EU/Competition: Energy

Newsletter 6/2020

In December 2019, the Netherlands adopted a law prohibiting the use of coal for the production of electricity as of January 2030 at the latest. Whilst four coal fired power plants were granted a transition period of five to ten years, the Hemweg plant had to close before 01.01.20, which resulted in commercial losses for the company running the plant. The law gave Hemweg the possibility to request a compensation for its early closure and the government agreed with the company to limit this compensation to EUR 52.5 million. In a decision of 12.05.20 the Commission approved that this measure – for the early closure imposed on the plant to contribute to the reduction of CO2 emissions – is  in line with EEA state aid rules. Visit the case dossier here.

The Commission launched 18.05.20 a public consultation on the review of the EEA rules on trans-European energy infrastructure. The Commission has confirmed the intention to publish a legislative proposal to adapt the TEN-E regulation before the end of 2020. In parallel, a more technical targeted consultation aims to gather input from stakeholders with specialist knowledge and who are familiar with the different aspects of the existing Regulation. Both consultations will run for 8 weeks. Visit the consultations here.

Over the past years, the Commission has reflected on the role of competition policy and how it fits in a world that is changing fast, is increasingly digital and globalised, and must become greener. Against this background, the Commission has concluded that ensuring the contestability and fair functioning of markets across the economy is likely to require a holistic and comprehensive approach, with an emphasis on the following three pillars: (i) the continued enforcement of the existing competition rules (Articles 101 and 102 TFEU / Articles 53 and 54 EEA); (ii) possible ex-ante regulation of digital platforms, including additional requirements for those that play a gatekeeper role (see our Digital agenda newsletter); and (iii) a possible new competition tool to deal with structural competition problems across markets which cannot be tackled or addressed in the most effective manner on the basis of the current competition rules (e.g. preventing markets from tipping). According to the Commission, the new competition tool should enable the Commission to address gaps in the current competition rules and, if appropriate, allow the Commission to impose behavioral or structural remedies against structural competition problems – in all markets. However, the Commission does not foresee a finding of an infringement, nor would any fines be imposed on the market participants. Respondents are invited to submit their views on the inception impact assessment until 30.06.20 and to respond to the open public consultation until 08.09.20. Subject to the outcome of the impact assessment, a legislative proposal is scheduled for Q4/2020. Visit the inception impact assessment and the consultation here.

On 11.05.16, the Commission adopted a decision in which it blocked the proposed acquisition of Telefónica UK (O2) by Hutchison 3G UK3 (Three). According to the Commission, that acquisition would have removed an important competitor on the UK mobile telephony market and the merged entity would have faced competition only from two mobile network operators. The Commission considered that the reduction from four to three competitors would probably have led to an increase in prices for mobile telephony services in the UK and a restriction of choice for consumers. The acquisition would also have been likely to have a negative influence on the quality of services for consumers, hindering the development of mobile network infrastructure in the UK. Lastly, it would have reduced the number of mobile network operators wishing to host other mobile operators on their networks. Three brought an action before the General Court seeking annulment of the Commission’s decision. By a judgment of 28.05.20 in Case T-399/16, the General Court annulled the Commission’s decision. The General Court outlined i.a. that: “…the mere effect of reducing competitive pressure on the remaining competitors is not, in principle, sufficient in itself to demonstrate a significant impediment to effective competition in the context of a theory of harm based on non-coordinated effects”, and, in relation to the Commission’s novel argument relating to the impact of the merger on network sharing partners, “EU competition rules are primarily intended to protect the competitive process as such, and not competitors … [and] the fact that a concentration affects competitors is not in itself a problem. In particular, the fact that rivals may be harmed because a merger creates efficiencies cannot in itself give rise to competition concerns”. The landmark ruling is the Court’s first judgment on the legal test under the EUMR introduced in 2004 and the Commission’s Horizontal Merger Guidelines and is therefore highly significant for the EU’s system of merger control. It is also important for the Norwegian merger control model as Norway has adopted an identical substantive thresholds for intervention in the Norwegian Competition Act, and there is no reason to establish a separate and distinct threshold for proving the legal standard in Norwegian law. The Commission can appeal issues of law to the European Court of Justice. Visit the judgment here.