UK Regulatory Law – Ofgem and the CMA

It has long been the policy in the UK to have a free market, but players in the market sometimes do not play fair. Commercial undertakings agree or act to manipulate the market in a way that is damaging both to their competitors and consumers.

Within the UK there is one ‘main’ market regulator, and this is the Competition and Markets Authority (the CMA). The CMA is one of those organisations which many will not have heard of, but to those who do know them, have reason to respect, if not to fear, them.

The CMA has Dawn Raid powers (they can turn up on your doorstep without an invite and demand entry), they have powers of disclosure (they can demand you give up documents to them) and they have the power to impose fines of up to 10% of global group turnover – i.e. the top and not the bottom line.

I have written about the CMA in other articles, and I shall not try your patience here with repetition. Instead, I want to look at Ofgem (Office of Gas and Electricity Markets). Who? I hear you say… well settle back and let me explain.
 

Who are Ofgem?

Ofgem monitor the energy market. They act to ensure businesses comply with regulation and to protect the interests of consumers. Ofgem have powers of investigation should they feel a business is in breach of its license or some other regulatory requirement.

Broadly, Ofgem monitoring falls into four divisions:
  1. Routine collection of information
  2. Referrals from CABs and Ombudsman Services
  3. Consumer research directed by Ofgem
  4. Whistle-blowers.
If warning lights are triggered, then Ofgem can:
  1. Carry out a formal investigation where the activities complained of concern the generation, transmission and supply of electricity and the transportation of supply of gas.
  2. Ofgem can refer the situation to the CMA.
Ofgem has powers under:
  1. The Enterprise Act 2002
  2. Consumer Rights Act 2015
  3. Business Protection from Misleading Market regulations 2008
  4. The Competition Act 1998.
Fines, as with the CMA can be up to 10% of global turnover and Ofgem can impose interim remedies too, to prevent prohibited behaviour before a final determination is made.

For more information, please contact a member of our Dispute Resolution team or email enquiries@dmhstallard.com 
 

The history of market regulation

The modern law of market regulation traces its history to the Restrictive Trade Practices Act 1976. This Act, introduced as it was shortly after the UK’s accession to the then EEC, was a brave first attempt. Very quickly though, the rather ‘form driven’ approach taken by those drafting the 1976 Act was found to be flawed.

At the heart of the EEC was the Common Market. Articles 85 and 86 of the original Treaty of Rome was aimed at Concerted Practices (Art 85) and abuse of a monopoly position (Art 86) and these articles survive almost unamended in what is now Article 101 (CPs) and 102 (Monopolies) of TFEU (Treaty for the Functioning of the European Union).

Most noteworthy about the European approach was that it was aimed less at the form of the Concerted Practice or the behaviour of the monopoly but at the economic effect of that conduct on the market. The EEC, latterly the EU, adopted a function as opposed to a form-based approach.

The UK adopted the Competition Act 1998, and this Act adopts the same economic function test.
 


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