Keeping competition healthy in the energy supply market
Ofgem has given a collective fine of £870,000 to two energy suppliers for being in breach of the Competition Act. This is the first time that suppliers have been financially penalised for breaching competition law, proving that Ofgem are prepared to use their powers when they deem it necessary.
Economy Energy and E (Gas and Electricity), as well as consultancy firm Dyball Associates, were found to have been involved in anti-competitive behaviour through colluding to avoid competing for customers. An argument was made that they were a combined family enterprise, but this was rejected.
Our associate partner in the commercial disputes team, Tim Speed, explores what this could mean for other suppliers with similar arrangements:
Putting the customer first
This significant financial penalty highlights Ofgem’s determination to put the customer first. By clearly demonstrating its expected standards, Ofgem is showing that its overall strategy places customers’ rights to find better deals at the forefront. Without ‘healthy competition’, customers could be trapped in deals with their supplier.
Ofgem’s activity over the last 18 months has focused on penalising suppliers who provide poor customer service and who demonstrate anti-competitive behaviour. This is likely to continue and it is expected that Ofgem will continue to penalise suppliers they find to be in breach of competition law, and will continue to tighten up the energy supply market in the years to come.
Considering existing arrangements
Suppliers who are currently involved in arrangements that potentially reduce ‘healthy competition’ in the market must consider their next steps carefully. Ofgem appears to be closely monitoring such activities and have proven that they will do whatever is necessary to encourage competition and improve customer service.
Ofgem has laid down a marker. The £870,000 penalty should deter other suppliers from entering into, or continuing, anti-competitive agreements, but whether it will remains to be seen.