3. Competition Law Enforcement

Commission Notice on the definition of relevant market for the purposes of Community competition law [1997] OJ C372/5 (Commission Notice on market definition), para 7.

Commission Decision of 14 March 2006 in Case COMP/M.3868 – DONG/Elsam/Energi E2, para 228; Commission Decision of 21 December 2005 in Case COMP/M.3696 – E.ON/MOL, para 209; Commission Decision of 9 December 2004 in Case COMP/M.3440 – EDP/ENI/GDP, para 31. The market structure and conditions of competition are different on each of the product markets. The transmission and distribution markets nowadays do not have any significant influence on the conditions of competition on electricity markets. Since they constitute the essential transport infrastructure for electricity, they are subject to unbundling requirements on the European level and the obligation to grant non-discriminatory access to third parties. Thus, they cannot influence competitive behaviour of operators on the supply markets.

German Electricity Wholesale Market (Chap. 2 n 49) para 11; Commission Decision of 14 November 2006 in Case COMP/M.4180 – Gaz de France/Suez, para 674; Commission Decision of 22 December 2005 in Case COMP/M.3867 – Vattenfall/Elsam and E2 Assets, para.10; Case COMP/M.3696 – E.ON/MOL (n 4) para 223; Commission Decision of 12 August 2005 in Case COMP/M.3729 – EDF/AEM/Edison, para 17; Commission Decision of 30 October 2003 in Case COMP/M.3268 – Sydkraft/Graninge, para 19; Case COMP/M.3440 – EDP/ENI/GDP (n 4) para.37; Commission Decision of 19 December 2002 in Case COMP/M.2966 – EnBW/Laufenburg, para 8; Commission Decision of 13 June 2000 in Case COMP/M.1673 – VEBA/VIAG, para.19. See also DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 397–399.

The Commission in the past used to distinguish a market for electricity trading as being separate from other electricity-related activities such as generation on account of the different legal and factual conditions under which trading takes place and also of the fact that electricity traders are not necessarily electricity generators. See Commission Decision of 30 November 1999 in Case COMP/JV.28 – Sydkraft/HEW/Hansa Energy Trading, para 20; Commission Decision of 3 February 2000 in Case COMP/JV.36 – TXU Europe/EDF London Investments, para 28; Case COMP/M.4180 – Gaz de France/Suez (n 5) para 677. In following decisions, however, the Commission considered the wholesale market as comprising electricity generation and imports as well as trading. See Commission Decision of 23 June 2009 in Case COMP/M.5467 – RWE/Essent, para 52 footnote 28 ‘there is no reason to consider physical trading as distinct from other wholesale sales of electricity where two parties agree on a price and other terms for a physical supply of electricity’; Commission Decision of 22 December 2008 in Case COMP/M.5224 – EDF/British Energy, para 17; Commission Decision of 12 November 2009 in Case COMP/M.5549 – EDF/Segebel, paras 16–21 of the Decision on Article 6(2) of the Merger Procedure and paras 77–83 of the Decision on Article 9(3) of the Merger Procedure. See also DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 397.

Nordic Competition Authorities, ‘A Powerful Competition Policy: Towards a More Coherent Competition Policy in the Nordic Market for Electric Power’ Report No 1/2003, June 2003, 32–33 <www.​kkv.​fi/​globalassets/​kkv-suomi/​julkaisut/​pm-yhteisraportit/​nordisk-energirapport.​pdf> accessed 1 December 2015.

See Commission Notice on market definition, para 39 with regard to the quantitative tests that can assist in market definition, including the similarity of price movements over time. As has been explained above, continuous arbitrage leads to the prices of identical products traded over-the-counter and on power exchanges developing in parallel. See Case COMP/M.3867 – Vattenfall/Elsam and E2 Assets (n 5) para 13; Case COMP/M.3729 – EDF/AEM/Edison (n 5) para 28; Case COMP/M.3268 – Sydkraft/Graninge (n 5) para 19. A capacity withdrawal strategy relies on the single price auction mechanism of the spot market for electricity. Even though the single auction price mechanism is a feature of the organised markets, the spot price determined on the organised markets influences the price of products traded over-the-counter. For the possibility of a separate (sub-) market for small retail suppliers which are not active on the power exchange and for which the direct access to the power exchange is difficult see Case COMP/M.3867 – Vattenfall/Elsam and E2 Assets (n 5) para 13; Case COMP/M.3868 – DONG/Elsam/Energi E2 (n 4) para 234.

The effect of capacity withdrawals on the short-term and the forward markets is also an illustration of the price correlation between the two. As the physical and economic withdrawal of capacity is directly associated with the behaviour of the withholding generator on the short-term market, a capacity withdrawal has a direct effect on the price of electricity procured through the spot market but at the same time an indirect effect on the price of electricity procured through the forward market.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 398. Some market participants even suggested product markets as narrow as hourly markets. See also Case COMP/M.5224 – EDF/British Energy (n 7) paras 16–19. The Commission left it open for the Netherlands in Case COMP/M.5467 – RWE/Essent (n 7) paras 30–32 whether a distinction between peak and off-peak hours was appropriate or not. Thus, it left it open whether the product market for off-peak hours was supranational and included Germany as accepted by the Dutch Competition Authority.

Ibid, para 245.

The Commission has considered the market for financial electricity trading as constituting a separate relevant product market in Case COMP/M.3867 – Vattenfall/Elsam and E2 Assets (n 5) para 15 and Case COMP/M.3868 – DONG/Elsam/Energi E2 (n 4) para 245. Both cases relate to the Nordic countries and thus to the Nordic electricity power exchange Nord Pool Spot ASA (‘Nord Pool’). To the contrary, see Case COMP/M.5549 – EDF/Segebel (n 7) paras 18–19, 21 of the Decision on Article 6(2) of the Merger Procedure and paras 81, 83 of the Decision on Article 9(3) of the Merger Procedure and Case COMP/M.4180 – Gaz de France/Suez (n 5) para 682, which both relate to Belgium.

Commission Decision of 10 May 2010 in Case COMP/M.5827 – ELIA/IFM/50HERTZ, paras 13–17; Case COMP/M.4180 – Gaz de France/Suez (n 5) para 683; Case COMP/M.3696 – E.ON/MOL (n 4) paras 219–222. See also Case COMP/M.3268 – Sydkraft/Graninge (n 5) paras 46–51 and Case COMP/M.3868 – DONG/Elsam/Energi E2 (n 4) para 240, where the Commission left open whether balancing services constitute a separate product market or not. See also Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 71–73.

It should be noted that balancing services, which differ across Member States, do not only refer to what we usually mean by the term ‘balancing market’. The balancing services include the so-called ‘spinning reserves’. TSOs need to buy both balancing capacity (MW) and balancing energy (MWh). In order to ensure that there is capacity kept on stand-by mode (‘spinning reserves’) to be called up on by the TSO when balancing energy is needed, the TSO enters into contracts with generating companies under which the latter are obliged to provide reserves. This is often done by means of half-yearly or yearly-tender procedures. In addition to spinning reserves, there is what we usually call the balancing market, i.e. a mechanism by which participants can place short-term bids to the TSO to provide incremental (generate more or consume less) or decremental (generate less or consume more) production. This market is usually based on energy-only bidding (meaning that payment is made only for the energy provided and not for being available to provide that energy). See DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 952ff.

For the substitutability of balancing services see Case COMP/M.3868 – DONG/Elsam/Energi E2 (n 4) paras 237–238; Case COMP/M.3696 – E.ON/MOL (n 4) para 219; Case COMP/M.3440 – EDP/ENI/GDP (n 4) para 51.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 69 ‘Dieser Markt umfasst den erstmaligen Absatz aller Elektrizitätsversorger aus eigener Erzeugung sowie die Netto-Importe von Elektrizität’. The Commission in Case COMP/M.5467 –RWE/Essent (n 7) pointed to the market definition of the Bundeskartellamt, see paras 231–234 ‘According to the BKartA, this market primarily includes the first level of supply of all electricity supply companies which have own generation capacities.’ The definition of the Bundeskartellamt was also approved by the German Federal Court of Justice (Bundesgerichtshof – BGH). See BGH “E.ON/Stadtwerke Eschwege” (Chap. 2 n 126).

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 70.

BGH “E.ON/Stadtwerke Eschwege” (Chap. 2 n 126) paras 18–20, 27 ‘Daraus folgt, dass Weiterverteilungsunternehmen nur den Strom zum Verkauf anbieten können, den sie zuvor von den Stromerzeugern und -importeuren gekauft haben. [] Da Strom nicht speicherbar ist, die Importmöglichkeiten eingeschränkt sind und eine Substitution durch andere Energieträger nur in einem vernachlässigbaren Umfang möglich ist, entscheidet der auf dem Erstabsatzmarkt von den Stromerzeugern und -importeuren durchgesetzte Preis über das Preisniveau auf dem Weiterverteilermarkt.’

