Competition & Regulation Legal Update

April 2008

New Legislation

UK

  • The Gas (Standards of Performance) (Amendment) Regulations published
    On 17 March 2008, Ofgem published an open letter, following publication on the OPSI website of the The Gas (Standards of Performance) (Amendment) Regulations 2008 (SI 2008/696), confirming the application of modified standards of performance (the guaranteed standards) for all licensed gas transporters. Ofgem proposed modifying the guaranteed standards as part of its recent gas distribution price control review and it consulted separately on the proposals in November 2007. The new standards will apply from 1 April 2008.
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EU

  • ERGEG publishes draft guidelines on exemptions from European Gas Directive
    On 21 March 2008, the European Regulators' Group for Electricity and Gas published draft guidelines in relation to the grant of exemptions under Article 22 of Directive 2003/55/EC. Article 22 aims to create incentives in the gas sector for efficient investments in new infrastructure projects by allowing certain exceptions to the third party access regime. The aim of the draft guidelines is to provide guidance for national regulators in making decisions applying Article 22 as a way of filling a gap prior to, or in the absence of, the development of binding guidelines.
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  • ERG adopts Common Position on symmetry of mobile/fixed call termination rates
    On 12 March 2008, the European Regulators Group published the text of its common position on symmetry of mobile/fixed call termination rates, adopted on 28 February 2008. The common position sets out an analysis in relation to fixed and mobile termination rates and the economic principles regarding the regulation of termination rates. The ERG considers that fixed termination rates should become symmetric as soon as possible and that, although asymmetric mobile termination rates may be appropriate in certain circumstances, they should be justified and only applied for a transitional period.
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Judicial decisions

CAT

  • CAT publishes order in National Grid application for interim relief
    On 19 March 2008, the Competition Appeal Tribunal published an order of the President under Rule 61 of the CAT Rules 2004 suspending the directions set out in the Gas and Electricity Markets Authority's decision in relation to an abuse of dominance by National Grid plc in the market for domestic gas until the appeal that National Grid intends to make against the decision is determined, or the expiry of the time limit for bringing an appeal against the decision. On 4 March 2008, National Grid made an application for interim relief under Rule 61, requesting suspension of directions contained in the decision. The Authority has consented to the grant of interim relief.
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  • CAT sets questions for Competition Commission reference in wholesale mobile call termination rate appeals
    On 18 March 2008, the Competition Appeal Tribunal handed down a ruling in the appeals by British Telecommunications Plc and Hutchison 3G UK Limited against a determination by Ofcom that H3G, along with each of the other UK mobile phone operators, holds a position of significant market power in the markets for voice call termination for each of their own networks. As a consequence of its finding of SMP, Ofcom imposed price controls on the mobile operators. Both the H3G and BT appeals involve arguments against the level of the price controls imposed by Ofcom and, as such, involve price control matters that are required to be referred to the Competition Commission for determination under section 193 of the Communications Act 2003. In its ruling, the CAT sets out the questions that the Competition Commission has to determine and the time-frame for the Competition Commission's determination.
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  • CAT publishes order in appeals by BSkyB and Virgin Media against BSkyB/ITV merger decision
    On 14 March 2008, the Competition Appeal Tribunal published an order in the applications under section 102 of the Enterprise Act 2002 by British Sky Broadcasting Group plc and Virgin Media, Inc for review of the report of the Competition Commission in relation to BSkyB's acquisition of a 17.9% stake in ITV plc and of the Secretary of State's final decision on that merger. The order rules that the proceedings be treated as proceedings in England and Wales and allows for mutual intervention by each party in the other's appeal. It also sets out the future progress of the case and provides for the parties to formulate and agree between themselves and, so far as applicable, ITV plc, arrangements for the disclosure of confidential information and documents relevant to the proceedings. The CAT has also published the transcript of the first case management conference, held on 11 March 2008, which considered these issues. A hearing has been fixed for 3 June 2008.
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  • CAT publishes transcript of hearing in Albion Water appeal
    On 3 March 2008, the Competition Appeal Tribunal published the transcripts of a hearing held on 14 and 15 February 2008 in the appeal by Albion Water Limited against a decision of the Water Services Regulation Authority finding that Dwr Cymru had not infringed the Chapter II prohibition of the Competition Act 1998. The CAT heard argument on the issue of whether Dwr Cymru's access charges were excessive and so amounted to an abuse of its dominant position.
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COMPETITION COMMISSION

