WIREDGOV

Ofwat has today opened a consultation on proposals to accept binding commitments from Severn Trent plc.

Severn Trent plc has offered to divest Severn Trent Laboratories in response to a complaint to Ofwat that Severn Trent Laboratories Limited had engaged in anti-competitive pricing practices contrary to the Chapter II Prohibition (Abuse of a dominant position) of the Competition Act 1998.

The complainant alleged that these pricing practices had been enabled by the structural links between Severn Trent Water Limited and Severn Trent Laboratories Limited.

The consultation, which runs for four weeks from 8 August 2012, seeks views from interested parties on the appropriateness of Ofwat accepting the commitments offered by Severn Trent PLC.

Notes to Editors:

1. Ofwat (The Water Services Regulation Authority) is the economic regulator of the water and sewerage sectors in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them.
2. Statutory water undertakers (in England and Wales) and water providers (in Scotland and Northern Ireland) are required by law to meet specified requirements in respect of the collection and analysis of samples of the water they supply to ensure that drinking water quality meets required standards. This includes a requirement to have the samples analysed by a laboratory which has a system of quality control that is subjected to independent oversight.
3. Severn Trent Laboratories Ltd provides water analysis services to Severn Trent Water and other water companies.
4. On 21 April 2010 Ofwat received a complaint alleging that Severn Trent Laboratories Limited (Severn Trent Laboratories) had won contracts to supply water analysis services to South Staffordshire Water Limited and Yorkshire Water Limited by pricing below any relevant measure of cost.
5. Ofwat considered that it had reasonable grounds for suspecting a breach of the Chapter II Prohibition (Abuse of a Dominant Position) under section 25 of the Competition Act 1998 and opened a formal investigation into the alleged conduct.
6. Ofwat’s formal investigation commenced in December 2010. Ofwat’s initial investigation focused on the allegations set out in the complaint, but with a specific emphasis on whether the structural links between Severn Trent Water’s core regulated business and the Severn Trent Laboratories water analysis business, could have facilitated the leveraging of substantial market power from Severn Trent Water’s core regulated business into the water analysis market.
7. The consultation paper will be available on the Ofwat website: www.ofwat.gov.uk.
8. Responses should be addressed to: Mala Shetty (mala.shetty@ofwat.gsi.gov.uk)
9. Media enquiries to Ofwat Press Office: Harbinder Babra on 0121 644 7616.