuses on developments in market studies and market investigations under the Enterprise Act 2002 during the period covered by the report.

Market studies under the Enterprise Act 2002

Digital Comparison Tools

In September 2017, the CMA published its final report following a market study into the use of Digital Comparison Tools (DCTs) by consumers to compare and potentially switch or purchase products or services from a range of businesses. The CMA made a range of recommendations to address concerns, including some specific recommendations addressed to the government, Ofcom, Ofgem and the FCA. As well as remedy recommendations, the CMA also opened a competition law investigation in relation to one DCT contract with home insurers, which appeared to limit insurers’ ability to charge a lower price on one platform than on another (‘wide price parity’/most favoured nation clauses) and may have resulted in higher home insurance prices. See Chapter II investigation into payment systems.

The CMA recommended to the government that intermediaries like DCTs should be brought within the regulators’ scope in the energy and telecoms sectors to allow the relevant regulators to enforce more firmly and more quickly, as well as monitor compliance better (and create a level playing field for all firms performing a similar function, for example, selling energy or telecom services).

In August 2021, as flagged in its 2020 Energy White Paper, BEIS published its call for evidence on third-party intermediaries in the energy retail market, such as energy brokers and price comparison websites. In the Energy White Paper the government committed to consult on regulating third party intermediaries, with a view to ensuring the regulatory framework adequately covers the wider market. The call for evidence represents the start of that consultation process. The consultation also sought evidence on the activities of third-party intermediaries and the extent to which they cause harm (or risk of harm) to customers and the energy system. BEIS is currently reviewing responses.

The following paragraphs provide an update on the progress made by the relevant regulators in implementing the CMA’s recommendations.

Ofcom

Ofcom has taken a number of steps to take forward the CMA’s recommendations of supporting the development of DCTs in telecoms in order to enhance competition and consumer choice.

In April 2021, Ofcom made changes to its voluntary accreditation scheme for DCTs. These changes will help to ensure the scheme is better able to adapt to a changed digital environment, for example by allowing new ways of presenting search results where that meets consumer needs.

In July 2021, Ofcom provided an update on its initial thinking in respect of data mobility in the retail telecoms and pay TV markets. This would enable people and small businesses to tell their communications provider to share information about their services easily and securely with third parties of their choice, such as comparison sites. The update summarises the responses to Ofcom’s 2020 consultation and outlines its next steps, including continued participation in the government’s Smart Data Working Group.

FCA

The FCA authorises and regulates DCTs that carry out regulated activities. The FCA has continued to take steps which seek to address the CMA’s recommendations, as well as broader action in support of consumer choice. The FCA has continued to supervise DCTs in line with the two-year strategy (PDF, 212KB) published in November 2020. This strategy is based on an analysis of firms’ strategies, business models, and drivers of culture (including governance arrangements and purpose). The FCA has identified the key harms and drivers of harm, including consumers being sold products that do not meet their needs and being unable to access financial services. Others include ineffective governance arrangements and poor culture, poor operational controls and poorly managed innovation.

The FCA considers that DCTs should give consumers sufficient information to allow them to make informed decisions. This includes information on benefits, exclusions and limitations, as well as other appropriate information about the policies offered. Furthermore, DCTs should understand the products they sell to match them to the appropriate target markets, and to distribute them effectively in a way that meets consumers’ needs and achieves good outcomes.

Heat networks

The CMA’s market study into heat networks (systems that heat multiple homes from a central source) concluded in July 2018. The government responded to the market study in December 2018, accepting the CMA’s recommendations that a new regulatory framework should be established to ensure consumer protection for all heat network customers and consulting on high level options for implementation. The CMA has since worked closely with BEIS, the Scottish Government (in particular over the Heat Networks (Scotland) Act 2021 giving effect to a number of the CMA’s market study recommendations in areas of devolved competence) and with Ofgem on design and implementation.

In December 2021, BEIS published its response to its 2020 consultation on policy options for regulating heat networks. BEIS confirmed that Ofgem will be appointed as the regulator for heat networks across Great Britain, while the Energy Ombudsman will act as the independent ombudsman service for heat network consumers and Citizens Advice will be appointed as the consumer advocacy body for heat networks in England and Wales. Legislation to implement these proposals will be introduced when parliamentary time allows. BEIS also published a consultation on recovering the costs of heat networks regulation, proposing that Ofgem and Citizens Advice’s total ongoing costs of regulating and performing consumer advocacy functions in the heat networks, gas, and electricity markets should be spread evenly across heat network, gas, and electricity consumers.

In recognition of significant potential for the number and scale of heat networks in Northern Ireland to increase dramatically, the Department for the Economy launched a consultation in January 2022 seeking views on proposals to introduce legislation that will provide greater consumer protections and support the growth of the heat network sector, including appointing NIAUR as the sector regulator. The Department for the Economy is working closely with BEIS on regulatory design.

Online advertising and digital platforms market study

In July 2020, the CMA concluded its market study into online advertising and digital platforms. The study concluded that the inherent characteristics of digital advertising markets (including network effects, consumer behaviour and the role of data) can lead to the market tipping in favour of a small number of players. The resulting lack of competition in those markets gives rise to harms to consumers and businesses, such as reduced innovation in goods and services, higher prices (as the costs of digital advertising are reflected in the prices of goods and services across the economy), and a lack of consumer control, with search and social media markets often characterised by ‘take it or leave it’ terms that mean consumers have to share their data with platforms to use services.

The CMA called for the development of a pro-competition ex-ante regulatory regime to oversee the activities of online platforms funded by digital advertising and the establishment of a dedicated Digital Markets Unit (DMU) to enforce the new regime, with the necessary powers to introduce pro-competitive interventions, such as data-related interventions (including consumer control over data, interoperability and data access powers).

Digital Markets Unit

In its response to the market study final report in November 2020, the government accepted the findings of the study and the CMA’s recommendations, and announced a new pro-competition regime for digital markets, featuring an enforceable code of conduct to govern the behaviour of companies with ‘strategic market status’ (SMS); pro-competition interventions to tackle the sources of market power; and a DMU housed within the CMA to maintain and enforce these new measures.

In April 2021, the government published the terms of reference for the non-statutory DMU to facilitate the execution of preparatory work to implement the statutory regime, for example, via gathering evidence on digital markets, and engaging with stakeholders across industry, academia, other regulators and government.

In July 2021, the government launched a consultation in which it set out details relating to the operation of the pro-competition regime and the powers it proposed should be given to the statutory DMU. Following the consultation, the non-statutory DMU has continued to work with government in the development of the legislation to establish the regime, for example, in relation to formal mechanisms for coordination between the DMU and other regulators.

Digital Regulation Cooperation Forum

Given the wide-ranging nature of digital markets and the regulators that could be involved, the Digital Regulation Cooperation Forum (DRCF), comprising the CMA, FCA, ICO and Ofcom, was launched in July 2020 to support the coordinated regulation of digital markets (with the aim that the DRCF would work with other regulators where this supports regulatory coherence).^{[footnote 7]} The DRCF would seek to ensure that synergies and tensions between different policy objectives are effectively managed.

In March 2021, the DRCF published its workplan for 2021 to 2022. The workplan set out the following priorities for the year:

• working together on critical digital issues (including design frameworks, algorithmic processing and end-to-end encryption) to provide coordinated regulatory solutions to improve outcomes for consumers

• developing joined-up regulatory approaches for delivering coherent regulatory outcomes where different regimes overlap

• working collectively to build skills and capabilities to ensure that the DRCF members are equipped for their evolving regulatory roles

The DRCF’s first chief executive was appointed in November 2021 to oversee delivery of the workplan and to manage the DRCF’s secretariat. The DRCF’s chief executive will continue to work closely with the chief executives of the member regulators to develop joined-up approaches and ensure that digital regulatory policy is developed in a responsive and holistic way.

In line with the priorities set out in the workplan, the CMA and ICO published a joint statement in May 2021 on the interaction between competition and data protection, flagging synergies between the 2 policy regimes (for example the need to make sure that consumers are informed about their choices and have appropriate controls when making decisions about online services). Ofcom and the ICO have also collaborated closely in relation to the Age-Appropriate Design Code and the Video Sharing Platforms regime, in order to ensure a coherent regulatory approach and make it easier for industry to understand and comply with regulatory requirements. In addition, in November 2021, the DRCF launched its horizon-scanning programme to build its collective knowledge and understanding of emerging digital developments, inviting input from the public via a dedicated mailbox and identifying 3 key priorities for the programme for the first half of 2022.

During 2021, the DRCF responded to a request from government for evidence on the additional mechanisms which might be needed to support cooperation between digital regulators. Following that input, government has continued to consider how the regulatory landscape could evolve to join up existing regimes and ensure future legislative changes facilitate a coherent approach to digital regulation.