  • Competition Commission publishes final report in Macquarie/National Grid Wireless merge
    On 11 March 2008, the Competition Commission published its final report on the completed acquisition by Macquarie UK Broadcast Ventures Limited of the National Grid Wireless Group. It has confirmed its provisional findings that the acquisition (by combining the only two UK integrated terrestrial broadcast transmission companies) would lead to a substantial lessening of competition in the provision of broadcast transmission services to television and radio broadcasters. It considers that this could lead to higher prices and lower service quality. Although, the Competition Commission is of the view that the most effective remedy would be divestment, in the light of the fact that the merger has taken place within the critical time frame of the digital switchover process, and divestiture could put this at risk, it has decided to consider a package of behavioural remedies. However, if the parties are unable to propose a package of remedies to its satisfaction, it will require them to implement the divestiture of NGW's entire MTS/NA business.
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Consultations and responses to consultations

OFCOM

  • Ofcom requires companies to sign up to complaints scheme and extends its probe into fixed-line mis-selling
    On 31 March 2008, Ofcom announced an industry-wide investigation into compliance with the obligation to be a member of one of the dispute resolution schemes which are designed to deal with consumer complaints. It has also extended its investigation into mis-leading sales and marketing practices of landline phone services.
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  • Ofcom consults on criteria for assessing when to adopt self-regulation or co-regulation
    On 27 March 2008, the Ofcom published a consultation document on revising its approach to assessing whether self-regulation and co-regulation are appropriate. Ofcom is proposing that an incentive-based approach should be applied to determining whether self-regulation and co-regulation is appropriate and it has also identified a number of criteria which should be taken into account in the design of self- or co-regulatory schemes.
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  • Ofcom publishes proposal for prevention of mobile mis-selling
    On 18 March 2008, Ofcom published its proposals for new rules to prevent mobile mis-selling. The proposals follow the publication of a code of practice for mobile phone operators in July 2007. When the code was published, Ofcom stated that it would expect a decrease in the number of complaints about mis-selling. If the expected decrease was not forthcoming, Ofcom would assess whether formal regulation was required to protect consumers. Although Ofcom considers that there have been some positive changes since the code was introduced, complaints continue at a high level. It has, therefore, proposed that conditions are introduced in order to allay its concerns about customers being given false or inaccurate information when they want to buy a mobile contract, and some cash back promotions that are offered by sales agents who then fail to reimburse the consumer. Communications providers must comply with the new conditions or face a penalty, which can be as much as 10% of relevant turnover. Ofcom intends to put these new rules into place by summer 2008 and has asked for views on its proposal by 29 April 2008.
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  • Ofcom publishes conclusions on 2007 review of ITV Networking Arrangements
    On 17 March 2008, Ofcom published its conclusions on its 2007 review of the ITV Networking Arrangements, the network arrangements between ITV Network Ltd (ITV) and the 15 regional Channel 3 licensees that co-ordinate the provision of a national television service capable of competing effectively with other broadcasters in the UK.
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  • Ofcom consults on revocation of statement on monitoring compliance with charge controls
    On 13 March 2008, Ofcom published a Notification under sections 48(2) and 86 of the Communications Act 2003 and an explanatory statement of its intention to revoke the regulatory statement describing its new framework for monitoring compliance with charge controls, which was published in December 2007. The statement contained Ofcom's decision to impose significant market power conditions on H3G, O2, Orange, T-Mobile and Vodafone in connection with the provision of information under the charge control compliance statement. Ofcom notes its view that there has been no material change to the relevant product markets since its publication of the March 2007 review of the wholesale mobile call termination market. Any comments on Ofcom's proposal should be submitted by 15 April 2008.
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  • Ofcom reviews regulation of market for directory information and directory enquiries data
    On 10 March 2008, Ofcom published for consultation a document setting out its assessment of the market for directory information and directory enquiries data, together with its proposals for revising the regulatory framework applicable to this market. In particular, Ofcom proposes to clarify General Conditions 8 and 19 to ensure that communications provider obligations reflect the requirements of the UK market and also to remove the requirement on British Telecommunications plc to supply printed directories of directory information under Universal Service Condition 7.
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OFGEM

