Corporate report

Promoting competition in services we rely on - The annual concurrency report 2023

Published 10 May 2023

Introduction

This is the ninth annual concurrency report^{[footnote 1]} to be published by the Competition and Markets Authority (CMA) since the enhanced concurrency arrangements came into effect on 1 April 2014.^{[footnote 2]} Under the concurrency 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.

Table 1: Sector regulators and their areas of concurrent jurisdiction^{[footnote 3]}

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 (referred to as 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
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

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, the Chapters I and II prohibitions of the Competition Act 1998, which are referred to in this report as the ‘Chapter I prohibition’ and the ‘Chapter II prohibition’ respectively)

• conduct market studies under Part 4 of the Enterprise Act 2002, 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

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

The concurrent competition powers are tools the sector regulators can use to promote competition in the industries they regulate. The promotion of competition is an important objective for each of the sector regulators, sitting alongside their other objectives. These vary from regulator to regulator, but include issues such as consumer protection, financial resilience, security of supply, safety and environmental objectives. This report, however, is concerned specifically with the concurrency arrangements. It does not aim to assess the regulatory landscape as a whole, and the sector regulators’ work in pursuit of their wider objectives.

Use of the concurrent competition powers is one means available to the sector regulators to promote competition, and improve service and quality to customers. They can also promote competition through their sectoral regulatory powers. For instance, a sector regulator may regulate to require that access to infrastructure is provided to third parties. Although this report is not directly concerned with the sector regulators’ use of regulatory measures, it does include details of how sector regulators choose between the exercise of their concurrent competition powers and regulatory powers, when seeking to promote competition.^{[footnote 4]} It is a feature of the regulated sectors that regulators’ direct regulatory powers can dovetail with competition law powers to achieve pro-competitive outcomes.

Next year’s report will mark 10 years since the enhanced concurrency arrangements introduced by the Enterprise and Regulatory Reform Act 2013 (ERRA13) came into force. These new arrangements were designed to strengthen co-operation between the CMA and sector regulators, with a view to increasing competition law enforcement activity in these sectors and improving the consistency and quality of decision-making as well as more generally encouraging the promotion of competitive outcomes.

For the 10th anniversary of these arrangements, there is an opportunity for the CMA to review more broadly with the concurrent sector regulators the overall operation of the concurrency arrangements and the extent to which the overall objectives of the concurrency regime, and the promotion of competition in the regulated sectors, have been achieved. The CMA will set out further details on the scope of this review in due course.

This year’s report, as with previous reports, has a narrower purpose, and does not aim to provide a broader assessment on the longer-term effectiveness of the concurrency arrangements. Rather, it focuses specifically on the period from 1 April 2022 to 31 March 2023:

• the first part of the report provides an overview of the year as a whole

• the second part sets out in more detail the competition enforcement work that has been undertaken in the regulated sectors

• the third part sets out the markets work that has been carried out

• the report concludes with an overview of the wider cooperation between the CMA and the sector regulators

Overview of the year

The last year has seen increased public attention on the work of the sector regulators within certain sectors, with the energy and water sectors particularly falling under the spotlight. Debates have continued on the overall effectiveness of the UK’s regulatory framework, including regulators’ accountability for their work and the strategic direction they receive from government. In this context, the Government is currently carrying out a review into the economic regulation of the energy, water and telecoms sector, following a recommendation from the National Infrastructure Commission that the UK regulatory framework needs updating and strengthening as it is increasingly facing emerging and long-term challenges it was not designed to address.^{[footnote 5]} These are important debates. This annual report on concurrency is not, however, intended as an appraisal of these wider concerns. Rather, this report is required to consider specifically the use both by the CMA and sector regulators of their shared competition law powers.

A significant focus for the sector regulators throughout the reporting period has been on the ongoing cost of living crisis.^{[footnote 6]} The goods and services supplied in the regulated sectors – often essential - form a large and increasing part of household budgets, particularly of the least well-off and most vulnerable people in our society. For example, the number of households that are required to spend more than 10% of their income (after housing costs) on domestic energy is estimated to have increased to around 30% in 2022 from around 20% in 2021.^{[footnote 7]} Increases in the costs of these services have taken place in the context of rising prices for many other household goods, compounded by increases in interest rates which affect mortgage costs (for homeowners) and borrowing costs.

Competition is an important tool in helping keep prices down, and the current pressure on household budgets as a result of the cost of living crisis underscores the importance of open and competitive markets. However, it is not the only tool. The sector regulators’ work to support consumers through the sharp rise in the cost of living has involved a range of different tools which are outside of the scope of this report, including consumer protection measures, regulatory action as well as public advocacy. This report therefore reflects only part of the sector regulators’ efforts to support consumers over the last year.

In respect of competition law enforcement, this report records several material developments:

• Ofcom’s finding on an infringement of the Chapter I prohibition in relation to 2firms competing for a procurement contract. In November 2022, Ofcom fined Sepura £1.5m for exchanging commercially sensitive information with its competitor Motorola in relation to a tender process for the emergency services’ communications network

• ORR’s acceptance of commitments from the Railway Assessment Centre Forum in April 2022 to address its concerns that its rules of membership may hinder market entry for new suppliers of train driver psychometric assessments

• the launch by the FCA in January 2023 of a new investigation into a suspected abuse of dominance. The FCA has also progressed its ongoing investigation into alleged breaches of the Chapter I prohibition in relation to international money transfers, issuing a statement of objections in December 2022 in that case

• the continued application of competition law by the CMA in digital markets. The CMA opened 3 new cases to join the 3 cases already ongoing into the largest digital technology firms

During this reporting period, there has been growing use of the ‘markets’ regime (providing for market studies and/or market investigations) to tackle issues in the regulated sectors. The FCA and Ofcom have for the first time made use of their concurrent powers to conduct market studies under the Enterprise Act 2002 (EA02).^{[footnote 8]} Ofcom is conducting an EA02 market study into the supply of cloud services. The FCA is conducting an EA02 market study into the supply of wholesale financial data. The outcomes of the FCA and Ofcom EA02 market studies will likely be covered in the following reporting period.

As with previous annual concurrency reports, this report includes details of market reviews undertaken by sector regulators using powers specific to their sectoral legislation, in addition to EA02 market studies. This reflects the broad similarity of these market reviews with EA02 market studies. It also reflects the fact that conducting an EA02 market study is not a pre-requisite for a sector regulator to exercise its concurrent powers to refer a market to the CMA for a market investigation.^{[footnote 9]}

These market studies, as well as the wider market review work documented in this report, demonstrate the role of this type of work in promoting competition in the regulated sectors, alongside enforcement of the prohibitions under the Competition Act 1998. The report also includes details on the follow-up work on previous market studies and market reviews, to demonstrate the concrete impact of this type of work on the functioning of markets.

Digital markets

The reporting period has seen the CMA and sector regulators continue to develop the UK’s approach to promoting competition in digital services and technologies, including supporting innovation. The CMA has both progressed its existing Competition Act 1998 cases into conduct in digital markets and launched 3 new investigations in the reporting period. Alongside competition enforcement, the CMA completed its market study into Apple and Google’s mobile ecosystems. The FCA has started a discussion on the entry of the largest digital businesses into financial services markets and what this might mean for competition in the sector.^{[footnote 10]} As noted above, Ofcom has launched a market study into the supply of cloud services and has recently launched a consultation on a proposal to make a market investigation reference to the CMA into the supply of cloud infrastructure services in the UK.