Ibid, para 21 ‘Der bloße Handel mit Strom habe deshalb keine eigenständige wettbewerbliche Funktion für die Elektrizitätsmärkte.’

Ibid, para 27.

Säcker (n 3) 33.

BGH “E.ON/Stadtwerke Eschwege” (Chap. 2 n 126) para 18 ‘Würden sie auf eine Handelsstufe mit diesen Unternehmen gestellt, so würde die gehandelte Strommenge nicht zuverlässig abgebildet. Es käme zu Mehrfachzählungen. Der Marktanteil der Stromerzeuger und -importeure würde dadurch – unzutreffend – eingeschränkt, obwohl der gesamte gehandelte Strom allein von ihnen stammt.’

Säcker (n 3) 52–53. The Bundeskartellamt refers to the possibilities available to pump storage plants. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 70, 184.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 184. Säcker likens the arbitrage made by pump-storage power plants to the arbitrage available through long-term supply and forward contracts. The latter offer the opportunity for profitable arbitrage in the sense that a good bet on the price today has an impact on competition in the future. See Säcker (n 3) 53.

Säcker (n 3) 53.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 93–94.

Säcker (n 3) 53–54.

Monopolkommission, ‘Strom und Gas 2009: Energiemärkte im Spannungsfeld von Politik und Wettbewerb’ (Chap. 2 n 49) para 80 footnote 48; Anjali Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (Presented to FERC Market Monitoring Workshop, 3–4 December 2002) 5 <www.​caiso.​com/​docs/​2002/​12/​05/​2002120508555221​628.​pdf> accessed 1 December 2015; Twomey and others (Chap. 2 n 2) 19. The Bundeskartellamt, however, did not deduct the capacity bound by long-term supply agreements for the calculation of the RSI. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 99–100. See Sect. 3.2.2.

Säcker (n 3) 54.

Case COMP/M.5549 – EDF/Segebel (n 7) paras 18, 20 of the Decision on Article 6(2) of the Merger Procedure and paras 80, 82 of the Decision on Article 9(3) of the Merger Procedure; Case COMP/M.5224 – EDF/British Energy (n 7) para 15; Commission Decision of 26 March 2007 in Case COMP/M.4517 – Iberdrola/Scottish Power, para 11. The Commission left open whether combined heat and power (CHP) plants should be considered as constituting a separate product market due to the fact that demand could be oriented to meeting the client’s demand for both energy and heat and that the utilisation of CHP heat requires the client to be situated near the power generator in order to be economically viable to use the heat for industrial purposes. See Commission Decision of 18 December 2002 in Case COMP/M.3007 – E.ON/TXU Europe Group, paras 15, 16.

The assessment could be different if one were to accept that there is a specific demand from the consumers’ side for ‘green’ electricity. The lack of such demand from the consumers’ side is counterbalanced by the existence of national and supranational provisions for the promotion of renewable energy.

Case COMP/M.5467 – RWE/Essent (n 7) para 44; Case COMP/M.4517 – Iberdrola/Scottish Power (n 32) para 27.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 73.

For the move away from feed-in tariffs introduced with the Renewable Energy Sources Act 2014 see further below in Sect. 3.1.1.2.2.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 73 ‘Die Erzeugung und Einspeisung von EEG-Strom erfolgt daher völlig losgelöst von der Nachfragesituation und den Preisen im Stromgroßhandel. Betreiber von EEG-Anlagen können stets unabhängig von der Marktsituation einspeisen und erhalten hierfür die gesetzlich vorgeschriebene Vergütung. Sie unterliegen nicht dem Wettbewerb der übrigen Stromerzeugung. Aufgrund dieser Sondersituation wäre eine Einbeziehung der EEG-Strom-Erzeugung in den Erstabsatzmarkt nicht sachgerecht.’

Ibid 73.

Ibid 73–74.

Säcker (n 3) 46–47.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 73–74, 249–251 ‘Dies wirkt sich zwar unmittelbar auf die Preisbildung an der Strombörse aus, da konventionelle Kraftwerke im Umfang des vermarkteten EEG-Stroms aus der Merit Order verdrängt werden.’

The Bundeskartellamt stresses that the effect of EEG electricity on the market price depends on the demand for electricity in the sense that it is much stronger during peak load hours when the merit order curve is steep compared to base load hours during which the merit order curve is relatively flat. See ibid, 249–251.

Säcker (n 3) 47. For uncertainty as a factor that supports competition on the market see Case C-8/08 T-Mobile Netherlands BV and Others v Raad van bestuur van de Nederlandse Mededingingsautoriteit [2009] ECR I-4529, paras 34–35; Case C-7/95 P John Deere v Commission [1998] ECR I-3111, paras 88–90.

Säcker (n 3) 47.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 259–260.

Ibid 259–260.

Säcker (n 3) 47.

Commission Notice on market definition, para 38; Wernhard Möschel in Ulrich Immenga and Ernst-Joachim Mestmäcker (eds), Wettbewerbsrecht, vol 2 GWB: Kommentar zum Deutschen Kartellrecht (4 edn, Beck 2007) §19 para 27; Case 322/81 Michelin v Commission [1983] ECR 3461, paras 48ff.

Erneuerbare-Energien-Gesetz vom 21. Juli 2014 (BGBl. I S. 1066), das durch Artikel 4 des Gesetzes vom 22. Juli 2014 (BGBl. I S. 1218) geändert worden ist (EEG 2014).

See also Commission Press Release IP/14/867, 23 July 2014.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 103.

Commission Notice on market definition, para 8.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 401.

Commission Decision of 15 December 2009 in Case COMP/M.5711 – RWE/Ensys, para 31; Case COMP/M.5549 – EDF/Segebel (n 7) para 22 of the Decision on Article 6(2) of the Merger Procedure and para 91 of the Decision on Article 9(3) of the Merger Procedure. Even before considering physical trading as part of the wholesale market for electricity, it was accepted that the wholesale market for electricity and the market for physical electricity trading were national in scope. See Case COMP/M.5827 – ELIA/IFM/50HERTZ (n 15) para 20; Case COMP/M.5711 – RWE/Ensys, paras 18–21, 31; Commission Decision of 8 June 1995 in Case No IV/M.568 – EDF/Edison-ISE, para 18.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 402 and Annex B, para 1.

On the issue of incompatibility of market designs and insufficiency of interconnecting infrastructure as obstacles to market integration see ibid, para 519ff.

Regarding the Italian wholesale electricity market, which could be subdivided into different geographic zones, see ibid, Annex B, paras 2–3; Case COMP/M.3729 – EDF/AEM/Edison (n 5) paras 38–41. Similarly, in the case of Greece there may be smaller markets on the basis of the distinction between the interconnected system (i.e. mainland Greece and interconnected islands) and the non-interconnected system. See Commission Decision of 30 March 2009 in Case COMP/M.5445 – Mytilineos/Motor Oil/Corinthos Power, para 23; Commission Decision of 27 August 2008 in Case COMP/M.5249 – Edison/Hellenic Petroleum/JV, para 13; Case COMP/38.700 – Greek Lignite and Electricity Markets (Chap. 2 n 111) paras 171–172. On the contrary, one could consider a wholesale market for electricity which encompasses a major part – if not all – of the Nordic countries. See DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) Annex B, para 5; Case COMP/M.3268 – Sydkraft/Graninge (n 5) paras 21–27, where the Commission left open whether the geographic market was larger than Sweden. See also Leen Vandezande and others, ‘Evaluation of Economic Merger Control Techniques Applied to the European Electricity Sector’ (2006) 19 (6) The Electricity Journal 49, 51. According to Vandezande and others in past cases, the Commission used certain rules of thumb relying on the occurrence of congestion and price differences as well as the relative size of the interconnectors for deciding the geographic scope of markets.

Case COMP/M.4180 – Gaz de France/Suez (n 5) paras 696–732. Market coupling is a method for integrating electricity markets in different areas by the use of implicit auctioning involving two or more power exchanges. Instead of the cross-border transmission capacity being explicitly auctioned among the market players, it is implicitly made available to market players who bid for energy on their power exchange. The power exchanges on either side of the border then use the available cross-border transmission capacity to minimise the price difference between two or more areas. Thus, cheaper electricity generation in one country can meet demand and reduce prices in another country. In case there is sufficient transmission capacity, prices will equalise across adjacent countries. For more information on market coupling see Belpex – Belgian Power Exchange, ‘About Market Coupling’ <www.​belpex.​be/​index.​php?​id=​4> accessed 1 December 2015; EPEX Spot – European Power Exchange, ‘Market Coupling’ <www.​epexspot.​com/​en/​market-coupling> accessed 1 December 2015; EMCC – European Market Coupling Company, ‘Market Coupling’ <www.​marketcoupling.​com/​market-coupling> accessed 1 December 2015.