  • Ofgem publishes initial consultation on electricity distribution price control review
    On 28 March 2008, Ofgem published its initial consultation on its next electricity distribution price control review, which will set the price controls for 2010 to 2015. The consultation sets out Ofgem's initial views on the issues that it has to address, the methodologies that it might use and the process it intends to follow.
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  • Ofgem makes transmission licence modifications in relation to compensation for disconnection
    On 28 March 2008, Ofgem published a statutory notice modifying the Pass Through Items (Special Condition D4) and Transmission Network Revenue Restriction provisions (Standard Condition D1) of the electricity transmission licences of National Grid, Scottish Hydro Electric Transmission and Scottish Power Transmission. The modifications provide a mechanism for the licensees to fund compensation payments to generators in the event of disconnection. The licensees have consented to the modification and it comes into force on 1 April 2008.
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  • Ofgem publishes statutory consultation on licence modifications to implement system operator incentives
    On 13 March 2008, Ofgem published a statutory consultation notice under section 23 of the Gas Act 1986 on proposed modifications to National Grid Gas plc's gas transporter licence to implement its final proposals for system operator incentives, which were published in February 2008 and will apply from 1 April 2008 for one year.
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Regulatory Decisions/Statements/Publications

OFCOM

  • Reduction in the underlying cost of regulation for 2008/9
    On 31 March 2008, Ofcom published its Tariff Tables for 2008/9, which sets out an overview of the fees due from industry for the coming financial year. Ofcom is funded by payments from broadcasting licensees and communications providers, as well as payments for the management of the UK radio spectrum.
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  • Ofcom wins major case against the sale of illegal radio equipment
    On 27 March 2008, Ofcom has won a major court case against a company selling illegal radio equipment, as part of its on-going programme to tackle illegal broadcasting and protect the radio waves from harmful interference. Two directors from Broadcast Warehouse Limited, based in Croydon, pleaded guilty to selling radio equipment that did not meet regulations designed to make sure that the equipment does not cause interference to other radio users.
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  • Ofcom directs application of electronic communications code to EU Networks Fiber and Mapesbury Communications
    On 26 March 2008, Ofcom published directions under section 106(3) of the Communications Act 2003 applying the electronic communications code to EU Networks Fiber UK Ltd and Mapesbury Communications Limited for the purposes of the provision by them of electronic communications networks to have effect in the UK.
    For further details please click on the relevant company name.
    EU Networks Fiber UK Limited
    Mapesbury Communications Limited

  • Ofcom statement on mobile communications onboard aircraft
    On 26 March 2008, Ofcom published a statement setting out its plans for introducing the use of mobile communications services on aircraft.
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  • Ofcom announces investigation into dispute resolution schemes
    On 25 March 2008, Ofcom announced that it has opened an own-initiative investigation into communications providers' compliance with General Condition 14.7. Under this condition, communications providers are required to implement and comply with an Ofcom approved independent dispute resolution scheme for their domestic and small business customers. Two dispute resolution schemes have been approved by Ofcom, these are the Office of Telecommunications Ombudsman and the Communications and Internet Services Adjudication Scheme. During the investigation, Ofcom states that it will monitor compliance with General Condition 14.7 across the industry and will target communications providers who are not members of an Ofcom approved scheme. Where Ofcom has reasonable grounds for believing that there has been a contravention of a General Condition, it can issue a notification under section 94 of the Communications Act. Under section 96 of the Communications Act, Ofcom may impose a penalty of up to 10% of relevant turnover for failure to comply with a contravention notice.
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  • Ofcom issues statement on reduction in ITV children's programmes
    On 18 March 2008, Ofcom issued a regulatory statement setting out its views on ITV1's proposal to reduce the amount of children's television programmes which it intends to broadcast in 2008. Ofcom considers that ITV has taken account of Ofcom's opinions in relation to the reduction of programmes (as it is required to do under the Communications Act 2003); however, it states that ITV should not further reduce its children's output pending completion of Ofcom's review of public service broadcasting. Ofcom will be putting forward options for securing delivery of children's and other public service content in the PSB review, the first phase of which will be published in April 2008.
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  • Ofcom publishes final determinations in the supply of directory information by BT
    On 10 March 2008, Ofcom published its final determinations in the disputes between BT and The Number (UK) Limited and BT and Conduit Enterprises Ltd. The disputes concerned BT's charges for certain information used by directory enquiry service providers. Ofcom's final determinations in these disputes mainly follow the revised draft determinations that were published in February 2007. Ofcom has, however, revised its assessment of some of the costs that BT may recover through its charges.
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  • Ofcom’s Broadcasting Bulletins
    Broadcast Bulletin Issue number 105 - 31|03|08
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    Broadcast Bulletin Issue number 104 - 10/03/2008
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OFGEM

