Ofgem uses competition powers after market carve-up

Three businesses have been fined a total of £870,000 after they struck a customer sharing agreement in the British gas and electricity market, in breach of UK competition laws.

According to the UK's energy regulator Ofgem, suppliers Economy Energy and E (Gas and Electricity) Ltd (EGEL), together with consultancy business Dyball Associates, "entered into an agreement and/or concerted practice to share markets and/or allocate customers between Economy and EGEL in relation to the supply of gas and electricity to domestic customers in Great Britain".

Under the scheme, which Ofgem said existed between January and September 2016, the companies agreed that Economy Energy and EGEL would not "actively target" one another's customers, though they agreed to facilitate pro-active switching by the customers themselves.

Ofgem said that two energy suppliers shared "commercially sensitive and strategic information" concerning their customers and that they utilised software provided by Dyball to share markets and allocate customers between them – activity which Ofgem said Dyball was aware of.

EGEL was fined £650,000 for its part in the infringement, while Ofgem imposed financial penalties of £200,000 and £20,000 on Economy Energy and Dyball respectively.

It is the first time in over a decade that Ofgem has exercised its enforcement powers under the competition regime, and the first time ever it fined parties for market sharing activity. Back in 2008, Ofgem fined National Grid £41.6 million for abusing its domination position in the domestic gas meter market. In that case Ofgem’s decision was upheld in two successive appeals, although the penalty was ultimately reduced to £15 million.

"The level of the penalty reflects the seriousness of this infringement, the need to ensure Economy Energy, EGEL and Dyball, and other undertakings, are deterred from engaging in this kind of collusive conduct, and the need for a penalty to be proportionate," Ofgem said in the present case.

Competition law expert Alan Davis of Pinsent Masons said: "Ofgem has concurrent powers to enforce competition law in the energy sector alongside the Competition and Markets Authority and in addition to its regulatory powers. Ofgem has had a number of other competition investigations which they have either closed through agreeing commitments with the parties or on grounds of administrative priority, or they have transferred the case to the CMA."

"Ofgem has at least one other ongoing Competition Act investigation which involves an abuse of dominance allegation," Davis said.

The Competition Act contains a general prohibition against organisations putting in place agreements which may affect trade in the UK where those agreements have as their object or effect the prevention, restriction or distortion of competition.

Editor's note, 12/07/19: This article has been updated to reflect the previous action Ofgem has taken using its competition enforcement powers.