Case COMP/M.5549 – EDF/Segebel (n 7) paras 22–38 of the Decision on Article 6(2) of the Merger Procedure and paras 91–108 of the Decision on Article 9(3) of the Merger Procedure. For similar reasons the relevant geographic market was considered as Slovakia even though a market coupling mechanism was put in place between Slovakia and the Czech Republic. See Commission Decision of 4 November 2009 in Case COMP/M.5591 – CEZB/JAVYS/JESS JV, para 11.

For the Price Coupling of Regions (PCR), i.e. the initiative of seven European Power Exchanges started in 2009 to develop a single price coupling algorithm to calculate electricity prices across Europe and allocate cross-border capacity on a day-ahead basis see Nord Pool Spot, ‘European Integration: Price Coupling of Regions (PCR)’ <www.​nordpoolspot.​com/​How-does-it-work/​Integrated-Europe/​Price-coupling-of-regions/​> accessed 1 December 2015; Andrew Claxton, ‘Price Coupling Regions (PCR) Initiative’ (Presented to Workshop on Emerging Electricity Target Models, 3 June 2011) <www.​allislandproject​.​org/​GetAttachment.​aspx?​id=​5d08e1ca-45a6-4e1a-b0ff-bbaafcdcb807> accessed 1 December 2015.

Veit Böckers and Ulrich Heimeshoff, ‘The Extent of European Power Markets’ DICE Discussion Paper No 50, April 2012, 4 <www.​dice.​hhu.​de/​fileadmin/​redaktion/​Fakultaeten/​Wirtschaftswisse​nschaftliche_​Fakultaet/​DICE/​Discussion_​Paper/​050_​Boeckers_​Heimeshoff.​pdf> accessed 1 December 2015.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 561–562. See also Case COMP/M.4180 – Gaz de France/Suez (n 5) para 711 c).

Böckers and Heimeshoff (n 62) 33.

See, for instance, Delphine Perrot-Voisard and Georg Zachmann, ‘HHI, an Irrelevant Market Indicator Without a Relevant Market’ LARSEN Working Paper No 21, March 2009 <www.​gis-larsen.​org/​Pdf/​LARSEN_​WP_​21.​pdf> accessed 1 December 2015.

See, for instance, Elbert Dijkgraaf and Maarten CW Janssen, ‘Defining European Wholesale Electricity Markets: An “And/Or” Approach’ Tinbergen Institute Discussion Paper 2009-079/3 <http://​papers.​tinbergen.​nl/​09079.​pdf> accessed 1 December 2015. They show that certain periods exist where the French, Belgian and Dutch markets form a common relevant market. In presence of congestion, however, the market splits and the relevant market shrinks to a bilateral or unilateral market.

Whereas the Dutch Competition Authority considered that there is an interconnected market between the Netherlands and Germany in off-peak hours, the Bundeskartellamt did not accept the existence of a common market with the Netherlands. See Commission Decision of 28 September 2006 in Case COMP/M.4370 – EBN/Cogas Energy, paras 24–27; Case COMP/M.5467 – RWE/Essent (n 7) paras 25, 30–32.

The Residual Supply Index (RSI) takes the amount of imports into the domestic market into account. See Sect. 3.2.2. See also Perrot-Voisard and Zachmann (n 66). The authors propose a one-number HHI for a certain core market that takes into account the competitive pressure from adjacent markets.

Böckers and Heimeshoff (n 62) 32.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 75–81; Monopolkommission, ‘Strom und Gas 2009: Energiemärkte im Spannungsfeld von Politik und Wettbewerb’ (Chap. 2 n 49) 25 para 48; ESMT Competition Analysis (CA), ‘The Electricity Wholesale Sector – Market Integration and Competition: An Assessment from a German Perspective’ 13 January 2010, 21 <http://​static.​esmt.​org/​publications/​whitepapers/​WP-110-01.​pdf> accessed 1 December 2015.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 78–79.

Ibid 17 ‘Die Erstreckung des räumlich relevanten Erstabsatzmarktes auf Österreich wird zu einem höheren Ermittlungsaufwand führen, da die österreichische Stromproduktion künftig mit erfasst werden muss. Die Einbeziehung der österreichischen Stromproduktion wird zu einem leichten Absinken der Marktanteile der deutschen Stromerzeuger führen.’ See also Böckers and Heimeshoff (n 62) 33.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 81–87. In the case of the Netherlands, the Commission left open whether there is a national market for peak hours and a supranational market including Germany for off-peak hours, during which there is sufficient capacity available on interconnectors so that electricity producers in the Netherlands are disciplined by imports from Germany. See Case COMP/M.5467 – RWE/Essent (n 7) paras 25, 30–32. The study on German wholesale prices commissioned by RWE AG also referred to in the report on the sector inquiry of the Bundeskartellamt examined the degree of market integration between Germany and its neighbouring countries. With the use of the SSNIP test the study showed that Germany’s wholesale electricity market was already, for a significant number of trade hours, integrated with the markets of neighbouring countries. In particular, the results for 2008 showed that a supposed concerted price increase of all German suppliers by 5% would have been unprofitable because it would be thwarted by foreign suppliers in half of all trade hours. For the same reason, a greater price increase of 10% by all German suppliers would have been unprofitable in 29% of all hours. Therefore, the German electricity wholesale market was for a significant number of hours in 2008 competitively interlinked with neighbouring countries (in addition to Austria), thus suggesting the endorsement of a geographic market greater than the national. See ESMT Competition Analysis (CA) (n 71). However, the study and its results are criticised by the Bundeskartellamt in its report on the sector inquiry. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 83–87. See also Böckers and Heimeshoff (n 62) 33.

Case COMP/M.5467 – RWE/Essent (n 7) para 53; Case COMP/M.3868 – DONG/Elsam/Energi E2 (n 4) para 267; Case COMP/M.3268 – Sydkraft/Graninge (n 5) para 67; Case COMP/M.4517 – Iberdrola/Scottish Power (n 32) para 18; Case COMP/M.5711 – RWE/Ensys (n 55) paras 31–32.

Luc Peeperkorn and Vincent Verouden, ‘The Economics of Competition’ in Jonathan Faull and Ali Nikpay (eds), The EU Law of Competition (3 edn, OUP 2014) 56; Alison Jones and Brenda Sufrin, EU Competition Law (5th edn, OUP 2014) 59; Andreu Mas-Collel, Michael D Whinston and Jerry R Green, Microeconomic Theory (OUP 1995) 383. Other than sustaining price above the competitive level, market power also refers to the ability to restrict output or quality below competitive levels.

Stoft (Chap. 2 n 30) 318.

Ibid 322–323, 333–334, 370. Both practices concern withholding regardless if executed financially or physically in the sense that the undertaking does not act as a price taker and produces less than would be profitable, assuming all output could be sold at the market price. The withholding boils down to the difference between what a price taker would produce and what is actually produced.

Jones and Sufrin (n 77) 59; Peeperkorn and Verouden (n 77) 61.

Case 27/76 United Brands v Commission (Chiquita Bananas) [1978] ECR 207, para 65; Case 85/76 Hoffmann-La Roche & Co. v Commission [1979] ECR 461, para 38.

Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C45/7 (Guidance on abusive exclusionary conduct) para 10.

Ibid, para 11. According to para 11 footnote 6, the ‘significant’ period of time will depend on the product and on the circumstances of the market in question, but normally a period of two years will be sufficient.

David Harbord and Natalia Fabra, ‘Market Power in Electricity Markets: Do Electricity Markets Require Special Regulatory Rules?’ A Report Concerning the Competition Commission Electricity Generators Inquiry by Market Analysis Ltd, 15 July 2000, 67 <www.​market-analysis.​co.​uk/​PDF/​Reports/​elecmarketruless​urvey.​pdf> accessed 1 December 2015.

Since a generator may have a different market share with respect to its available installed generating capacity and its realised generation, i.e. what it sells to the market, one has to measure both shares. See London Economics Study (Chap. 2 n 22) 15; DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 1002; Commission Decision of 19 March 2002 in Case COMP/M.2684 – EnBW/EDP/Cajastur/Hidrocantábrico, para 30.

In addition, concentration measures inevitably rely on the market being defined correctly, which raises issues of appropriate market definition. If the relevant product and/or geographic market are defined too broadly or too narrowly, the results of concentration measures turn out to be arbitrary.

London Economics Study (Chap. 2 n 22) 54.

Ibid 54; Severin Borenstein, James Bushnell and Christopher R Knittel, ‘Market Power in Electricity Markets: Beyond Concentration Measures’ (1999) 20 (4) The Energy Journal 65, 68; Harbord and Fabra (n 84) 68–69.

Borenstein, Bushnell and Knittel, ‘Market Power in Electricity Markets: Beyond Concentration Measures’ (n 88) 68; Borenstein, Bushnell and Wolak, ‘Measuring Market Inefficiencies in California’s Restructured Wholesale Electricity Market’ (Chap. 2 n 1) 1377; Twomey and others (Chap. 2 n 2) 18.