  • Ofgem publishes Corporate Strategy and Plan 2008-13
    On 31 March 2008, Ofgem published its statement on its plans for the next five years. The strategy maintains Ofgem's seven themes but takes into account developing work on making the gas and electricity sectors more sustainable.
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  • Ofgem publishes revised guidance on impact assessments
    On 31 March 2008, Ofgem published a revised version of its guidance on its approach to conducting impact assessments, in accordance with its duty under section 5A of the Utilities Act 2000. The guidance has revised the previous version, published in June 2005, to take account of best practice, comments made by the Competition Commission in its ruling on the industry code modification appeal by E.ON UK plc under section 173 of the Energy Act 2004 and the Office of Fair Trading's guidance on competition assessments in regulatory impact assessments.
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  • Ofgem update on decisions on proposals to modify Balancing and Settlement Code
    On 28 March 2008, Ofgem published a letter explaining that its final decision on proposed modifications to the rules contained in the Balancing and Settlement Code, under which transmission losses are allocated to users of the electricity transmission system on a locational basis, will be further delayed. Having published its provisional decision on these modification proposals in June 2007, Ofgem announced in September 2007 that its final decision would be delayed until Spring 2008 as it intended to commission further analysis on the financial and environmental costs and benefits of the proposals.
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  • Ofgem calls for evidence in energy supply markets investigation
    On 27 March 2008, Ofgem published an open letter which calls for market participants, consumers and other interested parties to provide comments and evidence on a number of aspects of the workings of the energy retail markets. Ofgem is seeking this evidence as part of its investigation into the markets in electricity and gas for households and small businesses. Ofgem is, in particular, seeking information on customers' experience of the market, suppliers' market shares and switching rates for different customer groups, the competitiveness of suppliers' pricing, the relationship between retail and wholesale energy prices, potential barriers to entry and competitive conditions.
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  • Ofgem announces that it will not veto Interruptible Capacity Methodology statement
    On 27 March 2008, Ofgem announced that it has decided not to exercise its power to veto the Interruptible Capacity Methodology statement prepared by gas distribution networks in accordance with the new distribution network interruption arrangements which come into force on 1 April 2008. Ofgem has concluded that the ICM statement adequately informs users about how the new interruption tender process will work and it does not, therefore, object to any part of the statement.
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  • Ofgem publishes impact assessment in gas entry capacity baseline review
    On 20 March 2008, Ofgem published an impact assessment in its reconsideration of the baseline entry capacity figures for the entry points on the National Transmission System (NTS), as part of the transmission price control review.
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  • Ofgem publishes National Grid infringement decision
    On 19 March 2008, Ofgem published the decision that National Grid had abused its dominant position in the market for the provision and maintenance of domestic-sized gas meters. The publication of the decision follows Ofgem's announcement in February 2008 that it had imposed a fine of £41.6 million on National Grid in respect of its breach of the Chapter II prohibition and Article 82 of the EC Treaty.
