Long term exclusive supply obligations – EC investigates EDF and Electrabel

The European Commission announced on 26 July 2007 that it has launched proceedings against the French and Belgian electricity suppliers (EDF and Electrabel respectively) for possible abuse of a dominant position.

The European Commission is concerned about long term exclusive purchase obligations in contracts with industrial electricity customers. It fears that these obligations could make it difficult for new entrants in these markets to win customers, thus hindering the development of a more competitive electricity market in France and Belgium.

The proceedings launched against EDF and Electrabel do not mean the European Commission has already found an infringement but do allow the Commission to make an in-depth investigation. The proceedings are not part of the European Commission’s energy sector investigation concluded in January 2007. However, the European Commission has specifically noted that the energy sector investigation allowed it to gain an in-depth understanding of the energy sector and that “the knowledge acquired during the sector inquiry has allowed the Commission to draw conclusions as regards where Commission investigations based on competition law could be appropriate and effective”. In other words, sector investigations mean the European Commission gets to know an area well and that concerns noted in a sector investigation could lead to separate targeted investigation of individual companies. Other players in the energy sector should review the conclusions of the European Commission’s energy sector investigation for possible concerns relevant to them (see our earlier law-now on these conclusions).

Competition law compliance is vital in order to avoid becoming the subject of a time-consuming competition law investigation, with its associated possible fines, bad publicity and liability in damages.

For more details on competition law compliance, please contact us and take a look at our Competition Survival Pack. Please click here for the Commission’s press release on the launch of the EDF/Electrabel proceedings.