In December 2021, the House of Lords Communications and Digital Committee published its final report in its inquiry into the effectiveness of digital regulation. The DRCF is actively considering the Committee’s recommendations as it develops its new workplan for 2022-23 (due to be published in late April 2022).

Electric vehicle charging

In July 2021, the CMA published the final report of its market study into electric vehicle (EV) charging. The study found that while some parts of the sector were developing relatively well (such as rapid charging at destinations like shopping centres and chargepoints at home or work), other parts were lagging. In particular, there were greater challenges in rolling-out charging along motorways, at remote locations and on-street, and concerns about the reliability of chargepoints, difficulties in comparing prices and paying for charging.

The CMA set out 8 recommendations to promote competition, unlock investment, and build consumer trust:

• the UK government should set out an ambitious national UK Strategy for rolling out EV charging between now and 2030, alongside strategies in Devolved Administrations

• Ofgem and NIAUR should speed up grid connections, invest strategically and work to lower connection costs

• the RCF should be rolled out quickly and used to open up competition at service stations

• UK government and Devolved Administrations should consider targeting funding at gaps in remote areas which may not be served

• local Authorities should take more of an active role in planning and managing roll-out to maximise competition

• UK government and Devolved Administrations should equip and incentivise Local Authorities appropriately (for example, funding for expertise, a statutory duty)

• UK government should set open data and software standards for home chargepoints

• UK government should adopt principles to ensure charging becomes as simple as filling up with petrol/diesel with a public body to oversee this

As a result of information obtained during the market study, the CMA also launched an investigation into suspected breaches of Chapters I and II of the Competition Act 1998 (see Energy.)

Given the interlinkages between EV charging infrastructure and the UK’s electricity network, the CMA engaged closely with Ofgem during the market study to better understand the role of regulation and consumer protection in the energy sector. Ofgem, along with NIAUR in Northern Ireland, play an important role in supporting the development of the EV charging sector through the incentives given to electricity network operators to deliver the necessary investment in energy connections to enable the provision of charging points.

During the study, Ofgem announced that as part of its Green Recovery Scheme it would invest £300 million in over 200 low carbon projects in electricity distribution and transmission, including new infrastructure for EV charging at motorway service areas. In September 2021, Ofgem published its strategy to enable the transition to EVs, setting out how it intends to support the development of this sector. This includes proposals to address the CMA’s recommendations in facilitating the network connections and capacity required to meet future EV needs at least cost.

In March 2022 the UK government published its response to the CMA market study, agreeing with all of the CMA’s recommendations directed to the UK government. Alongside this, the UK government published its Electric Vehicle UK Infrastructure Strategy which sets out a vision for achieving a tenfold increase in chargepoints by 2030. The strategy outlined a fund of £1.6 billion to support the UK market to reach 300,000 public EV chargepoints by 2030. The strategy set out changes to improve the customer experience (including progressing regulations to ensure chargepoints are reliable and easy to use), and significant support for on-street charging (for those without access to off-street parking), as well as on fast charging for longer journeys. A new Local Electric Vehicle Infrastructure (LEVI) Fund of £450 million will boost local authority-led projects such as EV hubs and innovative on-street charging and includes £50 million to fund staff to work on local challenges and public chargepoint planning. The Strategy also committed to an accelerated rollout of a comprehensive rapid charging network on major roads, including delivery of the £950 million RCF in England.

The CMA welcomes the UK government’s response and EV Infrastructure Strategy and will continue to work closely with the UK government to take forward the CMA’s recommendations. The CMA will also continue to engage with Ofgem, NIAUR, the Devolved Administrations and the industry to help ensure the EV charging sector develops in a way that works well for all UK drivers.

Mobile Ecosystems

In June 2021, the CMA launched a market study into mobile ecosystems in the UK. ‘Mobile ecosystems’ refers to the operating systems, app stores and web browsers through which consumers can access via their mobile phones a variety of products, content and services (for example, music, TV and video streaming, fitness tracking, shopping and banking). These products also include other technology and devices such as smart speakers, smart watches, home security and lighting, which mobile phones can connect to and control.

The study sought to assess how mobile ecosystems operate, with a specific focus on the extent of competition faced by Apple and Google, and covered 4 broad themes:

• competition in the supply of mobile devices and operating systems

• competition in the distribution of native apps

• competition in the supply of mobile browsers

• the role of Apple and Google in competition between app developers.

In December 2021, the CMA published its interim report. The report provisionally found that Apple and Google have market power in relation to mobile operating systems, native app distribution, and mobile browsers and browser engines. It also raised concerns that both firms have been able to leverage their market power to create largely self-contained ecosystems; as a result, it is extremely difficult for new firms to enter and compete meaningfully with an alternative system.

The CMA is concerned that this is leading to less competition and meaningful choice for consumers. People also appear to be missing out on the full benefit of innovative new products and services, such as so-called ‘web apps’ and new ways to play games through cloud services on Apple devices. The CMA is also concerned that people could be facing higher prices than they would in a more competitive market, including for Apple phones, app subscriptions and purchases made within apps.

The interim report sets out a potential range of actions to address these issues, including:

• making it easier for users to switch between iOS and Android phones when they want to replace their device without losing functionality or data

• making it easier to install apps through methods other than the App Store or Play Store, including via so called ‘web apps’

• giving users a choice of how they pay in-app rather than being tied to Apple and Google’s payment systems

• making it easier for users to choose alternatives to Apple and Google for services likes browsers, in particular by making sure that they can easily set which browser they have as default

The CMA continues to work on the market study, with a view to publishing its final report in June 2022.

Ticketing systems

In March 2019, ORR closed its market study, which set out 3 recommendations to tackle the market issues identified in the automatic ticket gates (ATG) and ticket vending machine (TVM) markets. ORR continues to be involved in the implementation of these remedies and in October 2021 published its second update on progress with its recommendations. The report highlighted the steps taken by industry, including progress made towards streamlining the accreditation process for new suppliers and the progress made by an industry working group on interoperability. ORR will continue to monitor developments and work with industry to reduce barriers to competition in these markets.

Signalling market study

In April 2020, ORR closed its signalling market study launched in January 2020 to allow the industry to focus on responding to the COVID-19 pandemic. In light of the pandemic, ORR considered that it would be challenging to gather the required evidence to reach a fair and accurate decision by the legal deadline of 26 July 2020. However, by November 2020 ORR was satisfied that the industry was in a position to cooperate and fully engage, and so opened a second market study into the signalling market, with broadly the same scope as the first study.

ORR published its final report in in November 2021. ORR’s study found evidence of:

• high concentration, with the market increasingly dominated by historic incumbents Siemens and Alstom

• concerns over value for money

• barriers to entry and expansion, including:

  • funding issues around the total volume, stability, and predictability of signalling volumes which disproportionately impact smaller and would-be competitors

  • barriers to the introduction of new technology

  • co-ordination issues between Network Rail’s centre and regions, the latter exhibiting a degree of risk/change aversity and delivery focus at the potential expense of value for money

  • issues arising from the need to interface with incumbents’ installed technology base

A series of recommendations published by ORR in its final report aim to open up the railway signalling market to competition and encourage suppliers to compete on cost, quality and innovation. The recommendations cover:

• increased regulatory oversight: to enhance monitoring of the market and increase transparency over costs, delivery, volumes and market shares

• a pro-competitive approach to procurement: to reward pro-competitive behaviour, widen the pool of suppliers, and reduce Network Rail’s dependency on incumbent suppliers

• interfacing: to ensure interfaces are opened up and mechanisms for addressing concerns and complaints about interfacing and access to technology are effective

• balancing: to ensure Network Rail’s procurement processes are run on genuinely competitive terms and do not unduly favour existing suppliers or penalise first movers in new technology

• funding: to provide suppliers with greater certainty in the volumes of work awarded to them and reduce the risk when developing new technologies

Market investigations under the Enterprise Act 2002

Mobile Radio Network for the Police and Emergency Services

Motorola Solutions Inc’s (Motorola Solutions) Airwave network is a secure private mobile radio communications network for organisations involved in public safety in Great Britain. Currently, there is no alternative method for the police, fire and emergency services staff to communicate securely with each other when in the field.

In October 2021, the CMA launched a market investigation in respect of the supply of land mobile radio network services for public safety (and ancillary services) in Great Britain. This stemmed partly from concerns about the impact of the dual role of Motorola Solutions as the owner of the company providing the current mobile radio network (Airwave Solutions), and as a key supplier in the roll-out of the planned new Emergency Services Network (ESN). In particular, the CMA is concerned that the market for the supply of the mobile radio network used by all emergency services in Great Britain might not be working well, resulting in a more expensive service for customers.

