Energy market competition investigation will be ‘very controversial’, says Bristows

Bristows associate Sophie Lawrance has commented following the announcement of the energy sector competition investigation.

Lawrance said: ‘I think this is going to be a very controversial investigation. Ofgem won or settled on good terms the domestic mis-selling cases against four out of the big six energy companies, so they and the brand-new Competition Markets Authority [CMA] may be keen to build on this.’

According to Lawrance, both agencies have their reasons to take a tough stance — she said that Ofgem will want to be seen to be using its competition powers and also to be standing up to the energy companies (as many politicians, media and energy consumers see them as ineffective).

She added that the CMA will want to be seen as a tough regulator not afraid to engage into controversial investigations in its early days, sending a strong message to the politicians, consumers and the market.  

Lawrance continued: ‘Whichever way the investigation goes, the CMA will be under huge pressure from media and politicians on the one hand to take a tough stand, including potential structural remedies, for example breaking up the biggest energy companies, while on the other hand taking a softer approach with wider business communities. Whatever the outcome of this investigation, it is likely to be controversial and someone will always be disappointed.

‘Another interesting take on this is to look at it in terms of the competition authorities trying to win out over draconian measures imposed by a politician, i.e. Ed Milliband, if he is anywhere near power — no pun intended — after the election. 

‘It will be a test of the CMA, which has huge populist potential if energy prices can be brought down as a result, but could also be very controversial if it concludes by breaking up companies in a market that was supposedly opened up to competition 20-ish years ago, and where subsequent mergers have been reviewed by the UK competition authorities.’