Class action tsunami: water companies face £1.5bn claim for allegedly misleading customers and regulators

Steve Gummer, Jonathan Blunden and Oliver Slater discuss the landmark Competition Appeal Tribunal class action brought against six of England’s largest water companies.

The Competition Appeal Tribunal (“CAT”) is this week considering a landmark class action brought against six of England’s largest water companies. The case will have implications for Ofwat, water companies and customers alike. Our regulatory and competition experts consider what we know so far and what lies ahead for the parties and billpayers.

Case Overview

The landmark class action brought by Professor Carolyn Roberts marks the CAT’s first class action regarding alleged breaches of environmental duties. The claim targets six water companies, accused of providing misleading information to Ofwat and the Environment Agency. The companies involved are Thames Water, Severn Trent Water, Northumbrian Water, Anglian Water, Yorkshire Water and United Utilities.

The claim alleges that, as a result of the companies providing Ofwat and the Environment Agency with misleading information, Ofwat has allowed the companies to charge billpayers more than they otherwise would have been able to. The claim is brought on behalf of twenty million customers, who may have been overcharged by between £800 million to £1.5 billion. The first hearing in this important case is before the CAT this week (w/c 23 September 2024). A further hearing will take place in January 2025 if necessary. If the CAT issues the collective proceedings orders sought by the applicant, the case can proceed to full trial.

Regulatory Background

Under the terms of their Environmental Permits and licences, water companies have certain obligations to inform regulators of wastewater discharge from treatment works.

As part of its economic regulation of the water industry – carried out pursuant to price reviews – Ofwat sets certain performance commitments in relation to the discharge of wastewater that affects the environment. If companies underperform against these commitments (in other words, if they cause excessive pollution), Ofwat can impose financial penalties. The impact of these penalties limits the amounts undertakers can charge customers.

As such, the applicant claims that, in providing misleading information to the regulators, the water companies have prevented Ofwat from having access to information which would have lead to lower charges for customers. It is claimed that customers have been historically overcharged.

It is argued that the failure to provide accurate information is an abuse of each undertaker’s dominant market position.

Legal Background

Section 18(1) of the Competition Act 1998 (“CA98”) provides that:

“… any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom.” (emphasis added)

This is otherwise known as the “Chapter II Prohibition”. The Chapter II Prohibition aims to safeguard competition.

Professor Roberts claims that the water companies have breached the Chapter II Prohibition by misleading Ofwat. In other words, that the water companies have abused their dominant positions in relevant markets.

Water companies are regional monopolies. English and Welsh customers cannot choose their water company. Customers are tied to the relevant company for their region.

The CAT will be required to consider a number of important competition law issues:

1. What is the relevant market? The CAT will determine this question by reference to the relevant product and geographic markets. In particular, is the relevant geographic market each monopolised region or a wider area?
2. Do the water companies hold a dominant position in the relevant markets? Dominance is typically assessed by reference to an undertaking’s ability to “prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.”^[1] This is typically the case where the relevant undertaking has a large market share.
3. If the water companies do hold a dominant position on the relevant market, have they abused that position in providing misleading information to Ofwat? Roberts contends that the water companies significantly or systematically underreported the number of sewage discharges caused by sewer overflows and their treatment works for the past decade, resulting in higher charges being levied on billpayers. The CAT will consider whether such conduct amounts to an abuse.

If the CAT finds that the water companies have abused a dominant position, the question will become who has been overcharged and by how much. Those questions will determine potential damages payable to billpayers.

The CAT will also be required to consider the class action elements of the claim. The US-like class action is the first of its kind to be brought against water companies in England. Following amendments made by the Consumer Rights Act 2015 – which sought to bolster and protect consumer rights and interests across a range of industries – such collective proceedings can be brought before the CAT under section 47B CA98. This legislation allows an individual to represent millions of consumers under a single claim. The claim works on an opt out basis, where customers are automatically included in the litigation, but can opt out if they wish. The CAT will be required to consider whether Professor Roberts’ claims are eligible for inclusion under the collective proceedings regime. If the CAT issues the collective proceedings orders sought, the case can proceed to full trial.

Discussion and what’s next

This novel case touches on interesting and important questions of competition law, consumer protection law and economic regulation. The case poses interesting questions of interrelation and overlap between the regimes. The claims will be of interest, not only to the parties, but also to Ofwat and billpayers. The claims will also be watched closely by participants in other industries – is there scope for similar collective proceedings elsewhere?

The CAT is hearing the claims this week (w/c 23 September 2024) and has another week set aside in January 2025 if required. We’ll be keeping a close eye on developments.

Steve Gummer and Jonathan Blunden are Partners and Oliver Slater is a Junior Associate at Sharpe Pritchard LLP.

This video is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it.

[1] Case C-27/76 United Brands Company and United Brands Continentaal v Commission