The CMA is in the process of gathering and reviewing evidence. Some of the areas it is investigating include:

• Seeking to understand how the market has developed over time, in particular the nature and evolution of the commercial and contractual relationships between Airwave Solutions and its customers

• Assessing whether the seemingly highly concentrated market structure can be expected to afford Airwave Solutions unilateral market power (including considering the balance of negotiating power of each relevant party in contract negotiations that have taken place since 2015)

• Considering the extent to which Airwave Solutions’ role in the roll-out of interworking (ie the technology enabling users to communicate with each other across the Airwave network and ESN during the period of transition from one network to the other) may amount to a feature that prevents, restrict or distort competition, to the extent that it may contribute to prolonging a situation in which Airwave Solutions may have unilateral market power

• Considering Motorola Solutions’ control of both the Airwave network through Airwave Solutions and key elements of the design and roll-out of ESN may be a feature of the reference market that may prevent, restrict or distort competition in the supply of land mobile radio network services

In December 2021, Motorola Solutions (together with Airwave Solutions Limited and Motorola Solutions UK Limited) submitted an application for judicial review challenging the CMA’s decision to make the market investigation reference and the timetable by which the Reference was to be determined – the Competition Appeal Tribunal rejected Motorola’s application.

The statutory deadline for the investigation is April 2023. The CMA aims to publish its provisional findings in April 2022 and the final report in June 2022.

Monitoring and enforcement of remedies imposed following previous market investigations

Over the reporting period, the CMA has continued to take action in relation to breaches of remedies imposed following previous market investigations relating to the regulated sectors. These include:

Payment Protection Insurance Market Investigation Order 2011: CMA letter to Lloyds Banking Group about a breach of the PPI Order (September 2021), CMA letter to NewDay Ltd about 5 breaches of the PPI Order (October 2021)

Small and Medium sized Enterprises (SME) Banking Undertakings 2002: CMA letter to Danske Bank on a second breach of the SME Banking Undertakings (November 2021)

Private Motor Insurance Market Investigation Order 2015: CMA letter to Tesco Bank about a breach of The Private Motor Insurance Order (January 2022)

Market reviews and other markets work

As noted above, certain regulators have also used their sectoral powers to carry out market studies, market reviews and other markets work to deal with competition issues affecting their sectors. This work is summarised for each regulator.

CAA

Manchester Airport Market Power Determination

In November 2021, the CAA announced that it would continue to postpone the formal commencement of its Market Power Determination (MPD) relating to Manchester Airport until at least September 2022 due to continued disruptions from the COVID-19 pandemic. When the CAA carries out market power determinations, it considers whether the market power test in the Civil Aviation Act 2012 is met. If it determines that it is, then the airport operator in question will be subject to economic regulation by means of an economic licence.

In its announcement, the CAA disclosed that the International Consolidated Airlines Group S.A. (IAG) had formally requested the MPD and noted that it intended to engage with IAG, the airport operator, and other interested stakeholders before September 2022 to better understand stakeholders’ views on this matter.

Ofcom

Review of postal regulation 

In December 2021, Ofcom published a consultation on its review of postal regulation, setting out proposals to support the financial sustainability and efficiency of the universal postal service, promote competition and improve protection for consumers. The proposals seek to: 

• maintain the current overall universal service framework for Royal Mail

• retain existing consumer safeguards, including high quality of service standards and the price caps for second class letters, large letters and small parcels

• require Royal Mail to report publicly on its longer-term efficiency plan

• maintain the current scope of access regulation (ie the ability of third-party providers to access Royal Mail’s network to provide their own services) but not to extend it to small parcels, and not to bring tracked products (First or Second Class) into the scope of the universal service, recognising the adverse impacts that these regulatory changes could have on end-to-end parcels competition

• introduce new targeted consumer protections for parcel services, including new guidance to improve customer service and complaints handling by parcel operators and requiring parcel operators to have in place policies to better meet the needs of disabled consumers

Ofcom intends to publish its statement on the future regulation of postal services in Summer 2022.

Review of telecoms regulation in Hull

Following consultation in July 2020, Ofcom published its final statement in relation to the review of telecoms regulation in the Hull area in October 2021. This review covers all wholesale voice/broadband and leased-line markets in the Hull area. Ofcom found that while broadband consumers benefit from KCOM’s full-fibre network (which delivers a future-proofed gigabit-capable network to homes and businesses in the Hull Area), KCOM has nonetheless retained a near monopoly at both the wholesale and retail level.

On the residential broadband market, this has resulted in less retail choice and higher retail prices than the rest of the UK. As such, Ofcom has imposed further regulation to encourage competition in the retail broadband market.

This regulation reflects the fact that the move to fibre in both the Hull Area and the rest of the UK has the potential to encourage new providers to supply broadband in the Hull Area using wholesale products. In addition to ensuring that competitors will continue to have access to KCOM’s network on fair and reasonable terms, Ofcom’s regulation facilitates new entrants’ use of KCOM’s network by making improvements to the existing wholesale local access arrangements.

In addition, Ofcom’s regulation promotes access for rival providers to KCOM’s leased lines access services, using dark fibre. Through this, network providers will be able to lease from KCOM just the fibre element of a ‘leased line’ – the high-speed data connections used by large corporations and mobile networks.

Ofgem

Market review of microbusiness energy market

Ofgem commenced its Strategic Review of the microbusiness energy market in May 2019. The market involves the supply of gas and electricity to microbusiness customers (as defined in the Ofgem supply licence conditions).^{[footnote 8]} This review continued through the reporting period with a number of stakeholder consultation and engagement activities.

The review focuses on the 5 areas of Ofgem’s customer journey model (aware, browse, contract, dialogue, exit), with the overall aim of enhancing the engagement of microbusiness customers. At each stage of the customer journey model, Ofgem has explained the practical principles it believes should apply for microbusinesses to effectively engage in the market. Ofgem will map the evidence it collects to each stage and use the practical principles in its model to test whether microbusinesses’ experience aligns with its vision for a positive customer experience.

Ofgem published its consultation on initial proposals in July 2020 and after reviewing the responses, Ofgem published a statutory consultation in June 2021. Having carefully considered the responses, Ofgem published its final decision in March 2022.

Interconnector Policy Review

In August 2020, Ofgem launched a review of its regulatory policy and approach to new electricity interconnectors (the physical links that allow the transfer of electricity across borders). The review aimed to establish whether there is a need for further interconnection capacity in Great Britain beyond those projects currently with regulatory approval, and to consider Ofgem’s approach to the regulation of future interconnection in Great Britain.

Ofgem published 4 consultations in June 2021 and July 2021 covering its initial conclusions and recommendations for the 4 areas of the review:

• the effectiveness of the existing interconnector regime (cap and floor^{[footnote 9]}) in delivering its objective

• the likely socioeconomic impacts of additional interconnection

• the wider (non-socioeconomic) impacts of interconnection

• the regulation of multiple-purpose interconnectors 

Ofgem published its final decision in December 2021 setting out its conclusions, recommendations, and next steps. In summary, Ofgem will:

• open a cap and floor investment round in mid-2022, targeted for interconnectors that can connect by 2030

• implement some changes to the cap and floor regime framework and design to ensure it reflects the changing role of interconnectors in the energy system, works equally for different market participants, and continues to protect consumers’ interests

• launch a pilot scheme for multiple-purpose interconnectors (MPIs) under an adjusted cap and floor regime. Ofgem considers that MPIs could potentially deliver significant benefits and can contribute to the delivery of government policy objectives

Following this decision, Ofgem will launch an implementation period to engage with stakeholders and finalise the details of its decisions. Ofgem will then publish a final summary of its approach before opening a new application window and a cap and floor pilot scheme for MPIs in mid-2022

FCA

Credit information market study

In July 2021, the FCA resumed its Credit Information Market Study. This work had originally been launched in June 2019, but was paused in April 2020 due to the COVID-19 pandemic. Credit information is used to help assess the financial standing of consumers and plays a key role in enabling access to a range of financial and non-financial services.

The study examines:

• the purpose, quality and accessibility of credit information

• the market structure, business models and competition

• consumers’ engagement and understanding of credit information and how it impacts their behaviour

The FCA will reflect recent relevant market and regulatory developments in its analysis, including lenders’ and credit reference agencies’ response to the pandemic. 

The market study will support consumer credit markets that work well and is in line with the FCA’s commitments to put consumers’ needs first, which is critical to delivering the outcomes outlined in the FCA’s Business Plan 2022 to 2023.

Given the importance of credit information, it is vital that the sector works well. The FCA intends to publish an interim report in summer 2022, setting out its vision for the credit information sector, emerging findings (including on lenders’ reporting of forbearance) and early thinking on any potential remedies. It will also take into account the report the FCA commissioned from Rand Europe into potential future developments (PDF, 7.17MB) in the credit information market.