Borenstein, Bushnell and Knittel, ‘Market Power in Electricity Markets: Beyond Concentration Measures’ (n 88) 67; Giulio Federico, Xavier Vives and Natalia Fabra, Competition and Regulation in the Spanish Gas and Electricity Markets Reports of the Public-Private Sector Research Center 1, November 2008, 12 <www.​iese.​edu/​es/​files/​energy%20​report_​Eng_​tcm5-27082.​pdf> accessed 1 December 2015; Frank A Wolak, ‘Diagnosing the California Electricity Crisis’ (2003) 16 (7) The Electricity Journal 11, 15; Bert Willems and Emmanuel De Corte, ‘Market Power Mitigation by Regulating Contract Portfolio Risk’ (2008) 36 Energy Policy 3787, 3788; London Economics Study (Chap. 2 n 22) 54.

Dmitri Perekhodtsev, Lester B Lave and Seth Blumsack, ‘The Model of Pivotal Oligopoly Applied to Electricity Markets’ Carnegie Mellon Electricity Industry Center Working Paper 02-06, September 2002, 14 <http://​wpweb2.​tepper.​cmu.​edu/​ceic/​pdfs/​CEIC_​02_​06.​pdf> accessed 1 December 2015; Harbord and Fabra (n 84) 66. See also OECD, ‘Competition Issues in the Electricity Sector’ (2005) 6 (4) OECD Journal of Competition Law and Policy 81, 109–112. It is stressed that the traditional HHI is a poor indicator of market power in a market with capacity constraints like the electricity wholesale market. Therefore, it should be replaced by the ‘adjusted HHI’.

For an overview of the various methods of detecting market power see Twomey and others (Chap. 2 n 2).

Marc Bataille, Alexander Steinmetz and Susanne Thorwarth, ‘Screening Instruments for Monitoring Market Power in Wholesale Electricity Markets – Lessons from Applications in Germany’ DICE Discussion Paper No 150, July 2014, 3 <www.​dice.​hhu.​de/​fileadmin/​redaktion/​Fakultaeten/​Wirtschaftswisse​nschaftliche_​Fakultaet/​DICE/​Discussion_​Paper/​150_​Bataille_​Steinmetz_​Thorwarth.​pdf> accessed 1 December 2015.

Twomey and others (Chap. 2 n 2) 20; London Economics Study (Chap. 2 n 22) 290.

Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 8; Anjali Sheffrin, ‘Critical Actions Necessary for Effective Market Monitoring’ (Draft Comments, FERC RTO Workshop, 19 October 2001), 8 <www.​caiso.​com/​docs/​2001/​10/​19/​2001101915352626​702.​pdf> accessed 1 December 2015.

In the study undertaken by London Economics in the context of the European Commission’s sector inquiry, the RSI was calculated for several European countries. See London Economics Study (Chap. 2 n 22). National competition authorities have also used the RSI in the context of national energy sector inquiries. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98); Nederlandse Mededingingsautoriteit (Netherlands Competition Authority, since 2013 Authority for Consumers and Markets – Autoriteit Consument en Markt), ‘Monitor Energy Markets 2007: Analysis of Developments on the Dutch Wholesale Markets for Gas and Electricity’ September 2008, 50ff <file:///C:/Users/user/Downloads/Monitor_Energy_Markets_2007.pdf> accessed 1 December 2015; Autorità Garante della Concorrenza e del Mercato (Italian Competition Authority) and Autorità per l’energia elettrica e il gas e il sistema idrico (Italian Regulatory Authority for Electricity Gas and Water), ‘Indagine conoscitiva sullo stato della liberalizzazione dei settori dell’energia elettrica e del gas naturale (IC22)’ May 2005, 73ff <www.​autorita.​energia.​it/​allegati/​pubblicazioni/​IC22.​pdf> accessed 1 December 2015. The findings and the conclusions of the sector inquiries on the Italian electricity and natural gas markets are summarised at Antonio Capobianco, ‘Sector Inquiries on the Italian Electricity and Natural Gas Markets Expose Failures in Both Liberalisation Processes’ Competition Law Insight, 28 June 2005 <www.​competitionlawin​sight.​com/​industry-sector/​utilities-and-energy/​italy---energy-liberalisation-9126.​htm?​origin=​internalSearch> accessed 1 December 2015.

The Pivotal Supply Index (PSI) which was the precursor of the Residual Supply Index (RSI) is a binary indicator set equal to one if the supplier is pivotal and equal to zero if the supplier is not pivotal. As such it does not give an indication of the extent of a generator’s indispensability to meeting demand and thus its degree of market power. See London Economics Study (Chap. 2 n 22) 57.

Twomey and others (Chap. 2 n 2) 19.

Long-term contracts concern capacity contracted under long-term fixed prices. In the DG Competition data requests (2005, 2006) for the purposes of the sector inquiry, a long-term supply contract was defined as a contract of duration of three years or more or with no defined end date. See London Economics Study (Chap. 2 n 22) 70 footnote 36.

Twomey and others (Chap. 2 n 2) 20; Monopolkommission, ‘Strom und Gas 2009: Energiemärkte im Spannungsfeld von Politik und Wettbewerb’ (Chap. 2 n 49) para 80 footnote 48; Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 5; London Economics Study (Chap. 2 n 22) 74, 289.

Gert Brunekreeft, ‘Ownership Unbundling in Electricity Markets – A Social Cost Benefit Analysis of the German TSOs’ EPRG Working Paper 0816, August 2008, 4 <www.​eprg.​group.​cam.​ac.​uk/​wp-content/​uploads/​2008/​11/​eprg0816.​pdf> accessed 1 December 2015.

London Economics Study (Chap. 2 n 22) 57; Twomey and others (Chap. 2 n 2) 20.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 1013.

London Economics Study (Chap. 2 n 22) 57.

Twomey and others (Chap. 2 n 2) 20.

Ibid 20.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 98 ‘Vielmehr wird darauf abgestellt, dass ein wettbewerbliches Problem vorliegt, wenn der Indikator in einem bestimmten Anteil an Stunden unter einem bestimmten Schwellenwert liegt.’

Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 11; Twomey and others (Chap. 2 n 2) 20; David Newbery, ‘Predicting Market Power in Wholesale Electricity Markets’ EUI Working Papers, RSCAS 2009/03, 5 <http://​cadmus.​eui.​eu/​bitstream/​handle/​1814/​10620/​EUI_​RSCAS_​2009_​03.​pdf?​…> accessed 1 December 2015. The Bundeskartellamt supports the assertion that 5% of hours in a year corresponds to a ‘significant period of time’. It was argued that, as a low RSI normally corresponds to high quantities of electricity sold to the market and high market prices, with an RSI under a specific threshold for more than 5% of the time, more than 5% of the turnover in the market can be achieved. The turnover is determined by the quantities produced multiplied by the EEX spot price. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 106–107. For a criticism on this stance see Gisela Drozella and Harald Krebs, Marktbeherrschung im Bereich Stromerzeugung/Stromgroßhandel: Eine kritische Analyse der neueren Sicht des Bundeskartellamts (Veröffentlichungen des Instituts für deutsches und europäisches Wirtschafts-, Wettbewerbs- und Regulierungsrecht der Freien Universität Berlin, Bd. 35, Lang 2012) 78–80. According to the Commission, a significant period of time during which an undertaking is profitably increasing prices above the competitive level ‘will depend on the product and on the circumstances of the market in question’. See Guidance on abusive exclusionary conduct, para 11 footnote 6. Thus, whereas ‘normally a period of two years will be sufficient’, it could be argued that on account of the specificities of electricity markets and the huge impact that abuse of market power can have on consumers a time period which corresponds to roughly 18 days in a year does qualify as ‘a significant period of time’. See Sect. 5.​3.​2.​1.

Sheffrin, ‘Critical Actions Necessary for Effective Market Monitoring’ (n 95) 8.

Ibid 8.

Ibid 8.

The relationship between the RSI and the price-cost mark-up can be used for a variety of applications, including performing an economic assessment of the market power mitigation benefit of expanding a transmission path by analysing the benefits of more imports into a region which can increase RSI and reduce prices. Another application of the relationship between the RSI and the price-cost mark-up could be to test the level of reserve margins necessary to yield competitive market results. See ibid 9–10.

London Economics Study (Chap. 2 n 22) 78–79.

Ibid 61, 83, 815, 838–839; Gregory Swinand and others, ‘Modelling EU Electricity Market Competition Using the Residual Supply Index’ (2010) 23 (9) The Electricity Journal 41. The authors discuss how the RSI could be used to undertake ex-ante analysis of electricity market competition. They argue that, whereas the need for additional research is significant, ‘the evidence continues to support the use of the RSI as a key market structure variable in power generation market analysis.’ See also Newbery, ‘Predicting Market Power in Wholesale Electricity Markets’ (n 109). For a contrary view see Oscar Arnedillo, ‘What does the Evidence Really Say about the Residual Supply Index?’ (2011) 24 (1) The Electricity Journal 57.

Bataille, Steinmetz and Thorwarth (n 93) 18. See Sect. 3.2.2.1.

Brunekreeft (n 102) 10.

