Abuse of dominance in the EU gas sector


Term Paper, 2016
26 Pages

Excerpt

Contents

Abstract.

Introduction .

I. Abuse of dominant position.
a. Article 102 TFEU.
b. Enforcement of Article 102 TFEU.

II. The “Energy Europe” as a single block.

III. Abuse of dominant position in gas sector. Case law.

IV. Commission’s investigation on the Gazprom’s case.

Conclusion.

Abuse of dominance in the EU gas sector

Abstract

This article examines the European Union competition law in the gas sector, particularly the issue of abuse of dominant position, as it has been developed, through the building the single market, secondary legislature and the case law. It discusses the key challenges of the natural monopoly of gas supply in the current single market. In the article is shown duality between the EU law and international economic relations with the external actors through the case of Gazprom.

Introduction

The regulation of energy activities at the global and regional levels is a task for public international law, which is the system of law governing relations between states.[1] As a strategic and dynamic field, energy has been always significant issue for the states exporters and importers. As various energy crises has demonstrated, the economic problems cannot be solved solely by national energy policies.[2] Attempts to harmonize different legal norms for the energy sector are made constantly, which is proven by the existence and functioning of such international organizations such as the International Energy Agency, World Energy Council, Energy Charter Treaty, Energy Community etc.

The European Union, which in the international area acts as a supranational organization with the single market and internal (regional) and external law making powers within the international/supranational organizations[3], was also undertaking steps to harmonize energy legal norms of different member states by establishing an internal energy market. Among the huge strategic markets, the energy sector is the one where the small or middle-sized undertakings are unlikely to operate on the same competitive conditions as the big/state-supported companies do.

With the entry of the force Third Liberalization (Energy) Package, which is aimed to enhance the building of Single internal market of the EU, the competition in the gas market has developed. In the last decade the EU has opened a number of antitrust cases against companies-monopolists on the gas sector, including the Gazprom, which according to the EU is one of the obstacles on the way of creating liberalized de-monopolized European Union single market.

The aim of this paper will concentrate on tackling the following questions:

1. Characterization of the gas market situation, while highlighting the controversial aspects, in terms of EU competition law.
2. Discovering the breaches of the article 102 of the Treaty on the Functioning of the EU, according to the claims of Commission.

Given the aim of the assignment, the paper will cover and critically analyse the points mentioned below:

1. Critically review of the relevant legislation, regulating abuse of the dominant position in the EU (TFEU, regulation 1/2003)
2. Review the case law, with a particular emphasis in the European Union gas sector.
3. Discuss how the international companies fall under EU competition law, through the case of Gazprom.

In this article the author will use the methods of survey and data collection by the literature research, and following critical and comparative analysis.

The proposed methodology will allow the author to examine the current situation in the competition law area in the gas sector on the European Union single market.

The method of the analysis complies with inductivity: with the analysis of the current case law in the competition area of the gas sector, is making a conclusion, and therefore anticipations on the consequences of the case concerned.

By implementing the methodology outlined above, the thesis will include the following.

The first chapter will examine the concept and problematic of the abuse of dominant position, its enforcement.

The second chapter will observe the current position of the Energy Europe as a single legal block, with its historical background and legal acts harmonizing the energy, particularly – gas market.

The third chapter will review case law in the framework of the European Union competition legislation The fourth chapter will issue the Gazprom case, as an example of how the external or non-EU company falls under EU law.

The basis of the study is the works of the prominent scholars. On the international law area- M. I. Brownlie, V. Tyc; have been used the “EU Competition Law” by the A. Jones, B. Sufrin, V. Korah, “Energy Law in Europe” by M. Roggenlamp, A. Ronne, C. Reogwell, I. del Guayo, the works of M. M. Dabbah, M. Haighighi, A. Riley, the publication of the famous expert on the Gazprom studies A. Konoplyanik, on international relations in the gas sector A. Belyi, on the gas sector of the EU - I. Gudkov, and others. In order to be as much specific as possible the author will use recent academic articles from journals (from the database of the westlaw.co.uk), and at the same time in order to be as much relevant as possible the author will use the Internet sources such as the website of the European Commission. All these will help to analyse the arguments stated above.

The database of the precedent law will help to examine the normative content of the principles of the European Competition law. At the same time it will enable to investigate the scope of legal authority of the European institutions in the framework of the European legislation.

It needs to be stressed that this paper will regard the legal approaches of the case of Gazprom in the framework of the concept abuse of dominant position, but the political side is being excluded.

I. Abuse of dominant position

a.Article 102 TFEU

The European Union competition law began to emerge in the 1960s and continues to evolve today. Competition in the EU is developing in all spheres of the economy, even in those that had not been open to the general market. These areas include: energy, transport, postal services and telecommunications.

