The Competition and Markets Authority (CMA) will assess whether the merger between SSE and Npower could significantly reduce competition in the supply of energy to domestic customers in the UK.
The two companies propose to create a new company to serve their combined domestic retail customers.
The CMA said in a statement that it has been discussing the deal with SSE Retail and Npower since it was announced in November. It said: “Now that the companies have provided the information necessary to start an investigation, the CMA has launched its review.”
SSE began talks with the CMA over the planned merger of its supply business with Innogy’s Npower in January, it revealed in a third quarter trading update.
This followed pressure from the Business, Energy and Industrial Strategy (BEIS) select committee in December, when it called for the CMA to probe the tie-up between the second and sixth largest energy suppliers.
In response to today’s news, a spokesperson from BEIS said: “The CMA is independent of government and we will monitor its investigation’s progress.”
But even before the BEIS select committee first put pressure on the CMA in December, the merger was not without opposition – in November, the GMB said the proposed deal would lead to a ‘private cartel’ and needless price hikes.
Questions surrounding the merger are many, and include the strategy behind the move, whether the spark of a merger spree will condense the big six into the “big three”, and how will the tie-up affect the competitive dynamic of the much-maligned domestic energy market.
The CMA will investigate the merger on competition grounds, in line with its merger guidance.
The deadline for the initial decision is 26 April 2018.