It remains to be seen whether the judgment will be appealed.
The Competition Appeal Tribunal has delivered its judgment in relation to claims commenced against six water and sewerage undertakers which alleged that the undertakers had committed abuses of their dominant position, in breach of section 18 of the Competition Act 1998, in providing misleading information to the Environment Agency and to Ofwat by under-reporting numbers of pollution incidents. The claims alleged that the effect of this conduct had been to cause Ofwat to allow the undertakers to charge higher prices for sewerage services than would otherwise have been permitted.
The claims were brought by an individual, (the proposed class representative), by way of collective proceedings on behalf of all household customers of each undertaker.
The Tribunal heard argument on behalf of the proposed representative and on behalf of the undertakers in September 2024 and issued its judgment on 7 March 2025.
Ofwat explained to the Tribunal that the undertakers are subject to targets regarding pollution incidents incorporated by Ofwat into its price review process and thence into the undertakers’ price determinations. The regulatory regime includes financial penalties for not meeting these targets, and a combination of incentives and deterrents in that the undertakers are allowed to increase their prices, or conversely are required to reduce their prices, according to the number of relevant pollution incidents which they report.
The claims alleged that the undertakers significantly under-reported the number of relevant pollution incidents and thereby were able to charge higher prices than they would have been permitted to charge if they had submitted accurate reports. This conduct was alleged to constitute an abuse of a dominant position contrary to the Chapter II prohibition of the Competition Act 1998.
The regulatory framework overseen by Ofwat includes, in section 18 of the Water Industry Act 1991 (WIA), a power for Ofwat to issue an enforcement order against an undertaker which contravenes a condition of its appointment.
Section 18(8) WIA provides that:
“Where any act or omission—
- constitutes a contravention of a condition of an appointment …; or
- causes or contributes to a contravention of any such condition or requirement,
the only remedies for, or for causing or contributing to, that contravention (apart from those available by virtue of this section) shall be those for which express provision is made by or under any enactment and those that are available in respect of that act or omission otherwise than by virtue of its constituting, or causing or contributing to, such a contravention.”
This statutory exclusion of other remedies had been considered by the House of Lords in Marcic v Thames Water Utilities Ltd [2004], in which the court concluded that the claim in nuisance by Marcic was actually a claim that Thames Water had failed to construct new sewers and which accordingly fell to be dealt with by Ofwat under section 18.
More recently, the Supreme Court in United Utilities Water Ltd v Manchester Ship Canal Co Ltd (No 2) [2024] has considered the final words of section18(8) and explained that the ouster of causes of action effected by section 18(8) is only of causes of action for which a breach of a condition of an undertaker's appointment forms an "essential ingredient".
Ofwat stated to the Competition Appeal Tribunal that it considers that (i) misreporting to it of data and (ii) recovering money from customers on the basis of that misreporting, contrary to the terms of its price control regime, would constitute breaches of one or more of the undertakers’ conditions of appointment.
The Tribunal held that the alleged failure of the undertakers to supply accurate information to Ofwat for the statutory price control regime under the WIA was an essential ingredient of the claim for breach of statutory duty under the Competition Act. Accordingly, the Tribunal concluded that the claims for abuse of dominance in breach of the Chapter II prohibition were excluded by s.18(8) WIA.
The Tribunal explained that the position would have been different if the prices charged by the undertakers were in themselves said to constitute an abuse in the form of excessive and unfair pricing but that was not the case advanced here: there was no allegation that the prices charged were excessive.
The Tribunal added that if the claims for abuse of dominance were not so excluded, the Tribunal would have allowed each set of proceedings to go forward.
In summary, the approach of the WIA is that enforcement of compliance with an undertaker’s appointment conditions rests primarily with Ofwat; a private party may bring a claim only if there has been a breach of a subsequent enforcement order issued to the undertaker by Ofwat.
It remains to be seen whether the judgment will be appealed.
For more information, please contact our expert water lawyers.
Read More