Ibid 10.

Säcker (n 3) 68. See also Drozella and Krebs (n 109) 77ff; Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 106 ‘die Möglichkeit, Marktmacht auszuüben, aber noch von weiteren Faktoren (etwa der jeweiligen Zusammensetzung des Kraftwerkparks des betroffenen Unternehmens []) abhängen kann.’ Therefore, even with an RSI under 1.0 for more than 5% of the hours in a year the assumption of market dominance can be refuted when structural factors on the market imply that the undertaking does not have the ability to profitably impose supra-competitive prices. ‘[D]iese Vermutung [kann] widerlegt werden, wenn strukturelle Faktoren im Markt darauf hindeuten, dass das betroffene Unternehmen trotz des Überschreitens der Schwellenwerte ausnahmsweise nicht über die Möglichkeit verfügt, gewinnbringend Preise über dem Wettbewerbsniveau zu fordern.’

London Economics Study (Chap. 2 n 22) 815 ‘Pivotalness gives firms market power in electricity markets, but does not necessarily prove it.’

Federico, Vives and Fabra (n 90) 13.

Another limitation of the RSI acknowledged by Sheffrin is that congestions within the area where RSIs are computed are not explicitly considered. See Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 16.

Sheffrin, ‘Critical Actions Necessary for Effective Market Monitoring’ (n 95); Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30).

Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 6.

London Economics Study (Chap. 2 n 22) 74, 290, 801 footnote 21. The same holds true for the threshold applied by the FERC for the PSI. If the value of the PSI is 1 for more than 20% of the time, then this is indicative of a pivotal supplier. ‘As with the threshold applied in relation to the RSI, this threshold is not the result of rigorous economic analysis and as such should be considered to be an indicator of potential market power issues rather than a steadfast rule in relation to overall conclusions that can be drawn from the results.’ See London Economics Study (Chap. 2 n 22) 76, 291, 799 footnote 20. See also Twomey and others (Chap. 2 n 2) 21.

Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 6. The threshold value of 1.1 was suggested by Sheffrin by adding a safety distance to her findings of an intersection at 1.2. See Monopolkommission, ‘Energie 2013: Wettbewerb in Zeiten der Energiewende’ Sondergutachten 65, September 2013, para 109 <www.​monopolkommissio​n.​de/​index.​php/​de/​gutachten/​sondergutachten/​208-sondergutachten-65> accessed 1 December 2015.

London Economics Study (Chap. 2 n 22) 355, 487.

Bataille, Steinmetz and Thorwarth (n 93) 26–27.

Ibid 27.

The ‘largest seller’ as said by Sheffrin. See Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 5.

Bataille, Steinmetz and Thorwarth (n 93) 27.

Säcker (n 3) 68; Bataille, Steinmetz and Thorwarth (n 93) 27–28. Competition authorities could validate cost levels and thus the intersection of RSI with zero mark-ups by using data gathered and proved in the context of sector inquiries.

Monopolkommission, ‘Energie 2013: Wettbewerb in Zeiten der Energiewende’ (n 126) para 106ff. The Bundeskartellamt used both thresholds of 1.0 and 1.1. Accordingly, dominance can be assumed, in the sense of section 18 para 4 GWB (ex section 19 para 3 GWB), with an RSI value of less than 1.0 for more than 5% of the hours in a year. With an RSI of less than 1.1 for more than 5% of the hours in a year there might be significant market power but other criteria – not mentioned – should be taken into account for significant market power to turn into dominance. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 106 and Sect. 3.2.4.3.

In Germany this can be explained by the different costs in generation of electricity from coal and gas, which are predominantly setting the market clearing price. Due to relatively low coal prices, in 2012 production by coal was cheaper than by gas. Thus, coal-fired plants could generate a higher mark-up than gas-fired plants, which gain lower mark-ups than coal-fired and other base load power plants. Therefore, a supplier of power generated from gas exhibits less market power. See Bataille, Steinmetz and Thorwarth (n 93) 19.

Ibid 19–20.

Brunekreeft (n 102) 10.

Newbery, ‘Predicting Market Power in Wholesale Electricity Markets’ (n 109) 4; Drozella and Krebs (n 109) 77.

Brunekreeft (n 102) 10; DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 366–367. The impact of trading in the spot market on futures and forwards is one of Lang’s arguments for not deducting long-term supply contracts from company’s relevant capacity for the calculation of the RSI. See Lang (n 98) 11.

Säcker (n 3) 68–69. For this reason, Säcker argues that the RSI should be one indicator amongst others to measure market power and ascertain a dominant position.

The Monopolkommission has acknowledged that the RSI focuses solely on the structure of the market with no recourse to whether it would be really profitable for a supplier to withhold capacities. See Monopolkommission, ‘Strom und Gas 2011: Wettbewerbsentwicklung mit Licht und Schatten’ Sondergutachten 59, September 2011 <www.​monopolkommissio​n.​de/​index.​php/​de/​gutachten/​sondergutachten/​242-sondergutachten-59> accessed 1 December 2015, para 480 ‘Überdies sind dem bloßen Wert des RSI keine Informationen über die tatsächlich relevant Grenze inhärent, ab der es für einen Anbieter lohnenswert wird, tatsächlich Kapazitäten zurückzuhalten und damit Marktmacht missbräuchlich auszuspielen.’ See also Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 24, 160, 284 ‘dass einige Erzeugungsunternehmen aufgrund ihrer marktbeherrschenden Stellung sowie ihrer diversifizierten Kraftwerksportfolien sowohl einen Anreiz als auch die Fähigkeit haben, den Strompreis maßgeblich zu beeinflussen’. The formulation of the Bundeskartellamt is, however, wrong. It stresses that because of their dominant market position, undertakings have the incentive as well as the ability to materially influence the market price for electricity. A decision about market dominance, however, should be the conclusion after the undertaking’s incentive and ability to materially influence the market price have been assessed. See Drozella and Krebs (n 109) 93.

Drozella and Krebs (n 109) 91–92.

Case COMP/M.5224 – EDF/British Energy (n 7) para 26; Case COMP/M.5467 – RWE/Essent (n 7) para 42.

Drozella and Krebs (n 109) 91.

Ibid 93–95. The authors propose an alternative test to the RSI, where the price effect is calculated in Euro/MWh on the basis of the hourly merit order. This involves identifying the rise of the supply curve at its crossing point with the demand curve and multiplying this value with a close to reality, preferably generator-specific or, even uniform, capacity value. The Return on Withholding Capacity Index (RWC), which is proposed as a complementary and not an alternative index to the RSI, is based on this idea.

Bataille, Steinmetz and Thorwarth (n 93) 20.

Ibid 4.

Ibid 20–21. For these reasons, the authors acknowledge the weaknesses in applying behavioural indices such as the Lerner-Index and the Price-Cost Mark-up and they propose the Return on Withholding Capacity Index (RWC).

Ibid 23.

Ibid 22–23.

Ibid 23.

Ibid 25.

Bataille, Steinmetz and Thorwarth (n 93) 28. The authors suggest analysing the actual cost of anecdotally selected power plants that have a high likelihood of being withheld so as to accumulate knowledge and experience in estimating cost and profit margins.

Ibid 14.

Ibid 15.

Ibid 24.

See Chap. 4.

Drozella and Krebs (n 109) 94.

Bataille, Steinmetz and Thorwarth (n 93) 29.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 90.

According to market concentration analysis, an HHI above 1.800 corresponds to a highly concentrated market. See Richard Whish and David Bailey, Competition Law (7th edn, OUP 2012) 43. On the basis of available generation capacity the results were 2.093 for the year 2007 and 2.045 for the year 2008. On the basis of net electricity generation the results were 2.183 for the year 2007 and 2.145 for the year 2008. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 91.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 91ff.

Ibid 95.

Ibid 95.

United Brands v Commission (Chiquita Bananas) (n 81) para 65; Hoffmann-La Roche & Co. v Commission (n 81) para 38.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 96 footnotes 128, 129.

Umsatzsteuergesetz (UstG) idF der Bekanntmachung vom 21. Februar 2005 (BGBl. I S. 386), das zuletzt durch Artikel 9 des Gesetzes vom 25. Juli 2014 (BGBl. I S. 1266) geändert worden ist.

Ibid, para 1.

Drozella and Krebs (n 109) 60.

Drozella and Krebs (n 109) 61.

Ibid, Summary b) ‘Haben mehrere Unternehmen aufgrund ihrer Stellung auf einem vorgelagerten Markt neben- und unabhängig voneinander die Möglichkeit, wirksamen Wettbewerb auf einem nachgelagerten Markt zu verhindern, kann jedes von ihnen marktbeherrschend i. S. des Art. 82 EG sein’ (emphasis added). See also para 32.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 96 ‘Haben mehrere Unternehmen neben- oder unabhängig voneinander die Möglichkeit, wirksamen Wettbewerb auf einem Markt zu verhindern, so ist jedes von ihnen als im Sinne von § 19 GWB, Art.102 AEUV marktbeherrschend anzusehen.’

