The Passing-on Defence Should be Recognised in Legislation

(by Peter Whelan) The recent publication by the Department of Business, Innovation and Skills of Private Actions in Competition Law: A Consultation on Options for Reform acknowledges that considerable legal issues remain to be resolved concerning private enforcement of competition law in the United Kingdom. One of these issues is the exact status of the passing-on defence (i.e., the defence that allows an infringer to escape liability in a damages action by a given purchaser to the extent of any pass-on by that purchaser). The lack of certainty concerning the status of this defence acts as an obstacle to the initiation of private actions. This problem should be overcome by the express acknowledgment of the passing-on defence in legislation.

An Unpopular Solution to the Private Enforcement Problem

(by Andreas Stephan) The UK’s Department for Business is currently consulting on a package of reforms aimed at making it easier to bring private actions for damages against firms engaged in anti-competitive behaviour. Compensating consumers harmed by cartels and abuse of dominance is something competition authorities throughout Europe feel is important. However, the price to pay for private actions is the potentially enormous transaction costs of legal representation and economic evidence, coupled with the danger of scuppering public enforcement by undermining the leniency programme. One solution not considered in the current debate is to internalise compensation claims within competition authorities, drawing awards from public fines.

Too High a Price for a ‘Fairer’ Outcome? Non-Discrimination Clauses in Retail Energy Regulation

(by Catherine Waddams) Ofgem is considering renewing its undue discrimination clause requirements in residential energy markets.  This is not a good idea from a competition perspective. Evidence is accumulating to suggest these requirements have dampened competition in exactly the way predicted by a CCP research paper.[1] The history of electricity privatisation left a strong local incumbent in each geographic area and effective competition requires them to compete out of their own area. The ability to cut prices in a target market is precisely what is needed to attract customers from a local incumbent.  The regulator’s non-discrimination clauses introduced in 2009 have limited the allowable price differential a firm offers in and out of its home area.  The evidence suggests that this has been achieved by raising out-of-area prices and not by cutting in-area prices.  The non discrimination clauses may have produced a ‘fairer’ outcome but only at the cost of higher prices for consumers.