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  • Ofgem publishes final approval criteria for redress schemes in the energy sector
    On 14 March 2008, Ofgem published its decision setting out its approach to approving redress schemes in the energy sector under the Consumers, Estate Agents and Redress Act 2007. Ofgem's decision takes into account BERR's consultation on the subject and Ofgem's review of the Energy Supply Ombudsman.
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  • Ofgem publishes report on electricity microgeneration
    On 11 March 2008, Ofgem published a report on the market for exported electricity from microgeneration. Ofgem has found that suppliers are offering fair value export offers for households that want to sell back surplus power. It does, however, consider that the market could be improved by better provision of information in order to help customers find the best deals and easier access to financial incentives.
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  • Ofgem publishes statutory consultation on modifications to NGG's gas transporter licence to implement LNG storage price control
    On 10 March 2008, Ofgem published a statutory notice under section 23(3) of the Gas Act 1986 to consult on proposals to modify the conditions of the gas transporter licence granted to National Grid Gas plc in relation to the National Transmission System. These modifications are necessary to implement the LNG storage price control review.
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  • Ofgem publishes consultation on reporting requirements applicable to gas distribution networks
    On 7 March 2008, Ofgem published an open letter setting out the detailed reporting arrangements that will apply to gas distribution networks from 1 April 2008, following the gas distribution price control review.
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  • Ofgem announces review of regulatory regime for energy networks
    On 6 March 2008, Ofgem issued a press release announcing its plans to review the regulatory regime for gas and electricity networks. The review is to last for two years and will consider whether the current approach will continue to deliver reliable, well run networks to customers and provide good services and reasonable prices. The review will consider the major challenges for the future, including new government renewables targets for 2020, proposals for greater power network interconnection in Europe, a greater emphasis on small-scale distributed generation and growth in gas imports. It will also take account of Ofgem's commitments to curbing the regulatory burden under Better Regulation principles. Ofgem points out that, since the review will not report until 2010, the work for the next price controls for electricity distribution (which are due to come into play in 2009) will not be affected. The framework for the 2009 price controls will be published shortly.
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  • Ofgem makes direction to delay introduction of NGG entry capacity substitution methodology
    On 4 March 2008, Ofgem made a direction to National Grid Gas plc under special conditions of its gas transporter licence in relation to the National Transmission System. The direction, which is made under paragraphs 10(a)(i) and (ii) of Special Condition C8D, sets a date of 6 January 2009 for NGG to prepare an entry capacity substitution methodology and submit it to Ofgem for approval and of 6 April 2009 for it to have the methodology in force. Ofgem has also relieved NGG of its obligation under paragraph 10(b) of Special Condition C8D to use reasonable endeavours to substitute entry capacity in accordance with the approved entry capacity substitution statement until that date. Ofgem explains that these deadlines have been extended from those set in September 2007 following a request by NGG, although Ofgem has not accepted the proposed timetable suggested by NGG.
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OFT

