August 2012 – The Council of the Slovak Antimonopoly Office upheld a first instance decision in which a Slovak electricity distribution company, ZSE Distribúcia a.s., was fined for abusing a dominant position by charging excessive fees for taking special electricity meter readings in the course of customers’ shifting to another electricity supplier.
Factual background
By its decision No. 2012/DZ/R/2/030, the Council of the Antimonopoly Office of the Slovak Republic (the “Council”), acting in its capacity as the appellate body of the Antimonopoly Office of the Slovak Republic (the “AMO”) rejected on 29 June 2012 the appeal of ZSE Distribúcia a.s. (“ZSE-D”) and upheld AMO decision No. 2011/DZ/2/1/057 of 28 December 2011. In its decision, the AMO found that ZSE-D abused a dominant position by charging excessive fees for taking special electricity meter readings in the course of customers’ shift to another electricity supplier between 1 April 2008 and 31 March 2010 (the ‘’Fee’’). The Council also upheld the amount of fine (EUR 150,000 which corresponds to 0.032 % of the annual turnover) imposed on ZSE-D.
Summary of the Decisions and Judg ments
Electricity in Slovakia is distributed through three regional distribution companies (“DSOs”). ZSE-D, being part of the ZSE group, is one of the DSOs. Supply of electricity is among the commercial activities of ZSE group. ZSE-D came to existence after the unbundling/liberalisation process of vertically integrated companies operating on the electricity market. As a result of the liberalisation process, electricity consumers can today choose their electricity supplier. However, when an electricity consumer decides to change his electricity supplier, special electricity meter readings must be taken on the consumer’s premises so that the new supplier can supply him with electricity. Such electricity metering is done by DSOs.
ZSE-D charged for special electricity meter readings the Fee in the amount of EUR 27.31, whereas the Fee was paid by new electricity suppliers. In June 2010, amendments to the energy legislation prohibited charging such special Fee in situations involving change of electricity supplier. Nevertheless, DSOs still retained the right to charge the fees for electricity meter readings in other cases. After charging the Fee was prohibited, ZSE-D carried out a general reduction of fees charged for special electricity meter readings from EUR 27.31 to EUR 10.47. After receiving the complaints from ZSE-D’s competitors about these practices, the AMO opened proceedings against ZSE-D for an alleged abuse of a dominant position. AMO defined the relevant market as the market for electricity metering i.e. a market separate from electricity distribution. The geographical market for electricity metering was defined as territory where ZSE-D is active as DSO. The AMO concluded that ZSE-D had a dominant position on the relevant market.
AMO came to conclusion that the Fee charged by ZSE-D was excessive. The AMO pointed out that in line with the Court of Justice case law, the excessive character of prices could be also proven by comparison with prices of identical or comparable products in time or in a different geographical territory1 and that the price-cost test is not the only way to assess the relation between prices and economic value of the product. The AMO used the following two benchmarks to show that the Fee was excessive: (i) the prices charged for comparable services (electricity metering) provided by the two other DSOs2 and (ii) the fee for electricity metering charged by ZSE-D as of July 2010. In AMO’s view, this reduction was not credibly explained by ZSE-D.
After analyzing the case, AMO concluded that by imposing excessive Fees ZSE-D abused its dominant position. The AMO specified that in this case, the Fee could act as a barrier of entry for alternative electricity suppliers into the households seg ment.
ZSE-D may challenge AMO's decision by bringing the claim with the competent court.
Comments
Apparently, this is the first time that the AMO sanctioned a abuse of a dominant position in the form of applying excessive prices.
One of the main issues arising in proceedings before the AMO was the alleged lack of AMO’s competence to decide the case. ZSE-D argued that price regulation in electricity sector is a competence of the Slovak Regulatory Office for Network Industries (the “RONI”) and that the AMO is not entitled to step into the competence of the RONI if the RONI did not exercise it. The AMO confirmed its authority to deal with any cases involving breach of competition rules, irrespective of the fact that the activity in question is subject to supervision of specialized authorities. The AMO further added that even if the amount of the Fee would be regulated by the RONI, the AMO would still have power to investigate compliance of ZSE-D's fee policy with competition rules to the extent the rules imposed by the RONI allow ZSE-D to remain in compliance with competition rules without breaching the requirements imposed by the RONI.
Source: Michal Miko, Martin Pavlus, The Antimonopoly Office of the Slovak Republic fines electricity distribution company for abuse of a dominant position by charging excessive prices for electricity metering (ZSE), 28 December 2011, e-Competitions, N°48239, www.concurrences.com
1 The AMO founded its reasoning on the ECJ decision of 13 July 1989 in SACEM I (C-395/87)
2 SSE-D a.s. charged between EUR 10.69 and EUR 11 and VSDS a.s. between EUR 13.25 and EUR 13.45.