As digital markets develop, they can create new interactions and potential tensions between different regulators and different regulatory regimes. The Digital Regulation Cooperation Forum (DRCF) - which includes the CMA, the Information Commissioner’s Office, Ofcom, and the FCA - sits alongside the existing concurrency arrangements to help drive greater regulatory co-operation and deliver coherent approaches to digital regulation.

The Digital Markets, Competition and Consumers Bill was introduced into Parliament shortly after the reporting period.^{[footnote 11]} This will provide the CMA, and the Digital Markets Unit (DMU) that sits within it, with new powers to take swift and effective action to ensure that digital markets work better for people, businesses and the economy. Given that the CMA may exercise these new powers in relation to digital markets in the regulated sectors, it will remain important that the CMA and the sector regulators work together to ensure efficiency, focus and avoid duplication.

Environmental sustainability

The transition to a net zero economy has been a key consideration for the CMA and the sector regulators in the reporting period, and they continue to work through the interactions between competition policy, consumer interests and environmental issues. As part of this work, the CMA has recently consulted on new guidance on the application of the competition rules to agreements between competitors or potential competitors in relation to environmental sustainability. The guidance aims to ensure that competition law is not an unnecessary barrier to businesses seeking to pursue environmental sustainability initiatives. The CMA will continue to work with the sector regulators as it develops its approach in this area.

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 for the period 1 April to 31 March in the regulated sectors

	2022/23	2021/22	2020/21	2019/20	2018/19	2017/18
Number of cases ongoing at start of reporting period	7	8	9	9	7	5(*)
Number of new complaints†	17	25‡	18	14	16	18
Number of investigations launched under the Competition Act 1998	5	4**	3	3	5§	4
Number of those cases in the year to date in which:
- information gathering powers and powers to enter premises/conduct dawn raids were used	11	5	3	8	5	7
- a Statement of Objections was issued	1	3	2	3	1
Number of those cases in the year to date that resulted in:
an infringement decision	1	1	2	2	3
- the giving of commitments	1	3		1
- an exemption or clearance decision (or equivalent)
- case closure without full resolution	1	1	2			2¶
Number of cases that are ongoing	9	7	8	9	9	7
Number of cases in the year to date in which the decision was appealed to the Competition Appeal Tribunal		1		1
Decisions taken to use direct regulatory powers instead of competition prohibition powers where those competition prohibition powers could have been exercised	1		2

Notes:

(*) 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 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 Article 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 of 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 7 open cases in which jurisdiction was shared between the CMA and one or more sector regulator:

• Ofcom had a Chapter I investigation open into suspected anticompetitive conduct in relation to the supply of equipment for use on the emergency services radio network

• the CMA had a Chapter II investigation open into collection and use of advertising and single sign-on data by Meta

• the CMA had an investigation open into Google and Meta’s conduct in relation to header bidding services. The investigation concerned a suspected breach of the Chapter I prohibition by Google and Meta, and a suspected breach of the Chapter II prohibition by Google

• the FCA had a Chapter I investigation open into suspected anticompetitive conduct in relation to international money transfers

• the CMA had a Chapter I investigation open into suspected anti-competitive arrangements in the financial services sector

• the CMA had a Chapter II investigation open into Apple’s conduct in relation to the distribution of apps on iOS and iPadOS devices

• ORR had a Chapter I investigation in relation to psychometric testing services in the passenger rail transport sector

During the reporting period:

• 5 new investigations were launched in cases that were concurrent because the CMA and one or more sector regulators all had jurisdiction:
  • the FCA launched a Chapter II investigation in relation to conduct in the financial services sector.
  • the CMA launched a Chapter II investigation into the distribution of apps by Google.
  • the CMA launched a Chapter II investigation into Google’s practices in advertising technology intermediation services.
  • the CMA launched a Chapter I investigation into the purchase of freelance services in the production and broadcasting of sports content.
  • the CMA launched a Chapter II investigation into Amazon’s Marketplace.
• One investigation resulted in an infringement decision:
  • Ofcom’s investigation into the provision of equipment and related services in the electronic communications sector.
• One investigation was closed with commitments: * ORR’s investigation in relation to psychometric testing services in the passenger rail transport sector.
• One investigation was closed on the grounds of administrative priority:
  • the CMA’s investigation into whether an agreement between Google and Meta in relation to header bidding services infringed the Chapter I prohibition. As explained further below, the CMA continued its investigation into whether Google has abused a dominant position in relation to header bidding services, including through its agreement with Meta.

Further details on the cases listed are included in the section below.^{[footnote 12]} 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.

Digital

Chapter II investigation in relation to the Apple AppStore

In March 2021, the CMA launched an investigation into 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 AppStore. The investigation is ongoing.

Chapter II investigation into Meta’s use of data

In June 2021, the CMA launched an investigation into Meta’s collection and 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 own services, in particular Facebook Marketplace and Facebook Dating services. The investigation is ongoing.

Chapter I and II investigation into conduct in relation to header bidding services

March 2022, the CMA launched an investigation into whether Google and Meta entered into an anti-competitive agreement, and whether Google might have abused a dominant position through its conduct in relation to header bidding services.

In March 2023:

• the CMA decided on administrative priorities grounds to close its investigation into whether Google and Meta entered into an anti-competitive agreement under Chapter I prohibition. As a result, the CMA is no longer investigating Meta in this case

• the CMA is continuing to investigate whether Google has abused a dominant position through its conduct in relation to header bidding services under Chapter II of the Competition Act 1998. That investigation includes whether Google has abused a dominant position through its agreement with Meta

• the CMA had been separately investigating Google under the Chapter II prohibition in relation to its conduct across parts of the ad tech stack (see below). Due to the interrelationship of the facts and conduct, the CMA decided to combine the remaining part of the investigation in relation to header bidding services, with the separate investigation in relation to the ad tech stack

Chapter II investigation into Google’s practices in advertising technology intermediation services

In May 2022, the CMA launched an investigation into Google’s conduct with regards to advertising technology intermediation services (also known as the ‘ad tech stack’) which facilitate the sale of online advertising space between sellers (like online newspapers and other content providers) and buyers (advertisers). In March 2023, this investigation was combined with the CMA’s investigation into whether Google has abused its dominant position through its conduct in relation to header bidding services. The investigation is ongoing.

Chapter II investigation into Google’s distribution of apps

In June 2022, the CMA launched an investigation into Google’s distribution of apps on Android devices in the UK. In particular, the CMA is investigating Google’s Play Store rules which oblige app developers offering digital content to use Google’s own payment system (Google Play Billing) for in-app purchases. The investigation is ongoing.

Chapter II investigation into Amazon’s Marketplace

In July 2022, the CMA launched an investigation into Amazon’s conduct in relation to the way that non-public third-party seller data may be used within Amazon’s retail business, how Amazon sets criteria for selecting which product offer is placed within the ‘Buy Box’ and which sellers can list products under Amazon’s ‘Prime label’ on its Marketplace in the UK. The investigation is ongoing.