  • OFT publishes Annual Plan 2008-09
    On 31 March 2008, OFT published the final version of its Annual Plan 2008-09. This contains an explanation of the OFT's values, goals and principles and sets out the OFT's work programme for the next year in the context of four main themes: delivering high impact outcomes, being a centre of excellence and intelligence, working in partnership and building the OFT's internal capability. The OFT has also published, for the first time, a regulatory simplification plan, which sets out its initiatives to reduce regulatory burdens on businesses.
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OFWAT

  • Ofwat explains thinking on Overall Performance Assessment and regulation of consumer services
    On 28 March 2008, Ofwat published a letter setting out its thinking on the way that it uses the Overall Performance Assessment, a key part of its price reviews, and its wider approach to regulation of services to consumers.
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  • Ofwat publishes determination for wholesale access prices offered by Anglian to Aquavitae
    On 28 March 2008, Ofwat published a final determination setting the wholesale access prices offered by Anglian Water Services Limited to Aquavitae (UK) Limited. Aquavitae had requested such a determination having failed to agree access prices for supplies to four of Anglian's existing customers (having been granted a license under the water supply licensing regime). Ofwat determined the access prices in accordance with the statutory "costs principle".
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  • Ofwat publishes guidance on approach to 2009 price review
    On 27 March 2008, Ofwat published its final guidance on the framework for and its approach to setting price limits for customers' water and sewerage bills for the five years from 2010 to 2015.
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  • Ofwat consults on compliance codes guidance
    On 12 March 2008, Ofwat published for consultation the draft text of its Condition R compliance codes guidance. Condition of appointment R, applicable to all water and sewerage companies, requires them to draw up and use access codes, providing for access on reasonable terms, when allowing newly-licensed water suppliers to use their water supply systems. The companies must also draw up their own compliance codes, in accordance with Ofwat guidance, to ensure compliance with Condition R.
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  • Ofwat consults on regulatory issues arising from change of control of South Staffordshire Water
    On 7 March 2008, Ofwat published a consultation document seeking views on any regulatory issues that arise from the completed acquisition of South Staffordshire plc, the owner of South Staffordshire Water plc, by the Alinda Infrastructure Fund.
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  • Ofwat consults on regulatory issues arising from change of control of Southern Water
    On 7 March 2008, Ofwat published a consultation document seeking views on any regulatory issues that arise from the completed acquisition of Southern Water Capital Limited, the owner of Southern Water Services Limited, by Greensands Investments Limited.
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ORR

  • ORR publishes its Business Plan for 2008-09
    On 31 March 2008, ORR published its Business Plan for 2008 to 2009.
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  • ORR announces new policy for licence exemptions
    On 27 March 2008, ORR announced the introduction of a new policy and procedures for licence exemptions. It has published updated guidance for rail operators and new templates for licence exemptions and a new application form to reflect the conclusions reached following its consultation on this issue.
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  • ORR consults on review of use quota and use period provisions of Network Code
    On 12 March 2008, ORR published a letter seeking views on a review of Part J of the Network Code, which deals with changes to access rights, and, in particular, the provisions on use quota and use period criteria.
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  • ORR consults on proposed decision in relation to Crossrail track access option
    On 3 March 2008, ORR published for consultation its proposed decision on an application for a track access option for Crossrail passenger services on Network Rail's network. The ORR is proposing to allow a track access option for a period of over 10 years, due to the levels of investment involved, but intends to require a number of modifications to the proposed track access option including a buy-back mechanism, a “use or lose it” provision, a reduction in the number of paths per hour and making use of rights conditional on satisfying objective capacity and performance tests.
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POSTCOMM

  • Postcomm publishes Forward Work Plan for 2008-11
    On 28 March 2008, Postcomm published its Forward Work Plan for 2008-11. This sets out Postcomm's overall strategy and particular work priorities over the next three years.
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  • Postcomm publishes first submission to review of postal services sector
    On 27 March 2008, Postcomm published its first submission to the review of the postal services market, which is being conducted for the government. Postcomm argues in its submission that a number of issues in the structure and operations of Royal Mail need to be addressed in order to ensure that it is successful in the context of a liberalised postal market, that the universal service that it provides is protected without the need for significant tax payer investment, and that the mail market is attractive to new entrants.
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  • Postcomm modifies standard licence conditions
    On 20 March 2008, Postcomm published a notice under section 14 of the Postal Services Act 2000 modifying the conditions contained in the Standard Licences and in DHL Express (UK) Limited's licence, to take into account the changes to the licensing framework that were announced, in January 2008, in Postcomm's decision on amending the 2006 licensing framework. The licence modifications remove the requirements to pay an annual licence fee (for those operators with a licensed area turnover of under £10 million a year) and to maintain a financial guarantee or contractual arrangement to ensure that, in the event that they cease to operate, postal packets in the licensee's care will be delivered. This latter modification does not apply to all licence holders, as some have not yet agreed to it.
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Appointments

  • Ofcom makes Directors' appointments
     On 20 March 2008, Ofcom announced that it has appointed Jonathan Thompson as its new Director of Strategy. It has also appointed Campbell Cowie as a Policy Director in the Strategy and Market Developments team. Mr Thompson is currently Channel Four's Director of Strategy and Research. Mr Cowie is currently Time Warner ( Europe) Executive Director of Public Policy. Both appointments will take effect in June 2008.
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  • Ofcom board announcement
    On 6 March 2008, Ofcom announced that Stephanie Liston, a Non-Executive Director since 2005, will step down from the Ofcom Board on 31 March 2008.
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