CMA gives provisional clearance to SSE-Npower merger

The Competition and Markets Authority has provisionally cleared the combination of SSE and Npower, unconditionally and following a Phase II review.

The merger combines the supply activities of SSE Retail and Npower but does not extend to other aspects such as energy and distribution.

The second stage probe was launched on the basis of concerns that the transaction would lead to price increases in standard variable tariffs.  However, the CMA does not consider that such concerns are substantiated as the parties are not closest competitors.  This finding is interesting in light of the CMA’s 2014-2016 energy market reference which found that customers on standard variable tariffs were less likely to switch.  During the merger review the CMA found that the proportion of customers on such tariffs has now decreased. Those that do switch were found not to switch between the merging parties.

In the 2017-2018 period the CMA has cleared five transactions at Phase II without remedies.  Two transactions have been cleared with structural commitments. 

Against this background, merging parties in high value more complex deals may well consider that it is in their interests to fast-track to Phase II where the issues can be looked at more closely.  They will have to weigh up the costs and the benefits of trying to secure faster clearance at Phase I potentially subject to remedies against taking their chances with Phase II, where they may come through without remedies.  The CMA is expected to issue its final report by 22 October 2018.