Drozella and Krebs (n 109) 61.

Drozella and Krebs (n 109) 61.

Ibid, para 33 ‘Daran bestehen jedenfalls insoweit Zweifel, als keineswegs naheliegt, dass eine wettbewerbsfähige Resisestellenkarte mit Vorsteuerabzugsmöglichkeit zwingend den Umsatzsteuerausweis für die Rechnungen jedes noch so unbedeutenden Erbringers relevanter Reiseleistungen voraussetzt.’

See Case 26–76 Metro SB-Großmärkte GmbH & Co. KG v Commission of the European Communities [1977] ECR 1875. The producer in this case had a market share of less than 10%. See also Commission Decision 77/327/EEC of 19 April 1977, IV/28.841- ABG/Oil companies operating in the Netherlands [1977] OJ L 117/1. During the oil crisis of 1973, all oil companies in the Netherlands were found to be dominant towards their customers. Due to the general shortage of oil supplies each company tried to maintain supplies to its regular customers. They were not able to make up the deficiencies of the other companies and thus they were not in competition with each other. The ECJ annuled the decision due to lack of evidence of abusive behaviour. The issue of dominance of suppliers was left open. See Case 77/77 of 29 June 1978 Benzine en Petroleum Handelsmaatschappij BV and Others v Commission [1978] ECR 1513, para 18.

Kokkoris (n 152); Kurt Markert in Immenga and Mestmäcker (n 49) §20 para 8ff.

Drozella and Krebs (n 109) 60ff. See also Säcker (n 3) 65, who leaves open whether a concept of individual dominance by more than one undertaking would be legally and economically justified.

Joined Cases C-241/91 P and C-242/91 P Magill (n 175) paras 46–47; Case T-69/89 Radio Telefis Eireann v Commission [1991] ΕCR II-485, paras 61–63; Commission Decision of 21 December 1988, IV/31.851 – Magill TV Guide/ITP, BBC and RTE [1989] OJ L78/43, para 20.

See, for instance, Evrard (n 176) 500ff; Thomas F Cotter, ‘The Essential Facilities Doctrine’ in Keith N Hylton (ed), Antitrust Law and Economics, vol 4 Encyclopedia of Law and Economics (2 edn, Elgar 2010) 164ff. For a possible application of the essential facilities doctrine in Reisestellenkarte see Ensthaler and Kempel (n 169) 1112.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 37.

Drozella and Krebs (n 109) 63.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 97.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 96–97, citing Wessely (n 197) para 87 commenting on the decision in Hoffmann-La Roche & Co. v Commission (n 81) (para 41).

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 97, citing Guidance on abusive exclusionary conduct, para 14.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 97.

Ibid 97.

Drozella and Krebs (n 109) 69.

Ibid 70.

Ibid 71–72.

Case T-83/91 Tetra Pak International SA v Commission [1994] ECR II-755, para 109 ‘It is clear that holding such market shares [approximately 90%] meant that the applicant’s position on the market made it an inevitable partner for packers and guaranteed it the freedom of conduct characteristic of a dominant position.’; Case T-219/99 British Airways plc v Commission [2003] ECR II-5917, paras 211, 216, 217; Michelin v Commission (n 49) paras 52, 56. The commentary referred to by the Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 97 footnote 132, includes these cases in the ‘unavoidable trading partner’ cases. See Wessely (n 197) para 87.

Drozella and Krebs (n 109) 72.

Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 11.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 106. See also Monopolkommission, ‘Strom und Gas 2009: Energiemärkte im Spannungsfeld von Politik und Wettbewerb’ (Chap. 2 n 49) para 80; Monopolkommission, ‘Energie 2013: Wettbewerb in Zeiten der Energiewende’ (n 126) para 106ff.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 107.

Ibid 106, citing Sheffrin, ‘Critical Actions Necessary for Effective Market Monitoring’ (n 95) 8.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 99ff.

The same method is used by Lang, who argues against the deduction of the long-term supply contracts from Company’s Relevant Capacity. See Lang (n 98) 11. For a critique of his arguments see Drozella and Krebs (n 109) 89. Likewise, the Bundeskartellamt, without discussing the issue at all, did not subtract capacities committed under long-term supply contracts from the Company’s Relevant Capacity. As a further minor deviation, both of the Bundeskartellamt and Lang from Sheffrin’s method of calculation of the Total Supply parameter (‘Must-take Capacities’) see Drozella and Krebs (n 109) 89–90.

Säcker (n 3) 67; Drozella and Krebs (n 109) 90.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 99ff.

See also Sect. 3.1.1.2.2.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 103 footnote 144; Drozella and Krebs (n 109) 100–101.

This is the case especially when electricity production from renewables is not supported through a feed-in tariff system in which a fixed price is paid per KWh electricity but through a feed-in premium which is paid on top of the market price for electricity. See Sect. 3.1.1.2.2.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 94–96, 114.

See, for instance, Jones and Sufrin (n 77) 716ff.

Case T-342/99 Airtours plc v Commission [2002] ECR II-2585, para 59; Joined Cases C-68/94 and C-30/95 France and Others v Commission (Kali & Salz) [1998] ECR I-1375, para 221; Case T-102/96 Gencor v Commission [1999] ECR II-753, para 163.

David Newbery, ‘Electricity Liberalisation in Britain: The quest for a satisfactory wholesale market design’ (2005) 26 The Energy Journal, Special Issue: European Electricity Liberalisation 43, 57; OECD, ‘Competition Issues in the Electricity Sector’ (n 91) 85; Willems and De Corte (n 90) 3787; Federico, Vives and Fabra (n 90) 10.

See OECD, ‘Competition Issues in the Electricity Sector’ (n 91) 86; DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 572.

The models, which are based on oligopoly interaction theories, are trying to simulate competition in electricity generation markets. Depending on the assumption as to how generators compete with each other, they can be grouped into three categories, i.e. those which assume that players compete in output levels (Cournot), in supply functions (Supply Function Equilibria) and in price-quantity bids (Bid Function Equilibria). On the Cournot model see Carlos Ocaña and Arturo Romero, ‘A Simulation of the Spanish Electricity Pool’ Comisión Nacional del Sistema Eléctrico, DT 005/98, June 1998 <http://​energia.​cnmc.​es/​cne/​doc/​publicaciones/​dt005_​98.​pdf> accessed 1 December 2015; Borenstein and Bushnell, ‘An Empirical Analysis of the Potential for Market Power in California’s Electricity Industry’ (Chap. 2 n 95); Boaz Moselle, David Newbery and Dan Harris, ‘Factors Affecting Geographic Market Definition and Merger Control for the Dutch Electricity Sector’ The Brattle Group Limited, Final Report, June 2006 <file:///C:/Users/user/Downloads/Brattle_Group_NMa_Geog_rapport_fusies_energiesector_June_2006.pdf> accessed 1 December 2015. On supply function competition see Green and Newbery (Chap. 2 n 1); Kai-Uwe Kühn and Matilde P Machado, ‘Bilateral Market Power and Vertical Integration in the Spanish Electricity Spot Market’ CEMFI Working Paper No 0414, September 2004 <www.​cemfi.​es/​ftp/​wp/​0414.​pdf> accessed 1 December 2015; Ali Hortaçsu and Steven L Puller, ‘Understanding Strategic Bidding in Multi-unit Auctions: A Case Study of the Texas Electricity Spot Market’ (2008) 39 The RAND Journal of Economics 86. On competition in price-quantity bids see Nils-Henrik Merch von der Fehr and David Harbord, ‘Spot Market Competition in the UK Electricity Industry’ (1993) 103 The Economic Journal 531; Antón Garcıa-Dıaz and Pedro L Marın, ‘Strategic Bidding in Electricity Pools with Short-lived Bids: An Application to the Spanish Market’ (2003) 21 International Journal of Industrial Organization 201; Maria-Angeles de Frutos and Natalia Fabra, ‘How to Allocate Forward Contracts: The Case of Electricity Markets’ (2012) 56 European Economic Review 451. All of the simulation studies come to the conclusion – which does not differ from what we would expect from any other approach to assessing market power and competition – that in concentrated markets prices can rise significantly above competitive levels especially in peak demand periods. Furthermore, reductions in concentration result in significant pro-competitive effects. The simulation models, however, can be complex. Even though they can be used to understand and measure market power in generation markets, they do have their caveats. In order to be able to simulate the electricity wholesale markets they inevitably need to make stylised assumptions on the operation of the market which makes their results dependent on them. See Federico, Vives and Fabra (n 90) 13.

Federico, Vives and Fabra (n 90) 10.

German Electricity Wholesale Market (Chap. 2 n 49) paras 21, 39.

Ibid, para 19.

Ibid, para 19; Säcker (n 3) 72.

Säcker (n 3) 73.

