Water Collective Proceedings: no certification, but not a total wash-out
On 7 March 2025, the Competition Appeal Tribunal (the “CAT”) refused to certify a novel £1.5 billion class action against six water companies accused of under-reporting sewage discharges. However, the ruling focused on a technical jurisdictional issue rather than rejecting the claims on their merits. Notably, the CAT confirmed that it would have certified the claims if not for a statutory exclusion. This suggests future claims against regulated monopolies may find more success if structured as standalone competition law abuses rather than as challenges to regulatory compliance.
The claims
The proposed class representative, Professor Roberts, brought claims against six water companies, alleging that they had under-reported pollution discharges in England’s waterways. The claims were based on the regulatory regime governing these companies. Under that framework, Ofwat (the Water Services Regulation Authority) sets performance targets for water companies, with financial penalties for excessive pollution discharges.
The core allegation was that, by under-reporting pollution incidents, the water companies had avoided penalties and maintained artificially high prices, causing harm to consumers. Professor Roberts argued that this constituted an abuse of dominance under Chapter II of the Competition Act 1998. The claims sought up to £1.5 billion in damages, representing the alleged overcharges paid by affected consumers.
Legal basis for refusal to certify the claims
The CAT’s refusal to certify the claims was based on section 18 of the Water Industry Act 1991 (“WIA”), which limits remedies for breaches of the reporting provisions to (1) those expressly provided by statute, or (2) those available at common law independent of the statutory contravention (as established in Manchester Shipping Canal v United Utilities: see our previous article here).
On the first point, the parties agreed that there was no express statutory provision for a remedy for breach of the reporting provisions. On the second, the CAT noted that Professor Roberts’ claim for abuse of dominance was a claim at common law. However, since the claim relied on the determination of payment levels under the statutory regime, the CAT held that there was no way to separate the claim from the statutory regime. Accordingly, the CAT held that the claim was not permitted by virtue of section 18 of the WIA, and therefore did not certify the proceedings.
The CAT leaves the door open for similar claims
Whilst rejecting the claims on narrow statutory grounds, the CAT made important findings on other aspects of the claims. Notably, it expressly rejected the water companies’ argument that competition law did not apply to them because they each operated under a statutory monopoly to all residential customers in their area, with no scope for competition. The CAT highlighted the inequity of allowing business customers (which operate in a liberalised market for water services) to bring claims in competition law, while preventing residential customers from doing so. That, the CAT held, “would contradict one of the basic purposes of competition law, which is to promote the welfare of consumers”.
Crucially, the CAT indicated it would have reached a different overall conclusion if customers were left without any prospect of compensation. However, during the hearing, Ofwat told the CAT that it has the power to direct a water company to reimburse customers. We understand that this power remains untested, and, as the judgment notes, Ofwat had previously denied having such a power.
If the CAT had not excluded the claim, it confirmed that it would have certified the claims, as Professor Roberts met all other certification conditions.
Comment
Given the narrow grounds on which certification was refused, and the CAT’s express statement that – but for the statutory exclusion – it would have granted certification, it may be expected that Professor Roberts will consider appealing the judgment. If appealed, the Court of Appeal would need to determine whether the CAT correctly interpreted section 18 of the WIA as excluding competition law claims that are closely linked to the statutory regime. This could have significant implications for how competition law interacts with sector-specific regulatory regimes more broadly.
It is notable that the CAT appears to have taken Ofwat's assertions about its power to order water companies to pay compensation to consumers at face value, despite acknowledging uncertainties about the extent of these powers. This raises questions about the evidential threshold for establishing regulatory effectiveness as a factor in competition proceedings. The CAT’s reliance on Ofwat’s representations invites comparison with its treatment of regulatory powers in other contexts. In Advanz Pharma & Others v Competition and Markets Authority [2023] CAT 52, a pharmaceutical excessive pricing case, the CAT rejected arguments that the Department of Health had sufficient countervailing buyer power through its regulatory mechanisms, finding that the regulator lacked the ability to effectively restrain prices.
While the immediate result prevents these specific claims from proceeding (subject to any appeals), the CAT's analysis of competition law's application to statutory monopolies provides a valuable roadmap for other potential collective actions. By confirming that competition law applies to water companies despite their statutory monopoly status, and by clearly identifying the statutory limitation that proved fatal to these claims, the CAT has highlighted both the opportunities and pitfalls in seeking to hold regulated utilities accountable through competition law.