Communications

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

In December 2022, Ofcom issued an infringement decision to Sepura and Motorola, finding that on 5 September 2018 they infringed the Chapter I prohibition by exchanging competitively sensitive information. Ofcom found that Sepura and Motorola had participated in a concerted practice that had the object of restricting or distorting competition in the supply of terrestrial trunked radio devices, accessories and related services for use on the Airwave network in Great Britain. Airwave is a private radio network used by emergency services in Great Britain for two-way radio communications.

Ofcom found that senior employees at Sepura and Motorola contacted each other by text message shortly before a procurement process run by the Police ICT Company – now known as the Police Digital Service – for devices and related services used by the emergency services’ communications network. The text message exchange covered a range of matters relevant to the upcoming process, including Sepura’s pricing strategy and likely pricing levels.

In making its decision, Ofcom considered in detail how to apply a number of important legal principles under the Chapter I prohibition. These included the presumption of a causal connection between an exchange of commercially sensitive information and a company’s subsequent conduct, and how that presumption may be rebutted.

Having concluded that this exchange of messages had the object of restricting or distorting competition in this market, Ofcom imposed a financial penalty of £1.5m on Sepura. Motorola was granted immunity from financial penalties under the CMA’s leniency policy.

Chapter I investigation into the purchase of freelance services in the production and broadcasting of sports content

In July 2022, the CMA launched an investigation into suspected breaches of competition law by at least the following: BT Group, IMG Media (including Premier League Productions), ITV, and Sky UK. The investigation concerns suspected infringements of the Chapter I prohibition in relation to the purchase of freelance services and the employment of staff supporting the production and broadcasting of sports content in the UK. The investigation is ongoing.

Financial services

Chapter I investigation in the financial services sector

In November 2018, the CMA launched an investigation into suspected anti-competitive arrangements in the financial services sector. In the period covered by this report, the CMA has gathered and analysed additional evidence and information. The investigation is ongoing.

Chapter I investigation in the financial services sector

In September 2020, the FCA launched an investigation into suspected breaches of competition law by Dollar East (International Travel & Money Transfer) Ltd, Hafiz Bros Travel & Money Transfer Limited, and LCC Trans-Sending Limited (including its parent company Small World Financial Services Group Limited) trading as Small World.

In a Statement of Objections issued in January 2023, the FCA alleged that the firms fixed prices charged to customers in Glasgow for transferring money from the UK to Pakistan. The FCA’s provisional view was that, for a period in 2017, the 3 firms coordinated on the exchange rate offered to consumers for converting UK Pounds into Pakistan Rupees in transferring money to Pakistan; and fixed the level of a flat rate transaction fee charged to consumers when making money transfers from the UK to Pakistan via Small World’s services. As a result of this conduct, consumers in Glasgow may have been overcharged for sending money to Pakistan.

Chapter II investigation in the financial services sector

In January 2023, the FCA launched an investigation into a suspected infringement of the Chapter II prohibition in the financial services sector. The investigation is ongoing.

Rail services

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

In March 2021, ORR launched an investigation into suspected infringements of Chapter I of the Competition Act 1998 by the Railway Assessment Centre Forum (RACF). ORR considered that membership of the RACF appeared in practice to be essential for any party wishing to supply train driver psychometric assessments. In that context, ORR’s competition concerns were that the RACF’s rules of membership appeared to have the effect of hindering new entry and lacked transparency as they were unpublished. ORR was also concerned about various aspects of the rules themselves, such as the RACF’s requirement that prospective members produce a business plan without explanation for the requirement, or stating the objectively verifiable standards which the plan must meet. ORR also had concerns around the process by which new members were given mentors from the existing membership, which was a requirement for membership.

RACF offered a series of commitments in November 2021 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

In January 2022, ORR published a notice of proposal to accept the commitments offered by the RACF and invited representations from interested third parties on that proposed course of action. In April 2022, ORR published its decision to accept binding commitments from RACF.

Other relevant competition enforcement work

SSE Commitments

In November 2016, Ofgem accepted binding commitments from SSE following an investigation into whether SSE had infringed the Chapter II prohibition by abusing a dominant position and putting its competitors at a disadvantage in the electricity connections market within the area covered by SSE’s electricity distribution network in the south of England.

In October 2022, Ofgem publicly consulted on a proposal to release SSE from the Commitments, following a request from SSE. Ofgem proposed to release SSE on the basis that it had reasonable grounds for believing the competition concerns leading to the commitments no longer arose. These grounds included:

• changes to the regulatory landscape, including implementation of regulatory requirements on the facilitation of competition in the electricity distribution connections market)

• evidence on how the market was operating, including from an Ofgem review of competition in the electricity distribution connections market ^{[footnote 13]}

• the changes introduced by SSE to its processes through implementation of the commitments

Following the consultation on the proposal, Ofgem released SSE from the Commitments in November 2022.

Cases appealed to the Competition Appeal Tribunal

Chapter II investigation into bulk mail delivery services

In August 2018, Ofcom found that Royal Mail had abused its dominant position in the market for bulk mail delivery services in the UK through discriminatory pricing, in an infringement the Chapter II prohibition. 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 against Ofcom’s decision to the Competition Appeal Tribunal (the ‘CAT’). In November 2019, the CAT dismissed Royal Mail’s appeal and upheld Ofcom’s decision on all grounds, including the financial penalty.

Royal Mail appealed against the CAT’s judgment to the Court of Appeal. In May 2021, the Court of Appeal dismissed Royal Mail’s appeal. In June 2022, the Supreme Court refused permission for Royal Mail to appeal on the basis that its application “[did] not raise an arguable point of law of general public importance”.

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 which found that Compare The Market had infringed the Chapter I prohibition (and Article 101 TFEU) by using wide ‘most favoured nation’ clauses (wide MFNs) in its contracts with a number of home insurance providers selling through its price comparison websites.^{[footnote 14]}

The CMA’s infringement decision 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 to the CAT and hearings took place over November 2021. In August 2022, the CAT upheld Compare the Market’s appeal, and set aside the CMA’s decision, finding that the market definition in the CMA’s decision was materially wrong and that the CMA had failed to establish that Compare the Market’s wide MFNs had an anticompetitive effect

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 has issued 9 ‘on notice’ letters (which are the FCA’s equivalent to the CMA’s warning letters) to firms. The type of behaviour which led to the ‘on notice’ letters included potentially anticompetitive coordination between competitors in the financial services sector.

• The CMA and CAA issued a joint open letter to airport operators in January 2023 to remind them of their responsibilities and obligations under competition law, following intelligence received by the CMA to suggest that some UK airport operators might not always be complying with competition law.

Decisions taken since April 2022 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.

There has been one case during the reporting period in which Ofgem has been satisfied that its functions under Part 1 of the Competition Act 1998 in a case were exercisable, but that it was more appropriate for it to consider exercising functions using the Electricity Act 1989 rather than proceeding by exercising functions under Part 1 of the 1998 Act with respect to certain activities in the electricity market. Ofgem is continuing to monitor the situation to determine the most appropriate course(s) of action to pursue.

In addition to the above, the sector 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.

