This paper, available here, provides an overview of European Commission (“EC”) and European national competition authorities’ (“NCAs”) practice as regards the application of competition rules to unilateral conduct in the energy sector. It covers more than 120 cases, including national court judgments and investigations up to June 2019. While the article divides the various practices into 19 different sections, I will do so as follows:
In the introduction, the author summarises European and national approaches, as well as recent developments.
The 2007 EU Energy Sector Inquiry prompted much enforcement of Art. 102 TFEU in the energy sector. Most of enforcement concerned traditional foreclosure practices in relation to infrastructure capacity, access to the infrastructure, capacity hoarding and withholding of generation capacity. Other cases have dealt with new types of abuse, such as strategic underinvestment and market manipulation, and there have also been cases on excessive pricing. Energy markets remain a priority for the European Commission. Recent developments include closing investigations against the Romanian gas transmission operator, Gazprom, and the German power grid operator TenneT through commitments.
At national level, while several NCAs have addressed similar issues to the European Commission, they have also looked at different concerns, with a focus on exploitative abuses. It is remarkable that many national cases start with national energy regulator (“NER”) referrals to the NCA, and that NCAs often consult NERs on the appropriateness of proposed commitments. There is often a high degree of cooperation between competition and sectoral regulators.
This institutional alignment has substantive reflexes, such as the parallel application of Art. 102 TFEU and Art. 5 of the Regulation on Market Integrity and Transparency (“REMIT”), which prohibits market manipulation in wholesale energy markets for electricity and gas. For example, the Italian Competition Authority (“ICA”) and the Italian Energy Regulator (“IEA”) opened parallel investigations into the energy supply/bidding practices of ENEL and Sorgenia, two Italian electricity generators with power stations in Southern Italy, for possible violation of Art. 102 TFEU and Art. 5 of REMIT, respectively. The ICA closed its antitrust proceedings with ENEL through a settlement, and archived its investigation into Sorgenia. However, proceedings are still ongoing before the IEA.
On the other hand, there are ongoing cases in Italy and Slovakia on whether competition authorities can intervene if there is a sector specific energy regulation. This is an issue that has been addressed at EU level in the telecoms sector, which concluded that the European Commission could intervene even if there had been earlier ex ante telecoms regulator decisions on similar issues. At the national level, the Italian national courts have emphasised that what can be required under competition law has to take into account sector specific rules.
The paper then turns to discussing a number of practices akin to refusals to supply.
A particular area of intervention has concerned access to data/infrastructure. Cases focus not just on restrictions to access to physical infrastructure – such as power grids, clearinghouses and transmission networks – but also to key assets, including customer data, required for access to a market. This latter situation is particularly interesting. For example, the French competition authority issued interim measures ordering GDF Suez to grant its competitors access to certain customers’ data contained in the historic file that GDF Suez held as the electricity incumbent. In line with recommendations of the sectoral regulator, this data – i.e. the customer name and address, and the technical characteristics of her consumption – was strictly necessary to ensure effective competition among suppliers. The French competition authority considered that the database and the marketing resources that GDF possessed as a result of its earlier status as protected monopolist were necessary tools for new entrants to develop their business; and that GDF’s use of the regulated tariff database to market its competitive offers was also incompatible with competition on the merits.
One interesting related theory of harm is strategic underinvestment. Under this theory, a dominant essential facility holder can be under an obligation to take all possible measures to remove the constraints imposed by lack of capacity, and to organise its business in a manner that makes a maximum amount of capacity of the essential facility available. Reflecting the limited nature of such obligations under the abusive refusal to supply doctrine, these cases involve specific circumstances, where it appears that a specific demand is identified and not met. A possible remedy for such infringements is for the company to offer to build more infrastructure to meet competition concerns.
A couple of cases also interpreted long-term capacity bookings of transmission networks as a form of refusal to supply. In these cases, the booking on a long-term basis of the vast majority of available capacity at the main points of entry into a gas transmission network, or of almost the entire transport capacity on its own network on a long-term basis, effectively precluded competitors from entering into adjacent markets. Other capacity access and hoarding/supply issues have also triggered competition intervention. The relevant conducts have involved overbooking or pre-emptively booking terminal or network capacity, refusing to grant access to capacity available on the transport network or offering capacity in a less useful manner (“capacity degradation”).
