Ofwat has brought its abuse of dominance investigation into Bristol Water's activities in relation to the self-lay market to an end with the acceptance of commitments offered by Bristol Water.
If a development requires a new water main or sewer, the developer may ask the water or sewerage company to install the pipework or they may choose their own contractor to do the work, which is known as self-lay. Aquamain and Energetics Design & Build, who provide water supply infrastructure for developers, both complained to Ofwat in January 2013 that Bristol Water was abusing its dominant position and making it harder for 'self-lay operators' (SLOs) to compete. They argued that Bristol Water was discriminating in the price and non-price terms it applied for its services, offering different terms to SLOs compared with its own equivalent services to developers.
Broadly, Bristol Water’s commitments involve them committing to act fairly towards downstream competitors and, importantly, to change its internal structure to facilitate this.
Are commitments the remedy of choice for regulators wanting to achieve market solutions?
This case is another example of regulators preferring to settle cases through commitments rather than trying to get an infringement finding (Ofwat having previously accepted commitments from Severn Trent and Ofgem having accepted commitments from Electricity North West). Commitments can be a fast way of finding a remedy where a market does not appear to be functioning as effectively as it might be and they are attractive to regulators as the regulator gets a say in exactly what changes will be made during the negotiation of the commitments. Of course, the competition authority needs to be mindful of the views of third parties, as the OFT found out to its cost in the Skyscanner case, but obtaining commitments gives them a reasonably free hand.
Bristol Water will be making changes to their internal structure and this demonstrates again the use of commitments to achieve ‘structural’ style change (see also the European Commission’s commitments decisions in gas cases RWE and ENI - and also proposed commitments by E.On in electricity).
So, it looks like commitments are the tool of choice for regulators in abuse of dominance proceedings as they are quicker than full investigations leading to financial penalties (which are invariably appealed) and structural remedies can more easily be achieved. However, there is the concern that commitments decisions have no 'deterrence effect', so that if they are used too widely competition law (and particularly abuse of dominance cases) will lose its scare factor.