Ofwat consults on approach to mergers

Posted: Friday 12th June 2015

Ofwat has published a consultation on its proposed approach to mergers under new rules, which aim to reduce barriers to companies merging which provide benefits to customers.

There are rules in place for water mergers which recognise the importance of Ofwat being able to compare information across companies to keep down prices and drive better service. Up to now, qualifying company mergers were automatically referred to an in depth Competition and Markets Authority (CMA) review.

The Water Act 2014, when fully enacted, will make changes to these rules, giving Ofwat a greater role. Ofwat will provide an opinion to the CMA on:

the impact of a merger on Ofwats ability to make comparisons and relevant customer benefits; and

legal agreements with companies (undertakings in lieu) which would remedy, mitigate or prevent the prejudicial effect on Ofwats ability to make comparisons.

This could result in there being no need for an in-depth CMA review.

Ofwats consultation sets out its principles and approach to assessing mergers, including how it will assess the impact on its ability to make comparisons.

Keith Mason Senior Director of Finance and Networks said:

We welcome the changes to the rules on water mergers in the Water Act 2014. Our increased role at an early stage in the process will provide greater certainty around potential mergers and reduce the burden on mergers which provide benefits to customers. Yet it still ensures that customers remain protected where this is not the case.

Ofwat will publish its final approach to assessing mergers in September.

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