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European Commission Decision Relating to proceeding under Article 82 - EC Treaty (Case COMP/39.402...
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Transcript of European Commission Decision Relating to proceeding under Article 82 - EC Treaty (Case COMP/39.402...
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European Commission Decision
Relating to proceeding under Article 82 - EC Treaty (Case COMP/39.402 – RWE Gas foreclosure)
Master of International Management University of Trento
Neda MemariWS 2010/11
Prof. Vezzoso Simonetta
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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
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Subject Matter
• Decision is Addressed to RWE AG
• Preliminary assessment according to article 82 (now 102) EC treaty
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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
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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.
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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.
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Preliminary Assessment
• Relevant markets
• Substantial part of the common market
• Practices raising concerns
• Effect on trade between Member States
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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
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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
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Substantial part of the common market
• Gas transmission network covered by RWE
• Affected geographic market of the most German population
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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
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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
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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
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Proposed Commitments
• RWE notably committed to divest:I. RWE’s German high-pressure gas transmission network with a total length of
app. 4,000 Km
II. 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
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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
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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.
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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
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Thank you