There were 4 occasions in the reporting period where the PSR proceeded to exercise its powers under part 5 of the Financial Services (Banking Reform) Act 2013, having first considered whether it would be more appropriate to exercise its competition powers.^{[footnote 15]}

The FCA indicated that in the cases where the primacy obligation was triggered during this reporting period, Competition Act 1998 powers could not have addressed the relevant concerns, such that it needed to consider further whether it was more appropriate to proceed under the Competition Act 1998 than under its regulatory powers in the Financial Services and Markets Act 2000.

Ofgem indicated that there were no cases in which, when seeking to exercise the relevant sector-specific regulatory powers to which the primacy obligation applies, Competition Act 1998 powers could have addressed the relevant concerns.

NIAUR, ORR, CAA, Ofwat and Ofcom 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 relating to the regulated sectors during the period covered by the report.

Market studies active during the reporting period
	CMA: Mobile eco-systems (completed July 2022)
	Ofcom: Cloud services (launched October 2022)
	FCA: Wholesale Data (launched March 2023)
Market investigations active during the reporting period
	CMA: Airwave (launched October 2021)
	CMA: Mobile browsers and cloud gaming (launched November 2022)
Follow-up on market studies and investigations completed prior to the reporting period
	ORR: Signalling market study (completed 2021)
	ORR: Automatic ticket gates and ticket vending machines (completed 2019)
	CMA: Heat networks market study (completed 2018)
	CMA: Retail Banking market investigation (completed 2016)

Market studies under the Enterprise Act 2002

Mobile ecosystems

In June 2022, the CMA published the final report of its market study into mobile ecosystems. ‘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 (eg 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 found that Apple and Google have an effective duopoly on mobile ecosystems that allows them to exercise a stranglehold over operating systems, app stores and web browsers on mobile devices. The CMA concluded that weak competition within and between Google’s and Apple’s mobile ecosystems is harming consumers and will continue to do so absent intervention. Consumers will lose out as:

• new and valuable innovations could be held back in some areas, particularly where they affect Apple’s and Google’s businesses; eg, new types of services like cloud gaming on iOS or technological developments like web apps;

• choice is more limited; eg in browsers and app stores – hindering the development of new bespoke curated app stores to meet people’s different needs such as stores for different age groups or for gaming enthusiasts; and

• prices are higher than they should be; eg prices for Apple’s devices, Google’s search advertising fees, and both firms’ app store commissions are all above a competitive rate – ultimately leading to higher prices for the end consumer or worse quality.

The CMA engaged closely with Ofcom in the context of mobile ecosystems and the potential impact Apple and Google have on traditional communications services. The CMA will continue engaging with Ofcom on these issues, as well as others which impact communications infrastructure and services.

The CMA found that there were no easy or quick fixes to the issues identified in the market study, and that a new ex ante regulatory approach was required to oversee powerful tech firms and support the UK’s innovative tech sector. The CMA has also acted to further investigate certain of the concerns raised through the following actions:

• referring for an in-depth market investigation the supply of mobile browsers and mobile browser engines, and the distribution of cloud gaming services through app stores to consider whether certain restrictions are holding back potentially disruptive innovation. In March 2023, the Competition Appeal Tribunal (CAT) quashed the CMA’s decision to make a market investigation reference, following an application by Apple for a review of the decision under s.179 EA02. The CMA request for permission from the CAT to appeal the decision was refused on 03 May 2023, following which the CMA stated that it will apply to the Court of Appeal for permission to appeal.

• opening a new investigation under the Competition Act 1998 into Google’s app store payment practices, alongside the CMA’s similar investigation into Apple.

Cloud Services

In October 2022, Ofcom launched market study into the supply of cloud services in the UK. The study is exploring whether any feature of the markets for cloud services, or the behaviour of providers, could dampen competition and harm consumers through higher prices, lower quality products or less innovation.

In April 2022 (shortly after the end of the reporting period for this report) Ofcom published its interim report on its study, and opened a consultation on a proposal, based on its provisional views, to make a market investigation reference to the CMA into public cloud infrastructure services in the UK.

Ofcom’s interim report set out its provisional assessment of competition in the market for cloud infrastructure services. Ofcom explained that it had reasonable grounds to suspect that there were features in the public cloud infrastructure services market that may have an adverse effect on competition in the UK. Ofcom also identified behaviours by some providers that could raise barriers to switching and use of multiple providers. In particular: egress fees for moving data out of a provider’s cloud; restrictions on interoperability and portability; and committed spend discounts.

Ofcom invited views on comments on its proposal to make a market investigation reference in relation to the supply of public cloud infrastructure services by 17 May 2023. It intends to publish a final report setting out its findings and recommendations, including its decision on a market investigation reference, by no later than 5 October 2023.

Wholesale Data Market Study

The FCA launched the Wholesale Data Market Study in March 2023. The Terms of Reference explain the full scope of the areas and issues that the FCA will look at as part of the market study. In particular, the market study will look at the markets for:

• the provision of benchmarks across several asset classes – equities, fixed income, commodities, foreign exchange and interest rates

• the licensing and distribution of credit ratings data by credit ratings agencies and their affiliates

• the distribution of wholesale data by market data vendors

Wholesale financial markets rely on data to function effectively and efficiently, with wholesale data used to identify investment opportunities, execute trades of financial assets, make investment decisions, evaluate the financial positions of firms and meet regulatory obligations. The market study follows on from the FCA’s Call for Input on accessing and using wholesale data in March 2020  its Feedback Statement (FS22/1) in January 2022, and its findings report in the Trade Data Review in March 2023.

Market investigations under the Enterprise Act 2002

Mobile Radio Network for the Police and Emergency Services

The 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. In particular, the CMA was 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.

Following publication of its interim report in October 2022, the CMA issued its final report in the market investigation in April 2023, shortly after the end of the reporting period for this report.

The CMA found that the Home Office and emergency services are ‘locked in’ to a monopoly provider, Airwave Solutions, and will be in that position until at least 2026, likely 2029 and possibly longer. As a result, the CMA found that Motorola can charge the Home Office (which negotiates the contracts on behalf of the emergency services) prices substantially above the levels which would be expected in a well-functioning market. The CMA has decided to impose a remedy in the form of a charge control on the prices for which Airwave Solutions provides the Airwave Network and services. The charge control will limit the price of the Airwave Network services at a level that would apply in a competitive market, and mitigate the detrimental effects on customers (the emergency services and ultimately taxpayers).

Follow up work on market studies and market investigations under the Enterprise Act 2002

This section sets out follow up work on market studies and market investigations which concluded prior to April 2022.

Signalling market study

In January 2020, ORR launched a market study into the supply of railway signalling systems. In May 2020, ORR closed the market study due to the COVID-19 pandemic.