Willems and De Corte (n 90) 3787; Federico, Vives and Fabra (n 90) 10; Marc Ivaldi and others, ‘The Economics of Tacit Collusion’ IDEI, Final Report for DG Competition, European Commission, 19 <http://​ec.​europa.​eu/​competition/​mergers/​studies_​reports/​the_​economics_​of_​tacit_​collusion_​en.​pdf> accessed 1 December 2015.

German Electricity Wholesale Market (Chap. 2 n 49) paras 16–18.

Ibid, para 62.

German Electricity Wholesale Market (Chap. 2 n 49) para 20. The issue of monitoring others’ behaviour and the threat of deterrence actions in cases of retaliation refer to internal relations characterised by the absence of competition between the members of the oligopoly. See Ulrich Immenga and Torsten Körber in Ulrich Immenga and Ernst-Joachim Mestmäcker (eds), Wettbewerbsrecht, vol 1 EG: Kommentar zum europäischen Kartellrecht (4 edn, Beck 2007), Art 2 FKVO (Merger Regulation) para 466.

However, since any price increase in the electricity wholesale market results in a windfall profit for all generators in the market, it cannot be used as a stand-alone ground for developing a theory of coordination between the members of an alleged oligopoly. See Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (Chap. 2 n 5) 457.

Säcker (n 3) 72, 74.

Säcker (n 3) 75.

Säcker (n 3) 75.

German Electricity Wholesale Market (Chap. 2 n 49) para 20.

Twomey and others (Chap. 2 n 2) 13; Rafael Emmanuel A Macatangay, ‘Tacit Collusion in the Frequently Repeated Multi-Unit Uniform Price Auction for Wholesale Electricity in England and Wales’ (2002) 13 European Journal of Law and Economics 257, 258.

It has been stated by Sheffrin, without further explanation, and has been repeated by others that the RSI gives the possibility (by using a higher threshold than the one for individual dominance) to account for possible collusion. See Sheffrin, ‘Predicting Market Power Using the Residual Supply Index’ (n 30) 13; Twomey and others (Chap. 2 n 2) 21. What is presumably meant is that when comparing mark-ups with the RSI for individual hours there could be an intersection point above e.g. 1.1 when undertakings are colluding. Not much credit can be given to this possibility of the RSI, however. For such an analysis one would need, in addition to the RSI values, the hourly mark-ups of generators, the estimation of which is very time-consuming and not very accurate. The same restriction applies with regard to the RWC. I am grateful to Marc Bataille, Senior Economist in Germany’s Monopolies Commission, for our fruitful discussions and his insightful comments on the RSI and the RWC.

Massimo Motta, Competition Policy: Theory and Practice (CUP 2004) 185ff; Wolfgang Kerber and Ulrich Schwalbe, ‘Ökonomische Grundlagen des Wettbewerbsrechts’ in Münchener Kommentar zum europäischen und deutschen Wettbewerbsrecht (Kartellrecht), Bd. 1 Europäisches Wettbewerbsrecht (Beck, 2007) para 1101ff.

BKartA, “Phonak/GN Resound” (n 239) para 136 ‘Im Wesentlichen definiert sich ein Oligopolist durch sein Verhalten und nicht durch Kriterien wie Marktanteile oder Eigentümerstruktur. Symmetrien in den genannten Kriterien sind weder notwendig noch hinreichend dafür, dass tatsächlich koordiniertes Verhalten vorliegt.’; Monopolkommission, ‘Mehr Wettbewerb auch im Dienstleistungssektor!’ Hauptgutachten XVI, Juli 2006, para 505 <www.​monopolkommissio​n.​de/​index.​php/​de/​gutachten/​hauptgutachten/​175-hauptgutachten-xvi> accessed 1 December 2015.

Małgorzata Sadowska, ‘Energy Liberalisation: Excessive Pricing Actions Dusted off?’ (2011) 32 (9) European Competition Law Review 41, 44.

Macatangay (n 244).

Ibid 270.

Airtours plc v Commission (n 222) para 59; France and Others v Commission (Kali & Salz) (n 222) para 221; Gencor v Commission (n 222) para 163.

Säcker (n 3) 72, citing BGH, “E.ON/Stadtwerke Eschwege” (Chap. 2 n 126) para 52 and BGH, Beschl. v. 7.2.2006, Az. KVR 5/05 “DB Regio/üstra”, para 43.

Airtours plc v Commission (n 222) para 59; France and Others v Commission (Kali & Salz) (n 222) para 221; Gencor v Commission (n 222) para 163.

Macatangay (n 244) 259.

German Electricity Wholesale Market (Chap. 2 n 49) para 14 Table 1. The accurate market share could not be disclosed due to confidentiality requirements.

Ibid, para 13.

See Sect. 3.2.1.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (Chap. 2 n 5) 455.

German Electricity Wholesale Market (Chap. 2 n 49) para 14 Table 1 and para 15.

Ibid, para 16.

Ibid, paras 17–18.

Ibid, para 19.

Ibid, para 20.

Ibid, para 21. The European sector inquiry revealed that the average hourly total import/export capacity relative to the installed generation capacity in Germany for 2004 was 16%.

Ibid, para 22. See also the analysis of Säcker (n 3) 70–86. Market developments after the commitments decision against E.ON speak against the existence of a collective dominant position in the German wholesale electricity market.

German Electricity Wholesale Market (Chap. 2 n 49) para 23.

Ibid, para 23, citing BGH, “E.ON/Stadtwerke Eschwege” (Chap. 2 n 126). The Commission also referred to a collective dominant position of RWE together with at least E.ON in the merger decision between RWE and Essent. See Case COMP/M.5467 – RWE/Essent (n 7) para 257.

German Electricity Wholesale Market (Chap. 2 n 49) para 24.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (Chap. 2 n 5) 456.

Ibid 456.

Other than that, the data to measure the RSI was already available. The London Economics Study analysed the electricity wholesale markets of six Member States including Germany for the period 2003 to 2005. The commitments decision against E.ON concerned the withholding of capacities between 2002 and 2007 and especially in 2003 and 2004. For other possible reasons for not using electricity-specific indices see Sect. 5.​3.​2.

Borenstein, Bushnell and Wolak, ‘Measuring Market Inefficiencies in California’s Restructured Wholesale Electricity Market’ (Chap. 2 n 1) 1379.

Ibid; Frank A Wolak and Robert H Patrick, ‘The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market’ University of California, POWER Working Paper 047, February 1997 <www.​ucei.​org/​PDF/​pwp047.​pdf> accessed 1 December 2015. Wolak and Patrick found that in the UK market higher-cost combined-cycle gas turbine generators were providing base load power that could be supplied more cheaply by coal-fired plants that were being withheld by the two largest firms.

James Bushnell, ‘A Mixed Complementarity Model of Hydrothermal Electricity Competition in the Western United States’ (2003) 51 Operations Research 80, 89.

Borenstein, Bushnell and Wolak, ‘Measuring Market Inefficiencies in California’s Restructured Wholesale Electricity Market’ (Chap. 2 n 1) 1379.

Ibid.

Ibid; Severin Borenstein, James Bushnell and Steven Stoft, ‘The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry’ (2000) 31 RAND Journal of Economics 294, 317; Paul L Joskow and Jean Tirole, ‘Transmission Rights and Market Power on Electric Power Networks’ (2000) 31 (3) RAND Journal of Economics 450, 462.

On the distinction between exploitative and exclusionary abuses see Jones and Sufrin (n 77) 367ff.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 326, 403, 437; Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 115; Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (Chap. 2 n 22) 25; Stoft (Chap. 2 n 30) 322.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 119.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (Chap. 2 n 5) 458; François Lévêque, ‘Antitrust Enforcement in the Electricity and Gas Industries: Problems and Solutions for the EU’ (2006) 19 (5) The Electricity Journal 27, 32–33.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 119; Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (Chap. 2 n 5) 456; Lévêque (n 281) 32–33.

See Sect. 2.​4.​3.​1.

London Economics Study (Chap. 2 n 22) 86ff; Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 123ff.

London Economics Study (Chap. 2 n 22) 37, 86ff; Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 133ff.

Therefore, the discussion on the appropriate marginal costing and the relevant benchmark for the assessment of excessive prices that follows is also relevant here. In the case of the study by London Economics, the value of marginal cost was a modelled representation of the actual marginal cost claimed by the electricity operators which was estimated by the GED (Global Energy Decisions) optimal dispatch modelling of each system. An assessment of the modelled marginal cost was undertaken to investigate whether it allowed for a sufficient contribution to units’ fixed and start-up costs. See London Economics Study (Chap. 2 n 22) 61, 91.

Ibid 85; Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 134.

See, for instance, the tables produced by the Bundeskartellamt in Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 156–157.

London Economics Study (Chap. 2 n 22) 85.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 134, 158.

Ibid 158.

Ibid.

Ibid.

Ibid.

Ibid 148, 158.

Ibid 158.

Ibid 148, 158.

Ibid 148.

Ibid. For this reason withholding can be either an ‘error of omission’ or an ‘error of commission’. See London Economics Study (Chap. 2 n 22) 49.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 159.