Another types of cases focus on a variety of foreclosing practices.
A type of abuse investigated by the European Commission and NCAs in recent years concerns long-term and exclusive supply contracts in the downstream gas and electricity sectors. Such contracts can include a variety of clauses – such as exclusive purchasing obligations; bans on purchases from competitors; price increases in case of purchases from competitors; and rebates conditional upon the renewal of the supply agreement – which are anticompetitive because they unlawfully foreclose competitors. A particularly interesting type of foreclosing practice concerns conduct that prevents transparency and access to information – usually concerning interconnection or access points to networks; and its obverse, i.e. using information obtained as a result of a dominant position – e.g. a customer database or technical information – to obtain unrelated competitive advantages. It should be noted that different types of foreclosing practices may overlap with one another – e.g. the long-term capacity bookings of transmission networks can be categorised both as a refusal to supply and as an unlawful contractual arrangement.
In addition, a large number of exploitative abuses have been punished through the years.
One such abuse consists in the withholding of generation capacity with a view to raising electricity prices to the detriment of consumers. Such practices may be complemented by a medium and long-term strategy of deterring actual or potential competitors from entering the generation market (e.g. by manipulating the relevant energy balancing market), and also raise questions of possible infringement under REMIT, the EC Regulation on Market Integrity and Transparency. A number of other pricing practices have been sanctioned which typically involve the manipulation of the specific characteristics of energy markets. This may include seeking to loose bids to supply energy in spot markets, so as to benefit from a regulatory right to provide energy in local markets where shortages arise at higher prices; or withholding capacity of some sources of energy, so as sell energy from more expensive sources.
More notably, it includes margin squeeze, particularly when this arises from excessive prices charged by incumbents who are present at more than one level of the supply chain, with the effect of preventing even an equally efficient competitor from competing effectively on the downstream market. Relatedly, a number of pure excessive pricing cases have been brought against incumbents, particularly in Germany and the Nordic countries; and a number of companies have been sanctioned for imposing unfair conditions on their customers.
Other abuses by dominant companies have consisted in setting unnecessary conditions governing access to a transmission network or imposing unrelated obligations – e.g. requesting the purchase or sale of infrastructure. Relatedly, there have been a number of decisions in which NCAs held that it was an abuse of dominance to make the supply of gas or electricity conditional upon certain payment terms, such as the payment of bills in arrears, or due by a different customer supplied at the same connection.
Competition authorities have also been concerned about market partitioning infringements.
Such practices tend to be prohibited on the ground that they create artificial barriers that prevent effective competition across the relevant geographic market, limit a competitor’s ability to enter or compete effectively, or that allow a company to extend its monopoly to other markets by, for example, favouring its subsidiaries. In addition, traditional concerns against market partitioning threatening the single market imperative also seem to be behind some of these decisions, even if many were adopted by national authorities against practices partitioning regional markets.
This is an extremely comprehensive review, and bound to be a primary source for anyone seeking to understand competition enforcement in the energy sector in Europe. In addition to establishing a taxonomy of abusive practices, the paper also looks at infringements in certain sectors – e.g. street lighting, metering services or oil – irrespective of the nature of the abuse. It also discusses the Greek lignite saga, which led to the development of principles governing liability for State measures hampering the development of competition/
A number of things jump out. First, it puts the lie to assertions that certain types of infringement are only pursued exceptionally in Europe – e.g. refusals to supply, excessive pricing. Even though the review is limited to a specific economic sector, it is striking how often conducts amounting to these types of infringement have been investigated. Secondly, the sheer number of commitments that competition authorities and energy companies – mainly former State-owned incumbents – have entered into is staggering. While the large number of competition cases described in this piece lends support to the argument that the liberalisation of the energy market in Europe was poorly designed, the clear preference for market structuring commitments is in line with the related argument that competition law is being used to rectify those design defects.