Competition regulators are being deterred from flexing their muscles by a lengthy and uncertain legal process, the UK’s spending watchdog warned today.

The National Audit Office’s (NAO) review of the UK competition landscape said regulators had made “limited” use of powers amid prospects of drawn-out, expensive probes as well as likely appeals by well-resourced opponents to protect commercial interests.

“There is a risk that the length, and uncertainty of outcome, of the enforcement process in its entirety may reduce the appetite of the authorities for using their competition enforcement powers,” the NAO said.

While the Office of Fair Trading is the UK’s main competition watchdog, other regulators include Ofgem for energy companies, and the Water Services Regulation Authority.

Regulators can refer markets to the Competition Commission for investigation under the 2002 Enterprise Act, but since the law came in their have been just 10 referrals – far below the four every year anticipated.

This is a concern because the Competition Commission claims consumers benefited to the tune of £295m from market investigations in 2008-09.

A perceived loss of control by the regulator as well as worries over the outcome for the industry – such as a possible investment freeze until the end result is known – was also behind the lack of enforcement action, the NAO said.

This means there is little competition case law to back up an effective system, it added.

The NAO said regulators should “actively consider” using their referral powers on a “regular basis” and intends to report to Parliament on how often they use the option.

NAO head Amyas Morse said the UK competition framework was “highly regarded around the world”.

But he added: “There is evidence that industry regulators have not generated the level of competition cases necessary to develop the body of case law and experience that is the hallmark of a modern competition regime, and that potential benefits for consumers are not being fully realised.”