• The New Merger Clearance Regime for Water Companies
  • August 27, 2004
  • Law Firm: Watson, Farley & Williams - New York Office
  • Both the DTI and the Competition Commission ("CC") have gone out to consultation over elements of the new regime that is scheduled to start applying to mergers between companies engaged in supplying water services as from the end of 2004. The DTI's consultation concerns the method of calculating turnover for the purposes of determining whether or not a water deal qualifies for review.

    http://www.dti.gov.uk/consultations

    Interested parties have until 28 October 2004 to respond. The second consultation, which is unarguably the more significant of the two, concerns draft guidance produced by the CC which sets out, in some detail, the approach the CC proposes to take with regard to water merger references to be made to it under the new regime from the end of 2004 onwards:

    http://www.competition-commission.org.uk/rep_pub/consultations/current/index.htm

    Comments on the second consultation are requested by 29 October 2004. There has been an air of expectancy in the UK's water world ever since the CC took a benign view of the First Aqua/Vivendi transaction, only to be controversially overruled by the then Secretary of State, and was then given final decision-making powers under the Enterprise Act 2002 for water deals, subject to the necessary additional legislative adjustments. The CC made it clear in First Aqua/Vivendi that it does not necessarily share the water regulator's view that any further concentration in the water market will necessarily interfere with Ofwat's ability to regulate water companies effectively. The CC gives a hint in its draft guidance that its views have not changed in the interim when it states: "The Commission made need to consider whether it would be practicable and cost-effective for the DGWS to use alternative methods of comparison to offset partially or wholly the effects of the merger on his comparisons through developing comparative methods which are les sensitive to the number of comparators than those currently used". For the first time in a generation there would appear to be scope for concentration in the water market. Do not be surprised, therefore, if there is a flurry of bid activity just as soon as the new regime opens for business.