However, by November 2020 ORR was satisfied that the industry was in a position to assist, 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 November 2021. The final report made a series of recommendations to target a number of barriers to competition that ORR had identified, in a market which has 2 large incumbent suppliers. ORR’s remedies are summarised as:

• increased regulatory oversight by ORR on signalling procurement, to increase transparency and Network Rail’s accountability

• recommendations to Network Rail to maximise its ability to exercise buyer power

• recommendations to Network Rail to treat open interfaces as a priority

• recommendations to Network Rail to address how it balances long term competition with reliance on existing technology

• recommendations to a number of bodies to reduce the uncertainties faced by signalling suppliers, including uncertainties around the volumes of work awarded to them, and to reduce the risk when developing new technologies

In July 2022, ORR published a monitoring paper summarising progress with implementation of these remedies. ORR concluded that, overall, progress had been good, albeit with important work to be completed in key areas. ORR found that where progress has been slower, the key reason for this has been Network Rail’s decision to prioritise its procurement programme for the upcoming 7th Control Period, which covers the period from 2024-2029. Control periods are used by Network Rail to plan investments and decide priorities for the next 5 years. ORR found that most progress needed to be made on the recommendations that it had made to Network Rail on the priority given to open interfaces, and how it balances long term competition with reliance on existing technology.

Ticketing systems market study

In March 2019, ORR concluded its market study into railway ticketing systems. The study set out 3 recommendations to tackle the market issues identified in the automatic ticket gates (‘ATG’) and ticket vending machine (‘TVM’) markets:

• the Rail Delivery Group – a central membership body for the passenger rail transport industry – should host an industry working-group to look at ways on incentivising new entrants into the market, explores options for consolidating procurement, and examines options for greater compatibility between mainline and metro systems;

• Transport for London (TfL) and industry should work together to develop a solution for alternative ATG suppliers to connect to the TfL network; and

• the Rail Delivery Group should continue to simplify its accreditation procedures for new and innovative retailers.

ORR published its second update on progress with its recommendations in October 2021. 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.

In December 2022, ORR published a third monitoring update paper to the market study on ATG and TVM. The paper highlighted progress made by industry to address competition challenges relating to interfacing but also some concerns in relation to remaining barriers to access the TfL network for ATG and TVM suppliers.

Heat networks market study

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.

During 2022, Ofgem supported the government with the development of heat networks regulation and continued to develop its internal regulatory processes to prepare for the start of regulation. The Energy Bill is currently before Parliament, which will appoint Ofgem as the heat networks regulator if passed.

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. NIAUR is engaging with Ofgem on the potential future regulation of heat networks sector.

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.

One of the key measures introduced under the CMA Order was the Open Banking remedy – the CMA ordered the 9 largest current account providers in Great Britain and Northern Ireland (referred to as ‘the CMA9’) to create and pay for an Open Banking implementation Entity (OBIE) to agree, consult upon, implement, maintain and make widely available, without charge, open and common banking standards.

Open Banking has been a major success in improving competition in retail banking and securing positive outcomes for consumers and businesses. There are now over 7 million active users of Open Banking-enabled products in the UK, providing UK consumers and SMEs with innovative products to help them better manage and make more of their money. The scope of the CMA Order is, however, limited to the specific areas that were the focus of the CMA’s market investigation into retail banking in 2017. Extending Open Banking beyond the scope of the Order has the potential to unlock substantial benefits to consumers and businesses across the UK, for example, through unlocking the potential for Open Banking as a critical infrastructure for payments, as well as facilitating the growth of new savings and investments products and services.

In March 2022, the FCA, together with HM Treasury, the CMA, and the PSR announced the creation of a new Joint Regulatory Oversight Committee and the Government and regulators’ commitment to build on the success of Open Banking.

The key objectives of the Committee are developing the vision for the future of Open Banking and to make recommendations on the design of the future Open Banking entity, a future entity that will play a central role in developing and progressing the Committee’s vision. In December 2022, the Joint Regulatory Oversight Committee published a statement, providing an update on its work and emerging thinking^{[footnote 16]} In April 2023, the Joint Oversight Committee set out its recommendations for the next phase of Open Banking in the UK.^{[footnote 17]} This sets out a roadmap and a framework that will enable Open Banking to develop further in a safe, scalable and economically sustainable way.^{[footnote 18]}

Monitoring and enforcement of remedies imposed following previous market investigations

Over the reporting period, the CMA has continued to take action in relation to businesses failing to comply with remedial obligations following previous market investigations relating to the regulated sectors. For instance, the CMA has taken action in relation to a number of breaches of its Retail Banking Market Investigation Order 2017. The CMA publishes a full register of breaches of the CMA’s markets remedies (and mergers remedies) at the following link: Register of breaches of the CMA’s markets and merger remedies.

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 consider competition issues affecting their sectors. A summary of this type of work carried out during the reporting period is included for each regulator.

Ofcom	Ofgem
Review of postal regulation	Market monitoring of the retail energy market. Review of the non-domestic gas and electricity market
FCA	PSR
Trade data review. Big Tech entry into retail financial services. Multi-occupancy buildings insurance. Credit Information Market Study. Implementation of remedies following the non-workplace pensions review	Market review into cross border interchange fees. Market review into scheme and processing fees. Implementation of remedies following the market review into the supply of card acquiring services.
Ofwat	ORR
Market monitoring following the review of the bioresources market. Annual review of the business retail market	Market monitoring on open access services on the rail network.

Ofcom

Review of postal regulation

In July 2022, Ofcom concluded a review of the regulatory framework for post. The purpose of the review was to ensure that the regulation of post remained relevant and effective, particularly in light of change to the market such as consumers’ increasing reliance on parcel delivery and the continued decline in letter volumes. Ofcom decided to maintain the current overall approach to regulation. This included maintaining the framework for regulating access to Royal Mail’s postal network for businesses involved in collecting and sorting mail sent in large volumes (such as by banks or utility providers). Ofcom found that the evidence suggested that the current access framework works well in supporting retail competition in bulk letter services.

Ofgem

Market monitoring of the retail energy market

In the context of unprecedented increase in wholesale gas prices, Ofgem has continued monitoring health indicators for the retail energy market and has regularly published competition and customer service indicators on its data portal.

Ofgem has observed that since mid-2021, price dispersion under the price cap has been narrowing and the number of tariffs on offer has sharply declined. This trend intensified after the Energy Price Guarantee came into effect on 1 October 2022.^{[footnote 19]}

Price competition has largely disappeared from the retail energy market. Variable tariffs have generally remained on offer with prices adjusted towards the levels of the Energy Price Guarantee. The proportion of customers on fixed tariffs has continued to decline and was down to around 16% in November 2022. The reduction is mainly due to customers lapsing onto standard variable tariffs after existing fixed tariffs have expired.

In this context, levels of customer switching between suppliers have plummeted. The 2022 annual switching rates were down to 3% and 2%, respectively for electricity and gas, compared to 16% and 13% in 2021. Ofgem considers that this primarily results from reduced price competition in the market, rather than providing an indication of consumer disengagement.

After the wave of exits of domestic energy suppliers recorded in 2021, domestic gas and electricity markets have been more stable in 2022. Concentration levels remain moderate, with the HHI^{[footnote 20]} almost unchanged around 1300 in electricity and 1400 in gas.^{[footnote 21]} At the end of 2022, there were 22 active licensed suppliers in the domestic retail market, down from 26 in December 2021 after 4 exits and no entries. Large legacy suppliers currently hold a combined marked share around 71%, other large and medium suppliers account for around 27% and small suppliers are down to 2%.^{[footnote 22]}

Review of the non-domestic gas and electricity market

In November 2022, Ofgem initiated a review of the non-domestic retail energy market by writing to energy suppliers on reports about challenges being faced by non-domestic customers. Ofgem sought responses from non-domestic suppliers to these issues, to inform its next steps. Following further evidence gathering and engagement with customer representatives, Ofgem launched a call for input in February 2023 inviting stakeholders to comment on the state of market, and respond to the concerns which had been raised by stakeholders. These include concerns in relation to pricing and contractual behaviours; competition in the non-domestic energy market; and the regulatory support available for specific groups of customers. Ofgem aims to make public its findings and consult on next steps in Summer 2023.

