Transcript International Competition Law University of Trento MIM course
European Commission Decision Relating to proceeding under Article 82 - EC Treaty
(Case COMP/39.402 – RWE Gas foreclosure) Prof. Vezzoso Simonetta Master of International Management University of Trento Neda Memari WS 2010/11
Table of Content
I.
Subject Matter II. The Addressee III. Procedural Steps Under Regulation IV. Preliminary Assessment V. Proposed Commitments VI. Proportionality of the Final Commitments VII. Conclusion
Subject Matter
• Decision is Addressed to RWE AG • Preliminary assessment according to article 82 (now 102) EC treaty
The Addressee
• • • • • Rheinische Westfälisches Elektrizitätswerk AG (RWE AG) A German-based energy and utility company Primarily active in production & supply of gas & electricity Traditionally have been focused on NRW region in Germany Today has 8 subsidiaries and is active in other countries Its turnover was €42,507 million in 2007
Procedural Steps Under Regulation
• • • • In May 2006, the investigation was based on the results of an inspection at RWE’s premises.
On 20 April 2007, the EC initiated proceeding against RWE pursuant to article 81 & 82 .
On 15 October 2008, the EC adopted a preliminary assessment.
On 26 November 2008, RWE submitted comments to the preliminary assessment.
Procedural Steps Under Regulation
• • • • On 5 December 2008, a notice was published for inviting interested third parties to give their observations in one month.
On 19 January 2009, the EC informed RWE of the received observations.
On 2 February 2009, RWE submitted an amended commitment proposal.
On 6 March 2009, issued the final report of advisory committee on restrictive practices & dominant.
Preliminary Assessment
• Relevant markets • Substantial part of the common market • Practices raising concerns • Effect on trade between Member States
Relevant Markets
• The relevant product markets • • Distinguished between gas Supplier and transporter services TSO separate from DSO • Distinguished between Wholesalers and end Customers • • • The relevant geographic markets Negligible competition outside TSO Gas supply defined as grid-wide
Relevant Markets
• RWE’s dominant position on the relevant markets • • • • Dominant position since 2003 High entry barriers for potentially competing TSO Low market share on supply markets Entire available capacity was booked on a long term
Substantial part of the common market
• Gas transmission network covered by RWE • Affected geographic market of the most German population
Practices raising concerns
• • • • • • Capacity management (refusal to supply) RWE TSO may have pursued a strategy for keeping the transport capacities RWE has booked almost entire capacities on its transmission network on a long term basis Demand exceeded the offered capacities Huge difference between indicated and actual capacity used Lack of effective congestion management system
Practices raising concerns
• • • • • • • Margin squeeze RWE may have followed a strategy for squeezing competitors’ downstream gas supply margins Elevated tariffs for network access Elevated prices for access to its transmission network As a vertical integrated and dominant company control the gas transmission network Asymmetric cost elements disadvantaging competitors While RWE was itself exempted from paying balancing costs, due to agreements between RWE-energy-TSO, other transport customers had to pay high penalty fees within RWE TSO’s network
Effect on trade between Member States
• RWE’s behaviour was capable of affecting trade between Member States • Notably by affecting import and export flows • Hindering foreign competitors from competing within its grid area
Proposed Commitments
• I.
II.
RWE notably committed to divest: RWE’s German high-pressure gas transmission network with a total length of app. 4,000 Km Auxiliary equipment necessary for the operation of the transmission network III.
Intangible assets necessary for the operation of the transmission network • RWE commits to supply the purchaser for a limited period of up to five gas years • The business will be endowed with personnel and key personnel necessary for transmission network
Proportionality of the Final Commitments
• RWE’s divestiture can be a structural remedy • Oblige RWE to behave in a certain manner of its gas transmission activities • Ensure that RWE has no control over the gas transmission network • Clear-cut solution to the identified competition concerns
Conclusion
• Adopting a decision pursuant to article 9 (1) of regulation • Decision doesn’t conclude whether or not there has been or still is an infringement • In the light of the final commitments offered, the commission considers that there are no longer ground for action on its part • With no prejudice to Article 9(2) of regulation, the proceedings in this case should therefore be brought to an end.
References
• • • • http://ec.europa.eu/competition/ http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12002E082:EN:HTML http://www.zoll.de/english_version/a0_passenger_traffic/member_states/index.html
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1306245