Accessing and using wholesale data review

In March 2020, the FCA started a review into the access and use of data and advanced analytics in wholesale financial markets, with a call for inputs to identify possible issues caused by the changing access and use of data (PDF, 784KB). The review also aims to help the FCA understand any benefits these changes may bring, to ensure that that regulation does not impede beneficial innovation.

Respondents to the call for inputs highlighted several areas where competition may not be working effectively in the provision of trading data, benchmarks and market data. The FCA set out the feedback received and its thinking in a feedback statement (PDF, 538KB), along with next steps, which include:

• an information gathering and analysis exercise in Spring 2022, focused on the pricing of trading data, underlying costs, and the terms and conditions of the sale of trading data;

• a market study in summer 2022 looking at how competition is working between benchmarks; and

• a market study (to be launched by the end of 2022) looking at competition in the sale of credit rating data.

Mortgages market study

Following publication of the final report for its mortgages market study in March 2019, in October 2019, the FCA published a policy statement setting out new rules that reduce barriers to switching for customers who may benefit from switching but cannot do so despite being up to date with payments (mortgage prisoners).

In July 2020, the FCA published a statement on Mortgage Prisoners setting out further analysis on borrowers who had mortgages with inactive firms, including mortgage prisoners and in October 2020 adopted new rules to make it easier for borrowers in closed books (mortgage books which are closed to new customers) to be offered a new mortgage with a firm within the same group.

In November 2021, the FCA’s Mortgage prisoners review was laid before Parliament. This set out the loan and borrower characteristics of mortgages in closed books with inactive firms and updated the estimate of the number of mortgage prisoners. It found that interventions to remove regulatory barriers to make it easier for lenders to lend to mortgage prisoners had only had a limited impact, with most mortgage prisoners remaining outside the risk appetite of lenders. The government and industry committed to using the findings of the review to determine if there were any further practical and proportionate solutions that could be found for affected borrowers.

Strategic review of retail banking business models

The increasing pace of regulatory changes and technological developments brings unprecedented potential to transform retail banking. The pandemic has accelerated the move to digital channels and has had profound effects on consumers and business finances and placed increased financial pressures on some banks. The FCA has conducted work to understand the impact of the pandemic and other factors on retail banking business models and on competition in the sector, including personal and SME banking services. As part of this, the FCA gathered financial and operational data from a range of banks to update its ‘strategic review’ dataset (compiled as part of its 2018 strategic review of retail banking business models and a further data collection in 2019) as well as using consumer analysis such as from Financial Lives (the FCA’s flagship survey of UK consumers in relation to financial services). It published its final report on 20 January 2022.

Review of non-workplace pensions

The FCA launched its review on whether there is effective competition in non-workplace pensions in February 2018 and published its feedback statement in July 2019. It found that limited consumer engagement, combined with complex and confusing products and charges, had led to a lack of competitive pressure in the non-workplace pensions market (which covered £470 billion of retirement savings).

The FCA published a consultation paper in November 2021 with proposals to address these concerns, including proposals for a default investment option for non-advised consumers buying a non-workplace pension and warnings for consumers who remain in cash for sustained periods of time. The FCA intends to publish a policy statement and final rules later in 2022. Further work on the lack of clarity in product charging is being taken forward as part of wider work on value for money in pensions, which is being conducted jointly by the FCA and the Pensions Regulator.

Investment platforms market study

The FCA published its investment platforms market study final report in March 2019. The FCA found that while the market worked well overall, there were areas where it could work better to ensure consumers and advisers can shop around and switch easily, at low cost, when another provider better meets their needs. New FCA rules to make moving platforms easier came into force in February 2021 (implementation having been delayed due to the COVID-19 pandemic).

The FCA also announced that, alongside these rules, it would consult on restricting platform exit fees in 2020. Originally delayed due to the COVID-19 pandemic, the FCA subsequently decided to stop the consultation given a marked shift in the market away from exit fees since 2018, with at least 2 major platforms announcing they would no longer be charging these fees. The FCA is monitoring the situation and may consider consulting on new rules if market changes lead to harm re-emerging in this area.

In December 2019, the FCA reviewed the progress that firms and industry had made to better enable investors to switch platforms through STAR (an industry initiative delivering a cross-industry framework of good practice for improving consumer experience in moving their money from one financial institution to another). The FCA intends to carry out its next review of progress in 2022. It expects to see the impact of the implementation of standards on the switching process for consumers and the outcome and impact in the market from this work.

The FCA also announced in its final report that it would review industry’s progress in helping consumers access comparable charging information which is due for completion by April 2022.

PSR

Supply of card acquiring services market review

The PSR launched a market review in January 2019 to determine whether the supply of card acquiring services in the UK is working well for merchants, and ultimately consumers. Card-acquiring services enable merchants – like a newsagent or supermarket – to accept card payments, and the cost to merchants can be passed on to consumers. In November 2021, the PSR published its final report detailing its findings.

The PSR concluded that the supply of card-acquiring services does not work well for merchants with an annual card turnover of up to £50 million. The PSR identified 3 features that individually and in combination restrict the ability and willingness of merchants to search and switch between providers of card-acquiring services:

• acquirers and independent sales organisations (ISOs, which are third-party companies that sign up businesses to accept credit cards) do not typically publish their prices and their pricing structures and approaches to headline rates vary significantly. This makes it difficult for a merchant to compare prices for ISOs, acquirers and payment facilitators;

• the indefinite duration of merchant contracts with acquirers and payment facilitators does not provide a clear trigger point for merchants to think about searching for another provider

• point-of-sale (POS) terminals often use proprietary technology and cannot be used with different card acquirers, and their contracts often include automatic renewals and early termination charges

The PSR published an initial consultation on possible remedies in January 2022. Remedies under consideration include:

• summary information boxes setting out key price and non-price service elements of card-acquiring services
• stimulating the introduction of Digital Comparison Tools for merchants to allow them to compare offers
• establishing standardised trigger messages to be sent by providers of card-acquiring services to merchants ahead of their contract initial term ending and annually thereafter
• making it easier to switch card-acquiring services by looking at potential options for merchants to switch without incurring undue cost or suffering inconvenience from having to also exchange their POS terminal. This may include the replacement of terminals by POS terminal lease providers for instance.

The PSR will consider the responses to this initial consultation before deciding whether these remedies are the best way to address the features of concern, or if other intervention is needed. It plans to issue a provisional decision and draft remedies notice, and a final remedies notice later in 2022. 

In addition, during the review, evidence was provided showing that scheme fees paid by acquirers to the card schemes (and included in the fees which merchants pay acquirers in order to accept card payments) have increased significantly between 2014 and 2018. In addition, cross-border interchange fees have increased significantly in recent months. Taken together, these developments pose important questions as to whether there are sufficient competitive constraints on card schemes.

Work on card fees

The PSR announced in January 2022 as part of its Strategy a significant focus on competition in payments – including a longer-term vision to see account-to-account payments become a viable alternative for retail payments, providing greater competition to cards. This should lead to lower fees for merchants and ultimately lower prices for consumers.

While the PSR drives this work forward, it wants to identify what might need to be done to address any harm that may arise from increases in scheme fees and cross-border interchange fees (described in PSR above). In November 2021, the PSR announced it would investigate this matter and assess whether any action is required. The PSR has sent initial information requests to understand the factors that affect the level and structure of card fees and the reasons behind any changes. It will use the information gathered to identify where to direct its attention and will later this year set out what the programme of work will look like.

Payment systems central infrastructure provision market review

The PSR published its final decision on remedies following its market review into the ownership and competitiveness of payment systems central infrastructure provision in June 2017. 1 of the remedies – on competitive procurement – required the operators of Bacs and FPS (now Pay.UK for both systems) and LINK to have competitively procured central infrastructure contracts in place from a specified date. This introduced competition in the market for central infrastructure for Bacs, Faster Payments and LINK for the first time.

The LINK procurement was completed in the 2019 to 2020 reporting period, and services under the contract came into effect in this reporting period.

Pay.UK has been conducting a procurement process for central infrastructure services for the NPA, replacing Bacs and Faster Payments infrastructure. In July 2021, the PSR decided that it needed to reduce the risks of delivery to the NPA programme and in December 2021 required Pay.UK to narrow the scope of the procurement and change the compliance dates (Specific Directions 2a and 3a). The contract to replace the current Faster Payments infrastructure must now be in place from 1 July 2026 and Pay.UK must submit to the PSR a plan for developing the long-term strategy for Bacs by 31 March 2023.

ORR

Delay compensation third party intermediaries market review

In November 2018, ORR launched a market review into delay compensation third party intermediaries (TPIs). These companies act as an interface, or intermediary, between customers (generally individual rail passengers, although some claims companies focus on business customers) and train operating companies (TOCs) for the purposes of claims made under passenger delay compensation schemes. They provide passengers with an alternative to claiming directly from TOCs (as at October 2020, £89 million have been paid out to customers during 2019-2020, although most potential compensation has historically gone unclaimed).