FCA

Trade data review

The FCA launched a Trade Data Review in June 2022, building on its previous work on the use of data in wholesale financial markets.^{[footnote 23]} Trade data may be used for a variety of purposes, including by investment managers, brokers and banks to trade and make investment decisions.

In March 2023, the FCA published its findings report, finding that the market for trade data is not working as well as it could, highlighting in particular:

• some trading markets are concentrated among a few firms so there is little choice for users not to buy this important data and switching supplier is not an easy option;

• the way data is sold can be complex, making it harder for data users to make informed choices;

• complexity and limited choice result in additional costs to data users, which are likely to be passed on to UK retail investors and savers; and,

• despite rules in place requiring delayed data to be distributed for free, many users end up with little choice but to pay for data.

Based on the findings of this review, the FCA’s immediate focus will be on 2 pieces of further work relating to wholesale data:

• The FCA will work with government on developing consolidated tapes, which collect market-wide trade data and disseminate it in a single feed. Depending on the design of any consolidated tape and how it is provided, it could improve the overall cost, quality and accessibility of wholesale data. The findings of this review will help inform the design of consolidated tapes. The FCA plan to consult on consolidated tape proposals in the summer of 2023.

• The FCA has launched the Wholesale Data Market Study (see above) which will allow the FCA to look in more depth at the impact market data vendors have on wholesale data markets and outcomes for data users and end investors.

Big Tech entry into retail financial services

In October 2022, the FCA published a discussion paper seeking views on the potential competition benefits and harms from the entry and expansion of ‘Big Tech’ firms into a range of retail financial services sectors. The FCA hosted an expert panel webinar in November 2022, followed by sector-specific workshops in December 2022 with a total of over 300 attendees. The FCA plans to publish a Feedback Statement in the first half of 2023, setting out how the FCA will develop its regulatory approach in response to the feedback received.

Multi-occupancy buildings insurance

In January 2022, the Secretary of State for Levelling-up, Housing and Communities asked the FCA, in consultation with the CMA, to review the market for multi-occupancy buildings insurance, in the context of price increases and the restriction of coverage available following the Grenfell tragedy.

In September 2022, the FCA reported on the findings of its review. The FCA identified a range of potential remedies designed to give leaseholders in the UK greater protections from high buildings insurance prices, and to ensure the buildings insurance market operates better for leaseholders, including:

• recommendations to government and industry bodies that they continue to work on creating an effective risk pooling scheme, as it is considered that this would most likely reduce prices for insuring the minority of multi-occupancy buildings with the most substantial price increases;

• a multi-firm review by the FCA into the insurance brokers charging the highest commissions, which will consider whether leaseholders may benefit from additional rules preventing potentially harmful practices around commission; and

• a consultation by the FCA on requiring improved disclosure of information on insurance by FCA regulated firms such as brokers and insurers and improving product governance. The FCA recommended that Government consider new rules requiring that property freeholders provide information on the insurance policy to leaseholders.

The FCA expects to publish the findings of its multi-firm review, as well as a consultation paper with its proposed disclosure and governance remedies, in Spring 2023.

Credit Information Market Study

In June 2019, the FCA launched a market study into the market for credit information, which is used to help the assessment of the financial standing of consumers and plays a key role in enabling access to a range of financial and non-financial services. The market study was paused in April 2020 to enable the FCA to prioritise other work during the COVID-19 pandemic and relaunched in July 2021.

In November 2022, the FCA reported on its interim findings. The FCA found that the credit information sector works well in a few ways, but that aspects of the market are not working well. The FCA’s interim report set out a package of potential remedies to establish a new credit reporting governance body, and ensure that credit reference agencies can improve the quality and coverage of data, users of credit information can benefit from greater dynamic competition between credit reference agencies, and consumers are better able to access and dispute credit information. The FCA has engaged with a broad range of industry stakeholders on the desirability and design of the potential reform to industry governance arrangements, including the objectives, remit and structure of the proposed new body. The FCA aims to publish the final report on the market study in Q3 2023.

Implementation of remedies following the non-workplace pensions review

The FCA launched a review of the non-workplace pensions market in 2018, seeking to understand how well it was working for consumers. It reported on its review in July 2019, finding that there was a lack of competitive pressure in the market driven by low consumer engagement with complex and confusing products and charges. In response to these findings, the FCA proposed in 2021 that firms operating non-workplace pensions should offer non-advised customers as a default option a ready-made, standardised investment solution, alongside other investments. The FCA also proposed that firms should warn consumers when they have significant and sustained levels of cash in their non-workplace pension which is at risk of being eroded by inflation. In December 2022, the FCA set out its final rules, which must be implemented by December 2023.

PSR

In October 2022, the PSR published the final terms of reference for 2 market reviews into card fees. The reviews focus on Visa and Mastercard, as these businesses account for 99% of debit and credit card payments in the UK.

Market review into cross border interchange fees

One market review concerns cross-border interchange fees for consumer transactions between the UK and the European Economic Area (EEA) when the cardholder is not present, such as online sales (CNP transactions). Since the UK’s departure from the EU, these fees have been increased by Visa and Mastercard approximately fivefold. In the first half of 2022, UK acquirers paid EEA issuers £75 to100 million more than they would have if Mastercard and Visa had not increased their fees. The PSR considers this may be adversely affecting UK consumers, as merchants may pass the increased costs on to them (at least in part). In December 2022, the PSR published a working paper setting out its current understanding of how the recent increases in UK-EEA CNP cross border-interchange fees may be affecting UK service users.

Market review into scheme and processing fees

The second market review concerns scheme and processing fees charged by card payment system operators (eg Visa or Mastercard):

• scheme fees are charged in return for services relating to participation in the card system.

• processing fees are charged for authorisation, clearing and settlement services for card payments.

The PSR’s work on its card-acquiring market review, reinforced through its ongoing work with stakeholders, shows that the fees paid by ‘acquirers’ (organisations that process card payments for merchants) have increased significantly since 2014. In February 2023, the PSR published a working paper on different views of the competitive constraints that Mastercard and Visa face, based on input from a range of stakeholders. At the same time, the PSR also published a working paper on its approach to financial analysis, including how it plans to analyse the profitability of the schemes in detail.

Implementation of remedies following the market review into the supply of card acquiring services

Every time somebody makes a card payment, the merchant uses card-acquiring services to accept the payment. The PSR carried out a market review of card-acquiring services, publishing a final report in November 2021 in which it found that the supply of card-acquiring services does not work well for merchants with annual card turnover up to £50million. small and medium-sized merchants.

