• The Competition Authority Dismisses Suggestions of Tension in the Electricity Market
  • July 29, 2011
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • Summary

    On 8 June 2011, the French Competition Authority (FCA) rejected a request for interim protective measures from the SNPIET (union for independent thermal electricity producers) in relation to claims brought against the electric network administrator, RTE and the electricity provider, EDF. The FCA declared that tenders relating to the establishment of quick and supplementary electricity reserves were outside the scope of its jurisdiction by virtue of RTE’s status as a public service provider. The FCA also concluded that the SNPIET had not submitted sufficient evidence to support its claims that EDF had been engaging in predatory pricing when bidding for tenders, nor was there sufficient evidence to prove its allegations relating to EDF’s abuse of a dominant position.

    In December 2010, the SNPIET brought a claim before the FCA concerning the liberalisation of the electricity market. The claim was against; (i) RTE for including conditions in its tenders that impeded the ability of SNPIET’s members to put forward a bid, (ii) EDF for engaging in predatory pricing in the bids it proposed, (iii) EDF for abusing its dominant position in order to buy back electricity that producers had been unable to sell to RTE. In addition to the substantive claim, the SNPIET also requested interim measures from the FCA. The FCA rejected this request for interim measures and, in doing so, seemed to approve the way the market was operating.

    RTE argued that as it is responsible for maintaining a balance in the French electricity market, it could not afford to restrict itself exclusively to non-contractual offers when securing electricity reserves. Unconventionally, the FCA accepted RTE’s argument that its tenders fell outside the FCA’s jurisdiction by virtue of its status as a public service provider. This argument is frequently put forward by defendants but is generally rejected. While the FCA stated that contracts for the provision of electricity were an economic activity that came under its authority, it also accepted that tenders were essential to RTE’s public duties in contracting quick and supplementary electricity supplies.

    In relation to prices offered in EDF’s bids, the FCA carried out an opportunity cost test, analysing the benefits obtained from responding to the tender. The FCA concluded that EDF was able to show that its prices were, prior to the bid, devised on a profitable basis. The FCA seems to adopt a somewhat innovative approach to predatory pricing compared to the test used in cases like Glaxosmithkline. However, the FCA did confirm the previous definition of predatory pricing which must involve a sacrifice by the dominant undertaking.

    The SNPIET’s claimed that EDF was abusing its dominant position by buying electricity at a cheaper rate from smaller producers who, alienated from RTE’s electricity markets, had no other choice than to sell it. The FCA rejected these claims arguing that EDF was under no obligation to buy electricity produced by its competitors. Legislation which created this obligation had been repealed. Although EDF’s market position imposes a certain level of responsibility on it, this does not entail an obligation to purchase electricity from its competitors. SNPIET producers should have adapted to the liberalisation of the electricity market, and explored alternative solutions, such as bidding in RTE’s tenders. While the FCA made it clear that the analysis of these tenders were outside its jurisdiction, it did note that these tenders allowed for participation of all producers, which could imply, for some of them to do it as a group.

    The decision highlights the importance of evidence: sufficient proof is required from the moment interim measures are sought. The FCA reminded the parties that assertions about the opportunity cost of EDF’s pricing policy were no substitute for real evidence.