Ofcom seeks European Commission approval for BT/ Openreach separation

Ofcom has announced that it will notify the European Commission of proposals to partially separate BT Group from Openreach, its internet infrastructure subsidiary.  But it stops short of the full structural separation that is being urged by BT’s competitors and consumers.

National regulatory authorities including Ofcom must conduct a national and European consultation on their proposed regulatory measures.  European Commission directorate general for communications DG Connect can recommend that they amend or even withdraw the planned measures.

Ofcom believes that an overhaul of the relationship between BT Group and Openreach would bring greater regulatory certainty and that once it is independent from BT, Openreach would be better placed to invest in its broadband network.

Ofcom’s July statement had said that Openreach would become a separate company from BT with an independent board. Ofcom’s latest statement maintains its position that a full structural separation could entail materially greater costs and risks than a partial one and could affect BT’s pension scheme.

The proposals have not been well received by BT’s rivals who are continuing to press for a full structural separation.  It may be asked how the current proposals would bring about a change in BT’s behaviour in a manner that enables other entities to set up their own networks.  Inspiration might alternatively be drawn from other jurisdictions where the focus has been on incentivising other operators to invest in their own new fibre networks such as by allowing them access to the incumbent’s infrastructure on regulated terms. 

Source: https://www.ofcom.org.uk/consultations-and-statements/category-1/strengthening-openreachs-independence

FCA has competition concerns in asset management

The FCA has published its interim report in its asset management market study.

The FCA says that the study raises a number of concerns about whether the asset management sector is driving value for investors as there is limited price competition for actively managed funds. 

The FCA has proposed a package of remedies that would increase transparency and help investors identify the best funds and prices. Most of the remedies relate to governance and price transparency and if implemented would entail changes in the way that asset management firms market and sell their products.

The FCA has also proposed making what would be its first ever market investigation reference to the Competition and Markets Authority over what it views as competition concerns in a relatively concentrated investment consultancy market. 

The FCA is consulting on both its proposed remedies and its provisional decision to refer investment consultancy services to the CMA.

The FCA asks for comments to be sent to assetmanagementmarketstudy@fca.org.uk by 20 February 2017. It intends to publish a final report and remedies in 2017.

Source:  https://www.fca.org.uk/publications/market-studies/asset-management-market-study

Court of Appeal dismisses competition defence in Premier League case

The Court of Appeal has dismissed an appeal against a judgment in favour of the Football Association Premier League (FAPL) relating to the commercial use of foreign bought domestic decoder cards.

The defendant in this case was a pub landlord who used a decoder card which he had bought from a Danish reseller which was a licensed FAPL broadcaster for domestic purposes.  As a result, the reseller’s customers were not authorised to use the cards for commercial purposes such as a broadcast from a public house in the case of the defendant.

The Court of Appeal held that the restriction on the use of the cards for domestic or commercial purposes did not amount to an infringement of competition law.  The Court of Appeal also rejected the claim that the restriction on the use of the cards for domestic purposes was caused by territorial restrictions on the use of the cards.

The defendant relied on EU case law that had held that national legislation which prohibited the importation of foreign decoding devices was a restriction on the freedom to provide services under Article 56 of the TFEU (joined cases C-403/08 and C-429/08 Football Association Premier League Ltd and others v QC Leisure and others; Murphy v Media Protection Services Ltd).  However, the Court of Appeal held that the right on which FAPL relied in this case – the delimitation on the use of the cards for domestic purposes – was not of itself a restriction on competition between Member States.

The Court of Appeal also dismissed the argument that the defendant should be ordered to pay the difference between the commercial and domestic licensing rates as this would amount to a retrospective licence of the copyright works.

The Football Association Premier League Ltd v Luxton [2016] EWCA Civ 1097 (09 November 2016)

Ofgem accepts commitments from SSE

Ofgem has accepted binding commitments from energy supplier SSE to address concerns that it may have abused its dominant position in the electricity connections market. 

The commitments conclude a two year investigation where Ofgem provisionally noted that SSE was likely to hold a dominant position in the markets for non-contestable connection services for connections to its own networks.  Ofgem had concerns that by providing connections to independent network operators or independent connections providers on terms that were different to those that it offered to its own subsidiaries it would place those rivals at a competitive disadvantage.

SSE has committed to an overhaul of its pricing policies and internal restructuring to reduce the risks of anti-competitive conduct in the future. It will also conduct regular compliance reviews which will be externally audited.

As a result of accepting these commitments Ofgem will not reach a formal view on whether or not SSE has committed an infringement of competition law.  SSE must implement the remedies by 3 May 2017, being six months from Ofgem’s acceptance of the commitments.

According to SSE, the commitments will require it to make substantial changes within its operations although they probably fall short of what competitors were hoping for. 

The commitments echo similar themes to those raised in competition investigations in the energy sector by the European Commission, where the vast majority of cases have been resolved using commitments under Article 9 of Regulation 1/2003.

CMA gives green light to railway merger with behavioural commitments

The Competition and Markets Authority has cleared the completed acquisition by Arriva of the Northern Rail franchise after a Phase 2 inquiry and conditional on the parties’ commitments to fare caps on four routes.

The CMA concluded that the acquisition gave rise to a substantial lessening of competition (SLC) on three rail flows (Leeds to Sheffield, Wakefield to Sheffield and Chester to Manchester).

The CMA had provisionally identified a further problematic overlap (Chester to Stockport) but finally ruled out competition concerns after a further investigation. This shows the scope to move the CMA away from its provisional assessment following the submission of further evidence in the course of a Phase 2 investigation.

The CMA concluded that the merger situation arising from the award of the rail franchise did not give rise to an SLC in relation to the award of rail franchises and any overlapping public transport networks and bus/ rail flows. It did not consider that the parties had sufficient incentives to raise bus fares on these flows as a result of the merger.

To address the SLC on overlapping rail flows, the CMA has decided to impose fare caps on the unregulated fares on the overlapping rail routes of Northern Franchise and Arriva rail.  Generally, commitments on conduct are more prevalent in merger cases involving transport networks than structural remedies as it can be easier to monitor such remedies in a regulated environment.

The methodology that the CMA has adopted in this case may be of interest to future bidders for rail franchises as they seek to navigate the possible competition issues.

CMA Final Report, 2 November 2016