Since then, the PSR developed a package of remedies to help business get the best deal possible, including bilateral engagement with stakeholders such as industry and merchant trade associations. The PSR also consulted with other sector regulators including the FCA, Ofcom and Ofgem regarding these proposed remedies. In October 2022, the PSR issued its final decision on remedies. These include:

• limits on the maximum terms for the lease of the electronic devices merchants use to accept card payments (‘POS terminals’);

• measures to improve price transparency for merchants comparing different card-acquiring services (such as summary information boxes and associated online quotation tools); and

• trigger messages from providers of card-acquiring services to prompt merchants to consider renegotiating their contracts or switching suppliers.

The first of the remedies, in relation to POS Terminal leasing contracts, came into force in January 2023. The remaining 2 remedies in relation to trigger messages and summary information box and associated online quotation tools are due to come into force in July 2023.

Ofwat

Market monitoring following the review of the bioresources market.

Bioresources (or sewage sludge) are the semi-solid by-products of wastewater treatment. Sewerage companies are engaged in the treatment, transport and disposal of bioresources. Ofwat launched a review of the bioresources market in October 2020 to consider competition in the market, including any barriers to competition and market development. Ofwat consider that bioresources activities could help to create greater economic and environmental value through technological changes, economies of scale, inter-company optimisation and co-digestion of sludge with other organic waste (for example, food waste from kerbside collection).

In September 2022, Ofwat published its third market monitoring report covering developments in the bioresources market from 2017 to 2022. The report found that the market in sludge transport and disposal or recovery is reasonably competitive. However, Ofwat found that the level of sludge exported by sewerage companies to other companies for treatment was 1.7%, which it considered to be very low. In December 2022, Ofwat published its final methodology for its 2024 price review, which will cover the 2025-2030 period. This included a new methodology for controlling revenues from bioresources, which it hopes will facilitate a better functioning bioresources treatment market.

Annual review of the business retail market

Since April 2017, around 1.2 million business customers in England have been able to choose their supplier of water services, rather than being restricted to their regional monopoly. Since this market has opened to competition, Ofwat has published an annual state of the market report to assess how the market is performing for customers.

In September 2022, Ofwat published its fifth report, covering the period April 2021 - March 2022. Ofwat found that overall awareness of the market, activity in the market and customer satisfaction remained broadly in line with previous years. It reported that around 48% of business customers are aware that they have been able to switch or renegotiate with their existing supplier, but that larger customers were more active in the market compared to smaller customers.

Ofwat concluded a Chapter II investigation into Thames Water with commitments in March 2022, just before the reporting period for this Annual Concurrency Report. In that case, Ofwat had accepted commitments from Thames Water to address concerns that the approach it had taken to rolling out smart water meters (as a monopoly supplier) had resulted in limited access to data on actual water-usage obtained from meters. Water retailers in the business retail market rely on good quality data regarding customers’ actual water usage to offer certain additional services to business customers, such as water efficiency or leakage detection services, which they use to differentiate their offerings. In its fifth report on the business retail market, Ofwat noted that its decision in the Thames Water case had sent a strong signal that monopoly wholesalers have a key role to play in improving the data available in the business retail market, and encouraged wholesalers to reflect on Thames Waters’ commitments.

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. In respect of developer services markets, Ofwat has reported that the new appointment market has grown rapidly in the reporting period.^{[footnote 23]} Ofwat has continued to support industry to improve bulk charges for new appointments through a bulk charging industry working group. Ofwat has also removed certain requirements for self-lay providers to obtain their own street-works licence, rather than relying on their developers’ licence. ^{[footnote 24]}

Price protection in the business retail market

In December 2021, Ofwat published a consultation seeking views on its approach to 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 business retail market. In December 2022, Ofwat decided to retain and also revise the price protections for some categories of business customers as well as to retain the existing non-price protections in their current form. Ofwat’s decision takes effect from April 2023, and it plans to review the REC protections again in 3 to 5 years’ time.

ORR

Market monitoring of open access services

In April 2022, ORR published a report updating on its monitoring and response to open access passenger services on the railway network in Great Britain. There are 2 types of train operator running passenger services in Great Britain: contracted operators who hold contracts with the government to run services and open access operators work independently of, and often compete with the contracted operators on certain routes. Open access operators introduce competition to the railway sector which has been shown to deliver benefits to passengers. In deciding whether to grant these operators access to the network, ORR seeks to balance the benefits that open access operators can bring through increased competition (eg through lower fares or innovation) against the potential costs to incumbent operators and the government through lower franchise values.

ORR’s report found that despite the significant commercial challenges which open access operators had faced during the COVID-19 pandemic, they had continued to invest significantly in their businesses. ORR noted that the entry of a new open access operator on the east coast mainline in October 2021 was a significant development on the rail market in Great Britain.

As part of the report, ORR commissioned an independent consultancy firm to carry out an economic appraisal of historical open access operatory entry. The consultancy’s analysis found that open access has historically driven net benefits on all the route types that it analysed and it has, in aggregate, driven net benefits under a range of modelling assumptions.

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 2022, one new Competition Act 1998 case was allocated to the FCA and 4 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 (eg 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 (eg the provision of digital forensics support). There is also sharing of relevant policy, such as internal guidance and template documents.

Assistance on competition enforcement and markets 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 as well as feedback on draft documents such as draft infringement decisions. 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 CMA and Ofcom have engaged in regular discussions in relation to Ofcom’s market study into cloud services (in addition to a secondment of a member of CMA staff to work on the study). The PSR consulted with other sector regulators including the FCA, Ofcom, and Ofgem regarding the proposed remedies following its market review of card-acquiring services. The CMA has shared expertise on market-studies under the Enterprise Act 2002 with the FCA, in advance of the launch of its market study into wholesale data markets.

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 30 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 30 transactions, and most sectoral regulator assisted the CMA’s merger intelligence function in at least one transaction and often several more.

Aviation

The CAA continued to assist the CMA in the Phase 2 investigations of CHC’s acquisition of Babcock and Viasat’s acquisition of Inmarsat.

Communications

The CMA benefited from Ofcom’s expertise in broadcasting while investigating the joint venture between Warner Bros. Discovery and the BT Group, to merge their respective audio-visual sports content businesses (Eurosport UK and Ireland, and BT Sport). The CMA also worked closely with Ofcom as part of the remedies process on the acquisition by Cellnex UK Limited’s of CK Hutchinson Towers.

In addition, the CMA’s merger intelligence unit contacted Ofcom in relation to 10 other transactions.

Financial services

The FCA assisted the CMA with understanding the relevant regulatory framework as part of the CMA’s investigation into the acquisition by London Stock Exchange Group PLC of Quantile Group Limited.

The FCA also helped the CMA understand the market context and other relevant issues in 8 transactions under consideration by the CMA’s merger intelligence unit.

Energy

In the energy sector, Ofgem advised the CMA in relation to the acquisition by the consortium between Macquarie Infrastructure and Real Assets (Europe) Limited and British Columbia Investment Management Corporation of a 60% shareholding in the gas transmission and gas metering business of National Grid plc.

In addition, the CMA’s merger intelligence unit contacted Ofgem in relation to 8 other transactions.

Payment systems

The PSR provided payments systems expertise to the CMA’s merger intelligence unit when considering whether 5 transactions warranted a detailed merger assessment. This built on a workshop between PSR and CMA teams in July to share the PSR’s understanding of the sector and discuss the types of merger issues that may emerge in the sector.