One of the significant dimensions of the EU’s performance in the international area, according to the Treaty of the Functioning of the EU, is the creation of the system of measures, which would ensure the freedom of competitiveness in the whole territory of the Single market.[4] The need of the existence and maintenance of the “competitive environment” is the essential element of efficient functioning of the market economy. In one of the European Commission’s reports was stressed, that the competition is the best stimulant of the economic growth, which forces the undertakings to continuously improve the efficiency of production and thus contributes the consumers welfare, helps to better satisfy the public and individual needs.[5]

Title VII of the Treaty on the Functioning of the European Union is devoted to the common rules on competition. The competition regulation is directed to prevent the negative effects of the free competition’s limitation and thus to prevent consumer’s harm. Other aims of the competition regulation are: the protection of the rights and economic freedoms of small undertakings from bigger economic consolidations, cooperation and coordination in the Single European market creation, and the ensuring of the equitable and fair participation of the subjects of economical relations in the Common market.

The aim of the competition regulation was clarified by the Discussion Paper, which the European Commission published in year 2005. The Discussion Paper states that the purpose of article 102 is the protection of competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources.[6]

It should be stressed that the purpose of the competition law, in no event shall it be to protect competitors. That’s where in the market is effective competition, there should not be offered artificial protection to the weak and unable competitors, otherwise it would disrupt the normal competitive environment/relation between them. In addition, competition law should not be seen as a means to achieve a higher number of participants in the market.

One of the main objectives of the EU is to ensure the free flow of economic resources within the common market. EU competition policy is designed to ensure the successful functioning of the internal market and the protection of consumers and small businesses. All the participants have to compete with each other on equal terms.

Notwithstanding, the decision of the ECJ in the case of Microsoft v Commission presented the aim of the competition regulation in a different light, where it seemed more as a building of a Single Market.[7]

As long as large undertakings, especially monopolies, are often hold the dominant position in the market, it is more likely that they may abuse their dominance and create anticompetitive environment. Article 102 TFEU prohibits the abuse of a dominant position by undertakings.

Article 102 provides:

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Such abuse may, in particular, consist in:

(a) Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) Limiting production, markets or technical development to the prejudice of consumers;
(c) Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(d) Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations, which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Although sub-paragraphs (a) – (d) set out examples of abuses, they do not provide an exhaustive list[8]

In addition, the article 102 TFEU does not contain the concept of abuse of a dominant position, which is due primarily to the fact, that at the time of the signing of the Treaty establishing the European Community, in 1957, none of the Member-States have its own competition law, hence - the sufficient detailed regulation in competition area and definition of basic concepts were absent.

All the basic concepts of the EU competition law otherwise could be found in a case law. For instance, the TFEU does not define the term “undertaking”, however by the practice of the European Court of Justice this term is used widely, than just “legal entity”. Obviously, Undertaking is defined as any legal or natural person involved in economic or commercial activity in the provision of goods or services.[9] According to the case law of European Court of Justice under the EU competition regulation are also falling the undertakings of the public sector.

[...]


[1] BROWNLIE, I., 1998, Principles of Public International Law, Oxford, 5th edition, p. 184

[2] ROGGENCAMP, M., RONNE, A., REOGWELL, C., GUAYO, I., 2001, Energy Law in Europe, Oxford University Press, New-York, p.99

[3] TURKSEN, U., WOJICIK, J., 2012, The European Union and Russia energy trade – thickening of legality and solidarity?, IELR, p., p. 3 SUPRA NOTE.

[4] Article 3, Treaty of the Functioning of the European Union

[5] JONES,A., SUFRIN, 2012, EU Competition Law, Oxford, p. 263-264

[6] DG Competition Discussion Paper on the Application of Article 82 of the Treaty to Exclusionary Abuses, Bruxelles, December 19, 2005

[7] DABBAH, M.M., 2012, European Union Competition Law, Modul B: Abuse of a dominant position, revised edition

[8] JONES,A., SUFRIN, 2012, EU Competition Law, Oxford, p. 261

[9] STEINER, J., WOODS, L., 2006, EU Law, Twigg-Flesner, Oxford, p.9.

Excerpt out of 26 pages

Details

Title
Abuse of dominance in the EU gas sector
College
Charles University in Prague
Author
Year
2016
Pages
26
Catalog Number
V350558
ISBN (eBook)
9783668396272
ISBN (Book)
9783668396289
File size
645 KB
Language
English
Notes
Review by professor of Charles University: "Without any doubt, the topic is of a crucial importance and it reflects not only EU law but also international law aspects of the whole issue, although, the author’s focus is more on its EU law aspects and in the its conclusion also on some political aspects. This can serve as introduction to further research in much broader area on the edge of EU law and of international law. The author demonstrated good orientation in EU law.
Tags
EU competition law, EU-Russia gas relations, EU gas sector, liberalization packages, gazprom case, abuse of dominance in EU gas sector, abuse of dominance energy sector
Quote paper
Elmira Lyapina (Author), 2016, Abuse of dominance in the EU gas sector, Munich, GRIN Verlag, https://www.grin.com/document/350558

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