In June 2020, ORR consulted on a range of proposals seeking to improve access to delay compensation through amendments to TOC licences, together with an accompanying TPI Code of Practice.

In May 2021, ORR published a second consultation which announced that ORR would not proceed at that time with its proposals regarding TPIs, in light of the uncertain recovery trajectory of the industry and the government’s ongoing rail review. These aspects of ORR’s proposals were to be deferred, and as of March 2022 remain deferred pending further clarity on the future industry model. ORR’s second consultation did, however, propose to modify train operators’ passenger licences to include a condition on delay compensation, which will come into effect on 1 April 2022. The licence condition requires a level of common practice in a number of key areas including informing passengers and processing claims.

DB Cargo disposal of surplus freight locomotives

In March 2021, ORR launched a call for evidence about DB Cargo’s policy on the disposal of its surplus freight locomotives. It reviewed whether this policy continued to be necessary and proportionate to address competition issues pertaining to access to locomotives, which it was originally intended to address. A letter informing stakeholders of the outcome of the process was published in May 2021.

Ofwat

Business retail market - State of the Market assessment

In December 2021, Ofwat published its fourth annual State of the Market report. The report considered the extent to which the business retail market is currently performing for customers and how far the sector has progressed in addressing key sources of market friction. The report found that:

• outcomes for business customers continue to differ based on their size, with benefits accruing more strongly to larger customers. Smaller customers continue to have lower levels of awareness and engagement in the market when compared to their larger counterparts

• awareness levels in the market have decreased (43% of business customers are aware that they have a choice of retailer compared to 58% in 2019 to 2020 and 53% in 2018 to 2019). This reduction is driven predominantly by micro customers (0-9 employees)

• the number of customers that were active in the market has slightly increased, with 9% of eligible customers having been active in the last 12 months compared to 8% in 2019 2020, and larger customers continuing to be more active (28%)

• indicators on switching and renegotiation rates are mixed, with data from the Market Operator Service Ltd (MOSL, the market operator for the non-household retail market in England) indicating a reduction compared to previous years, while findings from Ofwat’s consumer insight survey showing a slight increase compared to 2019 to 2020

• the majority of customers (73%) continue to state that they are satisfied with their current retailer

• business customer complaints received by the Consumer Council for Water and Ofwat fell, with billing and charging remaining the most common cause for complaint

• associated retailers (those that acquired a customer base from previous monopoly water companies either at market opening or later) continue to lose market share to new entrants. New entrants continue to gain around 1% of SPIDs (‘Supply Point Identifier’ – used to identify the water and/or sewerage supplies at the property) each year. Despite gains made by new entrants and self-suppliers (where a business customer buys water supply and wastewater services from the water company and provides their own retail services), incumbent retailers continue to account for the large majority of market share

The assessment also considered the progress made in addressing key market frictions identified in previous state of the market reports (poor quality data, inadequate wholesaler performance, and cumbersome wholesaler-retailer interactions). While the sector made progress in improving wholesaler-retailer interactions in the market, data quality issues and wholesaler performance continue to require attention. The sector also made little progress during 2020 tp 2021 on reform of the Market Performance Framework (a group of mechanisms that govern, monitor and incentivise trading parties to deliver a set of service standards in order to comply with market codes that govern the non-household retail market). Ofwat considered that this could play a key role in resolving market frictions (in particular data quality) and so considered progress in this area as a key priority for the market going forward.

Business retail market – review of the business retail caps

Since April 2017, around 1.2 million business customers in England and large customers using more than 50 megalitres (Ml) of water per annum in Wales have been able to switch water and sewerage retail providers. Ofwat has now commenced a review of the existing price and non-price protections set in place via the Retail Exit Code (REC) to protect the interests of business customers who have not engaged in the market.

On 15 December 2021, Ofwat published a consultation seeking views on its approach to REC price and non-price protections. In particular Ofwat proposed retaining price cap protections for 2 groups of business customer:

• Group 1 (those with 0 to 0.5Ml consumption a year) – Group 1 customers are presently protected by maximum price caps linked to wholesale costs (as a pass through) plus average cost to serve and a net margin
• Group 2 (0.5Ml to 50Ml a year) – maximum price caps for Group 2 customers are given as wholesale costs (as a pass through) plus a gross margin (8% for water services, 10% for sewerage services)

Ofwat’s consultation set out that price protections for Group 1 customers need to be retained as competition is working less well for smaller business customers, and that a key element of the review will be the assessment of the level of these protections. With respect to Group 2 customers, higher levels of customer engagement and activity means the current approach remains appropriate. Ofwat plans to publish its decision regarding proposed changes by the end of 2022, with a view to any such revisions taking effect from April 2023.

Review of incumbent support for effective markets

Ofwat’s 2020 review of incumbent support for effective markets (project RISE) identified a number of ways in which incumbent water companies could improve their support for the business retail and developer services markets.

Despite noticeable improvements from some companies, Ofwat remains of the view that water companies could do more to support effective markets. In September 2021, Ofwat wrote to the CEOs of incumbent water companies challenging them to step up their efforts to support effective markets further. This letter highlighted important initiatives in the business retail and developer services markets and set out Ofwat’s expectation that companies fully support these to enable the business retail and developer services markets to work more effectively for customers (such as exploring the potential to simplify and standardise wholesale tariff structures in the business retail market and meeting target services levels and ensuring new connection charges are cost reflective in the developer services market).

During this reporting period, Ofwat worked with market participants to implement measures to improve the effectiveness of the business retail and developer services markets, including:

• in March 2021, Ofwat issued guidance on how incumbent companies can offer alternative credit arrangements to different retailers within the bounds of competition law

• MOSL and the Industry Codes Panel (a senior industry group for the business retail market) conducted a fundamental review of the business retail market’s governance arrangements, with a key focus on improving customers and customer outcomes in decision making. This review resulted in changes to the principles that govern key market codes (in September 2021) and the introduction of a new Strategic Panel (in November 2021) to provide strategic direction and oversee programmes of work in the market to ensure a relentless focus on improving customer outcomes

• MOSL initiated a review of the Market Performance Framework with calls for inputs published in November 2021

• To support further improvements to the regulatory framework for bulk charges for New Appointments and Variations (which compete with incumbents for developer services), Ofwat launched a sector working group in April 2021 to improve best practice approaches to new appointee bulk supply and discharge charges

• in August 2021, Ofwat published a report on new connection charging practices, which allows incumbents to establish how they might improve the cost-reflectivity of their new connection charges for 2022 to 2023

• in October 2021, Ofwat published rules for English incumbent water companies to use specific common terms and worked examples as part of their new connection charges from April 2022 onwards. These improvements in transparency will mean that third parties are better able to compete with incumbents for developer services

Review of the bioresources market

Following Ofwat’s 2019 price review (PR19) and its first bioresources market monitoring report, Ofwat launched a review of the bioresources market in October 2020 (bioresources, or sewage sludge, are the semi-solid by-products of sewage treatment). This review considered the current scope for bioresources competition, barriers to competition and the development of the market, and barriers to achieving different forms of competition and market models.

Ofwat set out its draft findings in a consultation published in May 2021, focusing on barriers to further market development and setting out the following proposed reforms to address these:

• updated information requirements to help Ofwat produce its market monitoring reports and provide greater market information
• improvements to cost allocation such as implementing a standard methodology to calculate sludge liquor costs and providing further guidance on energy generation revenues and overheads
• recommendations about how the sector can collaborate in future, including for example, by providing additional information to support the market, introducing standardised measures of sludge quality and considering regional collaboration

Ofwat published its second market monitoring report in November 2021, covering developments in the bioresources market from 2017 to 2021. Ofwat found that the proportion of sludge being exported for treatment has fallen from an already low level of 0.8% to 0.4%. However, the level of competition in transport/disposal of sludge remains healthy with the percentage of services provided by third parties increasing slightly to around 50%. Companies continued to report a number of barriers to the development of the bioresources market, often citing environmental regulations such as Farming Rules for Water creating uncertainty which deters bidding.

Following this report, Ofwat consulted in December 2021 on its proposed approach to funding bioresources activities for the 2024 Price Review, to ensure that its approach is more market-oriented. In February 2022, Ofwat published its final bid assessment framework guidance to help to ensure that companies procure bioresources services in a way that is transparent and promotes the market.

