On 5 March 2014, the European Commission announced that it has fined EPEX Spot and Nord Pool Spot, both European spot power exchanges, a total of €5,979,000 for breach of Article 101(1) of the Treaty for the Functioning of the European Union (TFEU).
So what are power exchanges and why are they so important?
Power exchanges are organised markets for trading electricity and they bring together power generators and traders. Spot trading refers to short-term trading on an exchange either within the same day or for the next day.
This case involved EPEX Spot (of France) and Nord Pool Spot (NPS) (of Norway) which are two of the leading European spot power exchanges. The Commission found that EPEX and NPS had breached Article 101(1) of the TFEU by agreeing not to compete with each other for their spot electricity trading services in the European Economic Area (EEA) and allocating European territories between them.
The infringement took place against the backdrop of discussions to establish a joint approach on technical systems to be used for cross-border trade as part of the EU Commission’s sponsored initiative to create an EEA internal energy market. However, the Commission concluded that the parties had used this initiative as cover to enter into cartel-related activities.
What the parties agreed went far beyond the legitimate purpose of the co-operation proposed by the Commission. The aim of their anti-competitive agreement was to protect their respective national market positions and to divide up the countries in which they planned to expand, so maintaining their respective market positions. The cartel was organised through meetings, telephone and video calls and e-mails. The infringement lasted for at least seven months in 2011-2012. The Commission undertook unannounced inspections of the companies’ premises in 2012 and the cartel ceased to operate from that date.
The parties elected to settle this case under the Cartel Settlement Procedure introduced in 2008. Under this procedure, the parties to a cartel can choose to engage in settlement discussions, after initiation of proceedings and prior to issuance of a statement of objections. The Commission has discretion as to accept the use of this procedure.
After settlement discussions, the party must acknowledge their liability for the infringement (including its scope and duration). The party must also confirm that they have been informed of the objections against them, that they have been given the opportunity to be heard and will not request access to the Commission’s prosecution file or an oral hearing.
Upon completion of the settlement procedure, the Commission will issue a ‘streamlined’ decision and the company will receive a 10% reduction in its fine to reflect its acknowledgment of the facts and engagement in the settlement procedure. The company will remain entitled to any additional reduction under the Leniency Notice.
In this particular case, EPEX Spot and Nord Pool Spot agreed to settle the case with the Commission under the Cartel Settlement Procedure and so received a 10% fine reduction. This case shows the efficiency benefits of the Cartel Settlement Procedure. This case was concluded within two years of the date of the Commission’s unannounced inspections. In addition, another benefit of the use of the Cartel Settlement Procedure is that it allows parties which have suffered loss and damage by reason of the parties cartel behaviour to sue for damages in the national courts as a follow- on action. They can rely on the settlement as conclusive evidence of liability. Therefore any person which has suffered loss due to the anti-competitive activities of EPEX Spot and Nord Pool Spot is now entitled to sue for damages using this settlement as proof of liability.
This is in marked contrast with the Commission’s increased use of commitments under Regulation 1/2003 under which companies accused of engaging in non-cartel related but anti-competitive conduct can settle cases without any admission of liability. This means that for third parties to recover damages from the subject of the investigation they would have to start a stand-alone case before the national courts of a Member State to prove the liability of the perpetrator.
This flies in the face of the Commission’s desire to encourage aggrieved third parties to recover damages for their loss caused by anti-competitive conduct through national courts in the draft directive on private competition actions which is currently going through the EU legislative process.