Mass competition claims against water companies fall

Professor Carolyn Roberts wanted to raise claims against the water companies on behalf of all their household customers. She argued that the companies did not accurately report on the number of PIs and that this enabled them to charge higher prices to customers under regulator Ofwat’s price review regime, where the regulator’s price review determinations for companies were tied to companies meeting pollution targets.

Professor Roberts said the alleged under-reporting, and consequently the charging of higher prices to customers, constituted an abuse of a dominant market position by each of the six companies concerned. The companies were appointed into statutory monopolies in the areas they operate in. Abusing a dominant market position is prohibited under UK competition law.

However, the CAT held that the competition law claims brought by Professor Roberts were excluded from those that could be raised for the contraventions she claimed. This was because of restrictions imposed under sectoral legislation, the Water Industry Act (WIA) 1991.

Under section 18(8) of the WIA, the only remedies that can be imposed on the water and wastewater companies for contraventions of the conditions of their appointment are those that have been legislated for 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”.

The CAT reviewed UK Supreme Court case law on the interpretation of those provisions. It held that the alleged failure of the companies to supply accurate information for the statutory regime of price control under the Act constituted what the Supreme Court considered was of an “essential ingredient” of the claim Professor Roberts had raised for breach of statutory duties by the water companies under the Competition Act. This meant the claims were excluded by the WIA from being brought as competition law damages claims.

Instead, the CAT accepted that Ofwat considers it has the power through an enforcement order under the WIA to direct a water company in breach of its conditions to reimburse customers the amount of any overcharge. The CAT also added that it considered “the administrative process of Ofwat is much better suited to determination of the level of under-reporting of PIs and of any amount due by way of reimbursement to customers than the adversarial process of litigation before the Tribunal”.

Alan Davis, competition law specialist at Pinsent Masons, said: “This was regarded as a key case for testing the limits of the UK competition collective proceedings regime and whether novel standalone claims for breaches of competition law, especially for abuse of dominance, may be brought as mass actions where the substance of the claim arises from an actual or alleged breach of regulatory obligations.”

“It is important to note that the CAT concluded in this case that it would have certified the collective claim were it not for the specific exclusion under the WIA. In particular, it confirmed that ‘the application of the statutory prohibition to exploitative abuse is not constrained or precluded in the present cases’, in other words, that it can be an abuse for a dominant undertaking to mislead a regulator, that the water companies are subject to competition law and that the claims were suitable to be brought as opt-out claims other than for the fact that they were excluded by the WIA. The CAT was also satisfied that Professor Roberts was suitable to act as a proposed class representative and other certification criteria were met,” he said.

“It remains possible therefore that other claims for breaches of conditions by regulated entities could potentially be brought as claims under the competition collective proceedings regime. It will depend on the interpretation of the specific regulatory provisions as to whether competition law claims would be excluded,” said Davis.

A lawyer acting for Professor Roberts has said that she is considering an appeal.