Rail

ORR assisted the CMA by provided technical insight to the CMA in relation to its investigation of the anticipated acquisition by Hitachi Rail of Thales SA’s Ground Transportation Systems Business.

The CMA’s merger intelligence unit benefited from ORR’s advice when considering whether one transaction warranted a detailed merger assessment.

Multilateral cooperation

UKCN

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). The UKCN 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 cooperation with overseas competition authorities, a roundtable discussion on the cost of living, a presentation by the Department for Business, Energy and Industrial Strategy on competition and consumer reform, presentations from the CMA on its work on the competition law block exemptions and accompanying guidance and a range of presentations from the CMA and regulators on the investigations and markets work set out in this report.

Secondments

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 active secondments between regulators and between the regulators and the CMA.^{[footnote 25]}

Digital Regulation Cooperation Forum

As noted in the overview of the year introducing this report, in response to the wide-ranging nature of digital markets and the regulators that could be involved, the Digital Regulation Cooperation Forum was launched in July 2020 to support the coordinated regulation of digital markets. Membership of the DRCF is comprised of the CMA, FCA and Ofcom, and the Information Commissioner’s Office. Examples of work carried out by the DRCF in the reporting period include:

• Publication of a discussion paper on algorithmic processing, setting out 6 common areas of focus among the DRCF members.

• Publication of a joint statement from the CMA and Ofcom setting out a shared view on the interactions between online safety and competition in digital markets.

• Further information on the work of the DRCF can be found in its Annual Plan 2022 to 2023.

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1. The report is published in accordance with the CMA’s statutory obligation (set out in section 25(4) of the Enterprise and Regulatory Reform Act 2013, read together with paragraph 16 of Schedule 4). ↩

2. 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. The CMA is required under section 25(4) and paragraph 16 of Schedule 4 of ERRA13 to publish an annual report on the operation of the concurrency arrangements. ↩

3. There is no longer a regulator with concurrent competition law powers in the healthcare services sector in England and the CMA now has sole jurisdiction to apply competition law in in that sector. From 2012, Monitor had concurrent powers in relation to the provision of healthcare services in England. Monitor was the sector regulator for health services in England and operated as part of NHS Improvement. The Health and Care Act 2022 has now abolished Monitor. From 1 July 2022, its functions were transferred to a new body called NHS England. However, Monitor’s concurrent competition law powers have not been transferred to NHS England. For completeness, the Health and Care Act 2022 placed a duty on NHS England to provide regulatory information or assistance to the CMA in respect of its functions under the Competition Act 1998 and the Enterprise Act 2002 so far as those functions are exercisable on behalf of the CMA by the CMA Board or a CMA group. ↩

4. In particular, the so-called ‘primacy obligation’ generally requires sector regulators to use certain specified sector-specific regulatory powers only after considering whether it would be more appropriate to use their powers under the Competition Act 1998. Further details on this obligation are contained in the section headed ‘Decisions taken since April 2022 to use direct regulatory powers instead of competition prohibition powers. ↩

5. Further details on the Government’s ongoing review can be found at the following link Economic regulation policy – GOV.UK (www.gov.uk). The National Infrastructure Commission’s recommendations are contained in its October 2019 report: Strategic Investment and Public Confidence (nic.org.uk) ↩

6. See UKRN Annual Workplan 2023 ↩

7. See Annual Fuel Poverty Statistics LILEE Report 2023 (2022 data) (publishing.service.gov.uk) ↩

8. Although these market studies represent the first Enterprise Act 2002 market studies conducted by these 2 regulators, they have both previously undertaken a significant number of market reviews using their sector-specific powers that are similar in nature to an Enterprise Act 2002 market study; ORR has conducted 2 EA02 market studies in recent years: a market study into railway ticketing machines (completed in 2019) and a market study into railway signalling (completed in 2021). Although these studies were completed before the reporting period for this report, details on the follow-up to ORR’s recommendations are included. ↩

9. This is demonstrated by the reference made by the FCA in relation to investment consultants (2017), which followed a market study conducted by the FCA under its sectoral powers, rather than the EA02. It is also demonstrated by the reference made by Ofgem with regard to energy (2014). ↩

10. Further details are included in the section headed ‘Big Tech entry into retail financial services’. ↩

11. Digital Markets, Competition and Consumers Bill - Parliamentary Bills - UK Parliament ↩

12. Some of these cases were also opened under Articles 101 and/or 102 of the Treaty on the Functioning of the European Union (TFEU), in addition to the Chapter I and Chapter II prohibitions of the Competition Act 1998. When the UK was an EU member state, the CMA, sector regulators with concurrent powers and courts were required to apply Articles 101 and 102 TFEU when national competition law was applied to agreements which may affect trade between Member States or to abuse prohibited by Article 102. Following the end of the Transition Period in December 2020, the CMA and sector regulators no longer have responsibility for enforcing Article 101 and Article 102 TFEU. Ongoing investigations at that point were continued solely under the Competition Act 1998. ↩

13. Consultation on our review of competition in the electricity distribution connections market - Ofgem ↩

14. 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. ↩

15. The PSR issued 3 directions related to Confirmation of Payee (CoP). CoP is designed to help stop some types of authorised push payment (APP) fraud and accidentally misdirected payments. In these cases, the PSR had decided that its regulatory powers were the most appropriate tool to achieve the wider implementation of CoP. In addition, following the final report in the PSR’s market review of card acquiring services in November 2021, 3 directions were given in October 2022 to implement the package of remedies set out in its final remedies notice in October 2022. The PSR had decided that its regulatory powers were the most appropriate tool to achieve the targeted and timely implementation of these remedies. ↩

16. Joint statement by HM Treasury, the CMA, the FCA and the PSR to update on the future of Open Banking - GOV.UK (www.gov.uk) ↩

17. This publication took place after the end of the relevant reporting period, but before publication of this report. ↩

18. Joint Regulatory Oversight Committee sets out recommendations for the next phase of open banking in the UK - FCA ↩

19. The Energy Price Guarantee is a government measure which limits the amount consumers can be charged per unit of energy, and provides compensation to suppliers for the savings delivered to households. ↩

20. ‘HHI’ refers to the Herfindahl-Hirschman Index. The HHI is calculated as the sum of the squares of each firm’s shares at a given level of aggregated activity. It ranges between 0 to 10,000, where a value of 0 represents perfect competition and 10,000 represents a monopolist. ↩

21. Ofgem includes in ‘large legacy suppliers’ those which have held a market share of at least 5% in either fuel since privatisation of the electricity and gas sectors. Ofgem includes in ‘medium suppliers’ those with market shares exceeding 1% but below 5% in both fuels. Ofgem includes in ‘small suppliers’ those with market shares below 1% in both fuels. ↩

22. Including the FCA’s Call for Input on accessing and using wholesale data of March 2020 and the feedback statement (FS22/1) of January 2022 ↩

23. The new appointment market involves a limited company being appointed by Ofwat to provide water and/or sewerage services for a specific geographic area. A new appointee has the same duties and responsibilities as the previous statutory water company. ↩ ↩²

24. Where a development requires a new water main or sewer, a self-lay provider can be chosen by the developer as an alternative to the statutory water or sewerage company installing the pipework. ↩

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