CMA

‘Loyalty penalty’ super-complaint

In September 2018, Citizens Advice submitted a super-complaint to the CMA, raising concerns that longstanding customers were paying more than new customers (a ‘loyalty penalty’) in 5 essential markets:

• cash savings, home insurance and mortgages – regulated by the FCA
• mobile and broadband – regulated by Ofcom

The CMA published its response to the super-complaint in December 2018, finding that the loyalty penalty was a significant problem impacting millions of people, including those who could least afford it. The CMA set out a package of reforms, including recommendations to the FCA and Ofcom to tackle this issue. As set out in an update in December 2020, both the FCA and Ofcom have made significant progress and taken steps to help tackle the issues. Steps taken during this reporting period are set out below.

In its general insurance pricing practices market study, the FCA found that firms identify customers who are more likely to renew and increase prices for them each year at renewal in a process known as ‘price walking’, while lower prices were available for customers who switched regularly. The FCA also identified concerns about insurance products in the market not offering fair value to customers, and that that some firms do not make it easy for consumers to cancel policies that renew automatically.

In May 2021, the FCA published its final rules arising from the general insurance pricing practices market study (PDF, 1.95MB). The new rules sought to address the loyalty penalty in retail home and motor insurance, and more generally promote effective competition in the market. From 1 January 2022, firms were required to ensure that renewal prices for retail home and motor customers were no more expensive than the equivalent new business price through the same channel. The FCA also introduced new rules in January 2022 to allow customers to cancel auto-renewing policies more easily. Firms are also required to strengthen their product governance to ensure that general insurance and pure protection products offer fair value from October 2021.

Ofcom has taken a number of steps to address broadband price differentials, requiring providers to send important information to their customers – both when their contracts are coming to an end and on a regular basis after that. Ofcom also secured commitments from major providers to protect customers from certain types of pricing practices.

In November 2021, Ofcom published its review of the impact of end-of-contract notifications and pricing commitments by broadband and mobile providers, which found a reduction in the number of out-of-contract customers of over 1 million from 2019 to 2020. Average prices paid by broadband customers also fell over the same period. Ofcom also found that the commitments secured from providers had had a positive impact for vulnerable customers. The price differential paid by vulnerable broadband customers significantly reduced between 2019 and 2020, from £4.40 to £2.30.

The CMA supports and encourages the regulators to continue to take tough action where needed – and to closely monitor the impacts of tackling the loyalty penalty.

The CMA will also continue to use the powers it has to protect consumers from exploitative practices linked to the loyalty penalty (for examples of action taken by the CMA on unfair subscription renewals, see the CMA’s consumer enforcement actions relating to anti-virus software and online console video gaming). The CMA welcomes the government’s proposals to strengthen the CMA’s powers to enable it to take action more effectively, through new powers to fine businesses who have broken consumer law directly and to further clarify consumer law on harmful practices relating to autorenewals and subscription services. The CMA is committed to continuing to work with government and others to ensure the competition regime and consumer law is robust to tackle the problems arising in markets.

Follow-up to previous market investigations

The following market investigations have all been completed before the beginning of the relevant reporting period. The remainder of this section sets out the follow-up work that has been conducted in relation to these market investigations during this period.

Investment consultants market investigation

The CMA’s final report of its investigation into the supply and acquisition of investment consultancy services and fiduciary management services to and by institutional investors and employers in the UK was published in December 2018 (the market investigation was launched in 2017 following a reference from the FCA).

The Investment Consultancy and Fiduciary Management Market Investigation Order 2019, made and published in June 2019, gave effect to the CMA’s remedies as regards the conduct of firms and pension scheme trustees.

The CMA worked closely with the FCA, Department for Work and Pensions (DWP) and the Pensions Regulator in the remedy design and implementation phase of the Order and continues to do so in relation to the transposition of the Order into the relevant sector-specific regulatory regimes.

The first compliance statements were received in January 2021. The CMA received in excess of 6,000 compliance statements from both investment consultancy and fiduciary management providers, as well as pension scheme trustees.

When the sector-specific rules and regulations relating to the investment consultancy and fiduciary management sector come into force, the provisions of the Order will cease to have effect. This so-called ‘sunset’ of the Order may happen in stages, as and when the rules and regulations come into force within each regulatory regime.

The DWP is now planning to make the sector specific rules and regulations identified in the paragraph above, as they apply to pension trustees, in late 2022, and HM Treasury also plans to make changes to the Regulated Activities Order in 2022. This will allow the FCA to consult on rules for investment consultants and fiduciary managers in 2023, with the aim of bringing investment consultancy into the FCA’s regulatory regime in 2024.

Retail banking market investigation

The CMA’s market investigation into the supply of retail banking services to personal current account customers and to SMEs in the UK concluded in August 2016. The market investigation considered the supply of personal current accounts (including overdrafts) and SME services including business current accounts and lending (but excluding insurance, merchant acquiring, hedging and foreign exchange). The CMA imposed an integrated package of measures under the Retail Banking Market Investigation Order 2017 designed to address the adverse effects on competition that it identified.

In February 2022, Part 11 of the Retail Market Investigation Order 2017 ended under the terms of its sunset clause. Part 11 covered the standardisation of business current account opening via the application of a standard evidence set to be used when deciding whether to approve an application from an SME for a Business Current Account. The intention behind the sunset clause was to allow for the industry to take a more flexible approach to the practice once embedded.

The CMA continued to take action to ensure compliance with the remaining remedies, with investigations resulting in published letters highlighting breaches of the remedy obligations to Monzo (22 June 2021 and 31 January 2022), Natwest, Bank of Ireland, Virgin Money, Santander, Lloyds Banking Group (13 October 2021 and 21 March 2022), Barclays (11 February 2022 and 21 March 2022) and Tesco Bank.

The remedies package also included a set of measures to underpin what is referred to as ‘Open Banking’ – facilitating the secure sharing of consumer and SME information to third party providers who can use that data to create innovative products and ensuring that new entrants and smaller providers in the UK retail banking sector are able to compete more fairly. To facilitate the implementation of Open Banking, the Open Banking Implementation Entity (OBIE), an independent organisation, was set up in 2017 by the 9 largest retail banks in Britain and Northern Ireland (Lloyds Banking Group, Barclays, Nationwide Building Society, NatWest Group, Santander, Danske Bank, HSBC UK Bank plc, Allied Irish Bank and Bank of Ireland, collectively referred to as the CMA9).

The implementation phase of Open Banking has continued, in line with the revised Roadmap and timetable published in May 2020 (revised to address the disruption caused by the pandemic). The CMA approved a further revision (PDF, 114KB) in November 2021 for the implementation of Variable Recurring Payments (authorised payments on the customer’s behalf within agreed parameters) for sweeping (the automatic transfer of money between a customer’s own accounts). In March 2022, the CMA provided additional clarification on the definition of sweeping (meaning the purposes for which sweeping can be used under the Open Banking remedy).

Open Banking has been a major success in improving competition in retail banking. Payment account service providers accounting for over 95% of current accounts offer Open Banking services (see the Open Banking app store). As at January 2022, there were over 5 million users of services powered by Open Banking technology (such as buying cars or paying tax). Further innovative services are in the pipeline (in particular to support vulnerable consumers and offer payment service alternatives to cards and direct debits).

To address concerns in relation to the governance of the OBIE, the CMA published a report by Alison White^{[footnote 10]} in October 2021, following an independent investigation into allegations regarding the OBIE and its former leadership. In response to the report’s recommendations, the CMA has been working closely with the OBIE on a package of governance measures as a matter of priority, taking into account its recommendations to strengthen the governance of the OBIE. The CMA9 have also been engaging constructively with the CMA, the Trustee and the OBIE to support these governance improvements in line with the Order.

A number of changes have been made, including appointing a new Implementation Trustee, 2 new non-Executive Directors, (Jeremy Newman and Barbara Ridpath) and a new Chief Executive Officer, as well as new appointments to the executive team (in particular, a new General Counsel and People and HR Director). In addition, in January 2022, the CMA published updated governance arrangements for the OBIE, setting out the composition of the Board, governance, budget and funding arrangements, and providing further clarity on the respective roles and responsibilities of the CMA, Trustee of the OBIE and the CMA9 in relation to the OBIE’s governance, as well as ensuring that appropriate processes and mechanisms are in place for the fulfilment of these roles.

The CMA will continue to work closely with the Trustee, the OBIE and other stakeholders, as appropriate, to take forward changes to strengthen the governance of the OBIE, taking into account the report recommendations and keeping under review the changes that have been made.

