EU/Competition: Energy

Newsletter 10/2020

In line with the European Green Deal and the EU’s objective to become a climate neutral economy by 2050, the Commission adopted 21.09.20 revised EU Emission Trading System State aid Guidelines in the context of the system for greenhouse gas emission allowance trading post-2021 (the “ETS Guidelines”). They will enter into force 01.01.21 with the start of the new ETS trading period, and replace the previous Guidelines adopted in 2012. The ETS Guidelines aim at reducing the risk of “carbon leakage”, where companies move production to countries outside the EEA with less ambitious climate policies, leading to less economic activity in the EEA and no reduction in greenhouse gas emissions globally. In particular, they enable EEA countries to compensate companies in at-risk sectors for part of the higher electricity prices resulting from the carbon price signals created by the EU ETS (so-called “indirect emission costs”). At the same time, overcompensation of companies would risk running counter to the price signals created by the EU ETS to promote a cost-effective decarbonisation of the economy and create undue distortions of competition. Against this background, the revised ETS Guidelines will: (i) Target aid only at sectors at risk of carbon leakage due to high indirect emission costs and their strong exposure to international trade. Based on an objective methodology, 10 sectors and 20 sub-sectors are eligible (compared to 13 sectors and 7 sub-sectors under the previous Guidelines); (ii) Set a stable compensation rate of 75% in the new period (reduced from 85% at the beginning of the previous ETS trading period), and exclude compensation for non-efficient technologies, to maintain the companies’ incentives for energy efficiency;

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(iii) Make compensation conditional upon additional decarbonisation efforts by the companies concerned, such as complying with the recommendations of their energy efficiency audit. Visit the revised guidelines here.

The European Union Agency for the Cooperation of Energy Regulators (ACER) and ESA concluded 29.09.20 a Memorandum of Understanding to put in place practical arrangements to ensure good cooperation between ESA and ACER in relation to the European electricity and natural gas markets. ​​​ESA has been vested with the powers to adopt binding decisions addressed to national regulatory authorities of the EEA/EFTA States. ESA’s role in the EEA/EFTA States mirrors the role of ACER in the EU Member States.

The Commission published 08.09.20 a Staff Working Document that summarises the findings of the evaluation of the Vertical Block Exemption Regulation (“VBER”), together with the Vertical Guidelines. The evaluation show that the market has changed significantly since the adoption of the VBER and the Vertical Guidelines, in particular due to the growth of online sales and of new market players such as online platforms. These developments have led to a number of changes in distribution models, such as increased direct sales by suppliers and a greater use of selective distribution systems, which allow suppliers a tighter control over resale conditions. Similarly, new types of vertical restrictions, such as restrictions regarding sales through online marketplaces and restrictions on online advertising, as well as retail parity clauses, have become more widespread. Against this backdrop, the evaluation has identified a number of issues with regard to the functioning of the rules. These include the following: (i) Some provisions lack clarity, such as the rules defining agency agreements. (ii) Other provisions are difficult to apply or are no longer adapted to the current business environment, notably when it comes to applying the existing rules to new market players that do not fit into traditional supply and distribution concepts and to new online sales restrictions. (iii) Some gaps are identified in the rules, such as a lack of guidance on how to assess retail parity clauses or restrictions on the use of price comparison websites, and areas that do not refer to case law issued since the adoption of the rules (e.g. the EUCJ’s Coty judgment C-230/16). (iv) There remains significant scope for diverging interpretations of the rules by national competition authorities and national courts, which is an important issue of concern for stakeholders, as it reduces the benefit of the rules. (v) While the evidence suggests that the lists of hardcore restrictions and excluded restrictions are generally appropriate, there may still be scope to further reduce the burden for businesses associated with self-assessing the compatibility of their agreements with Article 101 TFEU / Article 53 EEA. This could be achieved by exempting, in some specific areas of the rules, additional vertical agreements for which stakeholders have indicated that they would normally satisfy the conditions of Article 101(3) TFEU / Article 53 (3) EEA. There is also room for simplification and further cost reduction, notably by reducing the complexity of the rules. Visit DG COMPs dedicated VBER review website here.

In the EUCJ Schrems II judgment (C-311/18) the court indicated that companies relying on SCCs are responsible for determining whether the recipient country’s law concerning government access to data provides privacy protections meeting EEA legal standards. The EUCJ in Schrems II also invalidated Commission Decision 2016/1250 underlying the EU-U.S. Privacy Shield. The Court found that the Commission’s record underlying Decision 2016/1250 did not establish that privacy protections in U.S. law relating to intelligence agencies’ access to data meet EEA legal standards. Notwithstanding this finding, companies transferring data to the United States under SCCs today are responsible for undertaking their own independent analyses of all relevant and current U.S. law relating to intelligence agencies’ access to data, as well as the facts and circumstances of data transfers and any applicable safeguards, in assessing whether the transfers satisfy EEA law. The United States government has prepared a White Paper, focusing in particular on the issues that appear to have concerned the EUCJ in Schrems II, for consideration by companies transferring personal data from the EEA to the United States. The White Paper provides an up-to-date and contextualized discussion of this complex area of U.S. law and practice, as well as citations to source documents providing additional relevant information. It also provides some initial observations concerning the relevance of this area of U.S. law and practice that may bear on many companies’ analyses. The White Paper is not intended to provide companies guidance about EU law or what positions to take before European courts or regulators. Visit the white paper here.