In addition, separate consideration has been given by the CMA, the FCA, the PSR, government and industry stakeholders as to the future arrangements for Open Banking once implementation is complete. In March 2022, the CMA published its recommendations for these future arrangements (following consultation in March 2021). In particular, the CMA noted that any future arrangements should reflect the recommendations on good governance set out in the independent report by Alison White, and that any future entity should:

• have effective regulatory oversight, with a new Joint Regulatory Oversight Committee to be established to agree and implement the next steps led jointly by the FCA and the PSR
• have independent and accountable leadership, with a majority of independent directors on its Board
• have a clear purpose articulated by the Board
• be adequately resourced to carry out its functions through a more broadly-based and sustainable funding model
• effectively serve the interests of consumers and businesses, including consideration for how these groups will be represented in the governance of the entity
• be sustainable and adaptable to the future needs of the sector
• have a system to effectively support the monitoring and enforcement of the Retail Banking Market Investigation Order 2017

At the same time in March 2022, the CMA, HM Treasury, the FCA and the PSR published a joint statement on the future of Open Banking, setting out plans to establish the Joint Regulatory Oversight Committee and setting out its responsibilities, including making recommendations on the design of the future entity, advising on the transition from the OBIE to a future entity, considering the scope for the development of Open Banking beyond the Retail Banking Market Investigation Order 2017 and overseeing the future entity until a formal regulatory framework is in place.

Energy market investigation

The CMA’s energy market investigation, which followed a reference by Ofgem and concluded in June 2016, resulted in a package of remedies including 26 recommendations to Ofgem. These remedies were aimed at making competition in the market more effective and were expected to have market-wide implications and to enhance competition. Most significantly, the remedies aimed to increase consumer activity and engagement, and therefore put additional pressure on energy retailers to compete vigorously for customers.

Given the instability in the wholesale market and the collapse of many retail suppliers, Ofgem has continued to pause its collective switch and consumer engagement work related to the remedies package and has focused on its retail price cap and default tariff price cap work.

In addition, this year, Ofgem has highlighted its work on Market-wide Half-Hourly Settlement (MHHS), which it believes remedies an adverse effect on competition that the CMA identified in its final report on the Energy Market Investigation. This issue was identified in the SME retail electricity market from the absence of a firm plan for moving to half-hourly settlement for domestic electricity customers. This is described further below at Market-wide Half-hourly settlement.

Price cap

In August 2021, Ofgem announced the default price cap levels for the seventh charge restriction period (‘cap period’) from 1 October 2021 to 31 March 2022. Ofgem announced the next price cap levels in February 2022, which will come into effect on 1 April 2022.

The unprecedented and unexpected rise in gas and electricity prices across late 2021 and early 2022 put energy markets under severe strain, and Ofgem has worked closely with the government, the energy industry, and consumer bodies to manage the situation and protect consumers during this challenging time. The period of uncertainty is likely to continue through 2022, and Ofgem will continue to work to protect consumers, provide greater certainty for investors and strengthen the resilience of the sector.

The additional costs and uncertainties facing suppliers are likely to be beyond what is accounted for in the existing price cap methodology. When Ofgem published its decision to implement the default tariff cap in 2018, Ofgem outlined that it would consider amending the cap methodology where there were significant and unanticipated changes in factors determining suppliers’ costs associated with supplying energy to domestic default tariff consumers.

In light of the recent wholesale price volatility and its impact on the energy market in Great Britain, and to ensure that the cap reflects the costs, risks and uncertainties facing the supply companies Ofgem regulates, Ofgem is consulting on a range of reforms to change the methodology of the price cap to find a solution that reduces the costs and risks facing suppliers so that energy bills can be kept low, while preserving the wider benefits of the price cap for consumers. Ofgem recognises that market risks currently sit with suppliers, causing large losses and exits at times of market instability, which in turn leads to higher costs for consumers; but believes that shifting all the risk to consumers would leave them with more volatile energy bills. Ofgem expects these changes to come into effect from 1 April 2022.

Implementation of the default tariff Price Cap

As required by the Domestic Gas and Electricity (Tariff Cap) Act 2018, Ofgem introduced the default tariff cap on 1 January 2019. This price cap was intended to remain in place until 2021 at the earliest, after which the Secretary of State must decide each year whether to maintain the cap (following a recommendation from Ofgem) until 2023.

Ofgem designed the cap to prevent unjustified price increases and ensure default tariffs reflect more closely the underlying costs of supplying energy. Ofgem considers that price increases will be justified by underlying costs, and the cap will reduce when underlying costs fall. The level of the cap for the final price cap period covered by this review (1 October 2021 to 31 March 2022) is £1,277, representing a 12% increase from the previous period.

Ofgem estimates that the cap will save 11 million default tariff customers a total of about £1 billion each year.^{[footnote 11]} For a customer in ‘typical’ circumstances (with a dual fuel standard variable tariff (SVT) with typical consumption), the first cap level was £76 less than the weighted average SVT price for the largest 10 suppliers (in annualised terms), in the weeks before the cap was implemented.

In October 2019, Ofgem set out its framework to assess whether conditions are in place for effective competition in domestic supply contracts. The requirement for Ofgem to undertake a review into whether conditions are in place for effective competition in domestic supply contracts is set out in Section 7 of the Domestic Gas and Electricity (Tariff Cap) Act 2018. The first review was published in August 2020 and recommended the retention of the default tariff cap for 2021. This process was repeated in August 2021 for the period from 1 October 2021 to 31 March 2022, again recommending the retention of the cap. If needed, a further review will be carried out in 2022. The cap will cease to have effect at the end of 2023 at the latest.

Meanwhile Ofgem continues to monitor compliance with the default tariff cap and has taken action on multiple occasions where suppliers were found to be overcharging their default customers.

Market-wide Half-hourly settlement

MHHS, enabled by smart meters’ ability to record energy consumption every half-hour, makes possible the development of new products and services which reward customers for shifting their consumption to times when electricity is cheaper to generate and transport, so improving the efficiency of domestic electricity supply (for example, time of use tariffs, automation, vehicle to grid solutions and battery storage).

In response to CMA concerns about the absence of industry incentives to implement MHHS, following consultation Ofgem, in September 2021, modified the Balancing and Settlement Code (BSC) to impose a package of strong incentives and governance intended to ensure implementation of MHHS by October 2025. The measures included:

• making Elexon (which manages the BSC) formally responsible for delivery of MHHS implementation
• appointing PWC in February 2022 as MHHS Independent Assurance Provider, with a remit to monitor and provide assurance that industry participants are complying with the obligations in relation to MHHS implementation
• requiring industry participants to make the necessary changes to their systems and processes to ensure timely and cost-effective implementation, and to cooperate with programme governance including testing, qualification and migration
• designating (or re-designating) 1 or more documents as the MHHS Governance Framework (Ofgem did so in November 2021)
• modifying various codes and licences to ensure that relevant code bodies and the Data Communications Company (which runs the network underpinning smart meters) can work effectively with Elexon to implement MHHS

Ofgem considers that better quality and more frequent settlement data, combined with greater administrative efficiency, should encourage non-traditional players with disruptive business models to enter the market. A faster settlement timetable means suppliers would need less collateral to cover their potential settlement liabilities, which should reduce barriers to new entry. Ofgem believes that this, combined with improvements in efficiency, will improve the competitiveness of domestic electricity supply. Ofgem estimates that its chosen option for MHHS will deliver net benefits to energy consumers in Great Britain in the range of £1.6 to £4.5 billion over the 2021 to 2045 period.

General cooperation

The CMA and regulators have continued to cooperate more generally, in line with the practical arrangements set out in the Concurrency Regulations, the Concurrency Guidance and the bilateral Memoranda of Understanding agreed between the CMA and each of the sector regulators.

Information-sharing

In line with previous years, the CMA and the sector regulators have continued during the period of this report to exchange key information and comments in respect of the particular cases that they have been investigating, including emerging thinking and draft decisions, as provided for in Regulation 9 of the Concurrency Regulations and the Memoranda of Understanding. Additionally, and as in previous years, the CMA and the sector regulators have augmented the prescribed information-sharing process with more informal discussions and the sharing of know-how and relevant expertise.

Case allocation

Since April 2021, one new Competition Act 1998 case was allocated to the FCA and 3 cases were allocated to the CMA. The CMA and the regulators have engaged in constructive discussions on the allocation of concurrent cases, resulting in agreement having been reached in each case in accordance with the Concurrency Regulations. As observed in previous reports, case allocation permits the CMA and the respective regulator to use their complementary resources on cases to good effect and to ensure that cases are undertaken by the authority best placed to do so.

Assistance on casework

The CMA and sector regulators continue to provide each other with assistance on casework. Assistance is provided in a range of ways, including by sharing practical experience and expertise (for example, regulators have shared their sector-specific knowledge on cases and the CMA has shared relevant substantive and procedural expertise on competition cases) and through active involvement of officials at key stages of an investigation (for example, the provision of digital forensics support). There is also sharing of relevant policy, such as internal guidance and template documents.

Assistance on competition enforcement work

The CMA and the regulators continue to provide each other with assistance on their respective Competition Act 1998 investigations in the regulated sectors. In particular, the CMA has provided those regulators undertaking cases with relevant procedural advice and practical assistance on cases (including sharing detailed internal guidance and processes on how to run CA98 investigations) as well as feedback on draft documents such as draft infringement decisions and, in particular this year, draft consultations on commitments. Other areas on which advice has been given include on streamlining the access to file process, settlement, design and monitoring of market remedies and advice on compliance messaging.

In addition to commenting on draft documents, in accordance with the concurrency arrangements, the regulators themselves have provided the CMA and each other with sector specific expertise on relevant cases. For example, the FCA provided input to Ofgem’s Chapter II investigation into conduct by PayPoint in the market for the provision of over-the-counter top-up services to prepayment energy customers and to the PSR’s Chapter I investigation into cartel behaviour in the prepaid cards market (via a staff secondment to the investigation), while Ofgem has provided support to the CMA in relation to the commitments offered in the CMA’s electric vehicle chargepoints CA98 case.  

Assistance on markets work

The PSR and the FCA continued to work with the CMA on the implementation of the Open Banking remedy, in particular in considering the future governance and regulation of Open Banking (including any necessary interim arrangements) once the implementation phase is completed. The FCA also continued to assist with the design and implementation of remedies arising from the Investment Consultants Market Investigation, and the PSR has shared technical specialist knowledge to the CMA to assist with its mobile ecosystems market study. The NIAUR and Ofgem have worked together on a range of issues, including future regulation for heat networks and for biomethane, and on reviewing and approving contractual arrangements for gas transportation to Northern Ireland between transmission system operators. ORR also engaged with the CAA on the competition aspects of its sector powers.

Assistance on mergers work

Reviewing mergers is an important function performed by the CMA as the national competition authority. Although mergers do not fall within the scope of concurrency, where the CMA is investigating a merger involving a regulated sector, it often receives valuable input and assistance from the regulators. During this reporting period, the CMA and sectoral regulators worked together on 14 merger cases.

The CMA is also in frequent contact with sectoral regulators when monitoring merger activity in the UK. During this reporting period, the CMA’s merger intelligence unit worked together with the relevant sector regulation on 24 transactions, and each sectoral regulator assisted the CMA’s merger intelligence function in at least 1 transaction and often several more.

Aviation

The CAA assisted the CMA in the investigations of the acquisition by CHC of Babcock, and the acquisition of Asiana Airlines by Korean Air, a merger being reviewed in several international jurisdictions.

Communications

The CMA worked closely with Ofcom and benefited from its expertise in the telecommunications markets in several cases at phase 1 and phase 2 stages. These included the investigation into the joint venture between Liberty Global plc and Telefónica S.A to merge their UK operating businesses, and the acquisition by Cellnex UK Limited’s of CK Hutchinson Towers.

In addition, the CMA’s merger intelligence unit contacted Ofcom in relation to 3 other transactions.

Financial services

The FCA assisted the CMA with a number of investigations, including: the acquisition by S&P Global Inc of IHS Markit Ltd and IHS Markit Ltd’s joint venture with CME Global.

The FCA also helped the CMA understand the market context and other relevant issues in 5 transactions under consideration by the CMA merger intelligence unit.

Energy

In the energy sector, Ofgem advised the CMA in relation to the acquisition by National Grid Holdings One plc of PPL WPD and the acquisition by Brookfield Asset Management Inc of Scotia Gas Networks Limited.

In addition, with the challenges faced by the energy sector during the reporting period, in particular a number of retail suppliers having to exit the market, the CMA has worked closely with Ofgem throughout the supplier of last resort process. This is the process whereby an exiting firm’s customers are allocated to another incumbent retailer. Ofgem has helped the CMA to ensure that relevant merger situations were identified and that the process was carried out with as limited impact on competition as possible.

Payment systems

The PSR provided payments systems expertise to the CMA’s merger intelligence unit when considering whether 3 transactions warranted a detailed merger assessment.

Rail

ORR provided advice to the CMA’s merger intelligence unit when considering whether 1 transaction warranted a detailed merger assessment.

Water

Ofwat assisted the CMA with its investigation of the acquisition by Pennon Group plc of Bristol Water Holdings UK Limited. As well as assessing this acquisition under the provisions of the Enterprise Act 2002, the CMA was also required to assess this merger under the Water Industry Act 1991 to consider whether the merger had or was likely to prejudice Ofwat’s ability to make comparisons between water enterprises under the Water Industry Act 1991.

Ofwat advised the CMA on one further transaction being considered by the merger intelligence unit.

Healthcare

NHSI has continued to work closely with the CMA to support its assessment of mergers in the NHS and, more generally, in the healthcare sector. NHSI was consulted by the CMA’s merger intelligence unit in relation to 5 transactions.

NHSI has also assisted the CMA with a review of the remedies imposed following its investigation of the acquisition by Circle Health Holdings Limited of GHG Healthcare Holdings Limited. This was at the request of Circle following a possible change of circumstances since the CMA investigated this merger in 2019.

Multilateral cooperation

In addition to the regular bilateral meetings that the CMA holds with the sector regulators, valuable cooperation occurs multi-laterally through the UK Competition Network (UKCN) which seeks to facilitate the use of competition powers and the development of pro-competitive regulatory frameworks. This cooperation has an important function in ensuring consistency in the application of the competition regime but also in facilitating the sharing of best practice and knowledge.

As part of this function, the CMA and sector regulators hold regular discussions on current topics of interest and give presentations based on their experiences of specific issues from their competition work. Some examples of topics covered this year include a presentation from the Department for International Trade on progress with free trade agreement negotiations; presentations from the CMA on its environmental sustainability project, the establishment of the DMU and Office for the Internal Market (OIM); a presentation by the new Digital Regulatory Cooperation Forum; and a range of presentations from the CMA and regulators on many of the investigations and markets work set out in this report. Standalone sessions were also held, including a roundtable on BEIS’ competition policy reform consultation and a know-how session on competition disqualification orders (CDOs).

Secondments continue to be an important way of sharing expertise and transferring knowledge between the CMA and the sector regulators. During the period of this report, there were approximately 15 secondments between regulators and between the regulators and the CMA.^{[footnote 12]}

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1. The concurrency arrangements were introduced in their current form by the Enterprise and Regulatory Reform Act 2013 and took effect from 1 April 2014. They created a framework within which the CMA and sector regulators might more effectively work together to improve competition and competition law enforcement in the regulated sectors. ↩

2. See Department for Business, Innovation and Skills, Growth, competition and the competition regime – Government response to consultation, March 2012, paragraph 8.1. ↩

3. Ofwat removed 2 issues from the Competition Act 1998 investigation and opened separate investigations to instead consider these using powers under the Water Industry Act 1991. The first relates to the accuracy of data about customers that Thames Water made available to retailers at the time the business retail market opened in April 2017 (this investigation remains ongoing). The second issue relates to the fairness of certain credit terms that Thames Water applied to retailers. Ofwat has now closed this investigation after Thames Water revised its terms and conditions. ↩

4. The CMA applied Rule 10(2) of the CMA Rules in this case and addressed its decision only to BGL, and not to any of the home insurers that were party to the agreements with BGL containing wide MFNs. Rule 10(2) provides that where the CMA considers that an agreement infringes the Chapter I prohibition, it can address an infringement decision to fewer than all those party to that agreement or engaged in that conduct. ↩

5. The FCA’s warning letters are known as ‘on notice’ letters. This is to avoid possible confusion with the ‘private warnings’ letters which are issued under FSMA. ↩

6. This legislative obligation does not apply to NHSI (as Monitor). ↩

7. The FCA joined the DRCF as a full member in April 2021. ↩

8. A Microbusiness is defined in the gas and electricity supply licence as: A Non-Domestic Customer: (a) which is a ‘relevant consumer’ (in respect of premises other than domestic premises) for the purposes in article 2(1) of The Gas and Electricity Regulated Providers (Redress Scheme) Order 2008 (S.I. 2008/2268); or (b) which has an annual consumption of gas of not more than 293,000 kWh; or (c) which has an annual consumption of not more than 100,000 kWh electricity. ↩

9. Ofgem’s cap and floor regime is the regulated route for electricity interconnector development in the UK. It is a market-based approach which aims to incentivise developers to deliver interconnector capacity by limiting developers’ exposure to electricity market price risk. Ofgem applies regulatory parameters to set an upper (cap) and lower (floor) level to returns earned by interconnector developers. ↩

10. Alison White is an experienced Non-Executive Director and is currently the lead Non-Executive Director for the Office of the Secretary of State for Wales. Ms White was appointed to oversee the independent investigation into the allegations received regarding OBIE. ↩

11. The cap applies to all customers with a default tariff. Ofgem can exempt customers or tariffs in certain situations. Suppliers can request a derogation for standard variable tariffs that support the production of gas, or the generation of electricity, from renewable sources. ↩

12. Numbers reflect formal competition-related secondments and may not capture additional, informal secondments that may have taken place during the period. ↩