It is also possible that part of the unutilised capacity indicated by the algorithm has no price effect on electricity markets. This could be the case as it would not have been ‘in the money’ anyway, due to the utilisation of cheaper generation units. See ibid.

The Decision Division of the Bundeskartellamt subjected selected data on marginal costs to a random plausibility check. In view of the large number of cost items relevant to each one of the units, it was impossible to carry a plausibility check for all 340 generating units. See ibid, 160, 166.

Wolak and Patrick, ‘The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market’ (n 273) 52.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 326, 403; Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 117; Stoft (Chap. 2 n 30) 322.

Hannes Weigt, Modeling Competition and Investment in Liberalized Electricity Markets (Südwestdeutscher Verlag für Hochschulschriften 2010) 36; Stoft (Chap. 2 n 30) 319ff.

Weigt (n 305) 36.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 119.

Weigt (n 305) 36.

See Sect. 2.​4.​3.​2.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 162ff; London Economics Study (Chap. 2 n 22) 6, 14.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 163.

For more details see ibid 166ff.

Ibid 164.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) para 428 footnote 247.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 165; London Economics Study (Chap. 2 n 22) 81.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 166.

London Economics Study (Chap. 2 n 22) 14, 19 footnote 22, 22; Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 165–166.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 187.

Ibid 188.

Ibid.

Ibid.

Ibid 190.

Ibid.

Ibid.

Ibid 189.

Ibid 190.

Ibid.

Ibid 191.

Ibid.

See Gesetz gegen Wettbewerbsbeschränkungen idF der Bekanntmachung vom 26. Juni 2013 (BGBl. I S. 1750, 3245), das durch Artikel 5 des Gesetzes vom 21. Juli 2014 (BGBl. I S. 1066) geändert worden ist (German Act against Restraints of Competition) Section 29. Under the system provided for in Section 29, an undertaking adding a risk premium has the obligation to demonstrate and prove that the inclusion and amount of those additional costs is indeed justified.

OECD, Policy Roundtables 2011: Excessive Prices, 7 February 2012, 27 <www.​oecd.​org/​competition/​abuse/​49604207.​pdf> accessed 1 December 2015.

Sadowska, ‘Energy Liberalisation: Excessive Pricing Actions Dusted off?’ (n 248) 41.

For an overview of the EU policy on excessive pricing see Jones and Sufrin (n 77) 575–581.

Massimo Motta and Alexandre de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ in Arvid Fredenberg and Niklas Strand (eds), The Pros and Cons of High Prices (Swedish Competition Authority 2007) 21ff <www.​konkurrensverket​.​se/​globalassets/​english/​research/​the-pros-and-cons-of-high-prices-14mb.​pdf> accessed 1 December 2015. Our purpose is not to examine whether individual tests proposed from different scholars are fulfilled or not. We concentrate here on conditions within the tests which are of most relevance to the wholesale electricity market.

David S Evans and A Jorge Padilla, ‘Excessive Prices: Using Economics to Define Administrative Legal Rules’ (2005) 1 Journal of Competition Law and Economics 97, 119; Robert O’Donoghue and Jorge Padilla, The Law and Economics of Article 102 TFEU (2nd edn, Hart 2013) 776; Lars-Hendrik Röller, ‘Exploitative Abuses’ in Claus-Dieter Ehlermann and Mel Marquis (eds), European Competition Law Annual 2007: A Reformed Approach to Article 82 EC (Hart Publishing 2007) 530; Fletcher and Jardine (n 334) 543; Emil Paulis, ‘Article 82 EC and Exploitative Conduct’ in Claus-Dieter Ehlermann and Mel Marquis (eds), European Competition Law Annual 2007: A Reformed Approach to Article 82 EC (Hart Publishing 2007) 520; Motta and de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ (n 335) 22.

Commission, ‘Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors’ (Chap. 2 n 19) para 2.

German Electricity Wholesale Market (Chap. 2 n 49) paras 41–44.

Evans and Padilla (n 336) 119; Röller (n 336) 531; Motta and de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ (n 335) 24.

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 322, 331.

Ibid, para 322.

Commission, ‘Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors’ (Chap. 2 n 19) para 14.

Evans and Padilla (n 336) 119; Motta and de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ (n 335) 25.

Röller (n 336) 531; Motta and de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ (n 335) 26.

Motta and de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ (n 335) 19.

Ibid 27.

Fletcher and Jardine (n 334) 544; Motta and de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ (n 335) 40.

Commission Decision of 12 March 2004 in Case COMP/38.369 – T-Mobile Deutschland/O2 Germany: Network Sharing Rahmenvertrag, para 22 (the principle was not challenged on appeal to the CFI); Joint Cases C-359/95 P and C-379/95 P Commission and France v Ladbroke Racing Ltd [1997] ECR I-6265, para 35; Case C-280/08 P Deutsche Telekom AG v European Commission [2010] ECR I-9555, paras 80, 92; Case T-336/07 – Telefónica and Telefónica de España v Commission [2012] ECR I-000, para 339 (the principle was not challenged on appeal to the ECJ); Case T-398/07 – Spain v Commission [2012] ECR I-000, para 50.

See, for instance, the Regulation 1227/2011 on wholesale market integrity and transparency (REMIT), which explicitly states that its application is without prejudice to the application of competition law. See Chap. 4.

For a cumulative test see Miguel de la Mano, Renato Nazzini and Hans Zenger, ‘Article 102’ in Jonathan Faull and Ali Nikpay (eds), The EU Law of Competition (3 edn, OUP 2014) 514, 519; O’Donoghue and Padilla (n 336) 744; Nils Wahl, ‘Exploitative High Prices and European Competition Law – A Personal Reflection’ in Arvid Fredenberg and Niklas Strand (eds), The Pros and Cons of High Prices (Swedish Competition Authority 2007) 60 <www.​konkurrensverket​.​se/​globalassets/​english/​research/​the-pros-and-cons-of-high-prices-14mb.​pdf> accessed 1 December 2015. Against a cumulative test see Massimo Motta and Alexandre de Streel, ‘Excessive Pricing and Price Squeeze under EU Law’ in Claus-Dieter Ehlermann and Isabela Atanasiu (eds), European Competition Law Annual 2003: What is an Abuse of a Dominant Position? (Hart Publishing 2006) 97ff; Michael S Gal, ‘Monopoly Pricing as an Antitrust Offense in the U.S. and the EC: Two Systems of Belief about Monopoly Antitrust in the U.S. and EU: Converging or Diverging Paths’ (2004) 49 Antitrust Bulletin 343, 369.

Commission Decision of 23 July 2004 in Case COMP/36.568 – Scandlines Sverige AB v Port of Helsingborg, paras 102, 158. There have been cases, however, where the ECJ focused on comparisons. See Joined Cases 110/88, 241/88 and 242/88 Francois Lucazeau and Others v Sacem and Others [1989] ECR 2811, para 25; Case 30/87 Bodson v Pompes funèbres libérées [1988] ECR 2479, para 31.

Motta and de Streel, ‘Excessive Pricing in Competition Law: Never Say Never?’ (n 335) 37–40. Even though they argue against a cumulative test, they admit in another part of their paper that, due to the weaknesses of all the methods to prove excessive pricing, ‘it is recommendable that antitrust authorities and courts should carry out excessive pricing tests according to as many of the methods [] as possible. []. They should not limit themselves to a mere comparison between prices or prices and costs []. In any case, authorities should drop the case if different tests provide different results [].’

DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) paras 368–370; Stoft (Chap. 2 n 30) 222; Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (Chap. 2 n 22) 19.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 193.

Ibid.

Ibid 194–195.

Ibid 194.

Ibid.

Ibid 195.

In 2005 and 2007 the Danish Competition and Consumer Authority (Konkurrence- og Forbrugerstyrelsen) found that Elsam A/S, the country’s electricity generator abused its dominant position by adopting a bidding strategy which resulted in excessive prices in Western Denmark. The original decisions in Danish are available at <www.​kfst.​dk/​Afgoerelsesdatab​ase/​Konkurrenceomraa​det/​Afgoerelser/​2005/​Elsam-AS-misbrug-af-dominerende-stilling-i-form-af-h%C3%B8je-elpriser> and <www.​kfst.​dk/​Afgoerelsesdatab​ase/​Konkurrenceomraa​det/​Afgoerelser/​2007/​Ankede-afgoerelser/​Elsams-elpriser-i-2005-og-2006> accessed 1 December 2015. Summaries of the cases in English are available at <http://​en.​kfst.​dk/​Indhold-KFST/​English/​Decisions/​20051130-Elsam-AS-abuse-of-dominant-position-by-charging-unfair-prices> and <http://​en.​kfst.​dk/​Indhold-KFST/​English/​Decisions/​20070620-Elsam> accessed 1 December 2015. Elsam filed an appeal against the 2005 decision and in 2006 the Danish court removed the price cap on Elsam’s bids in Nord Pool that the Competition Authority imposed as a remedy. It nevertheless confirmed that Elsam abused its dominant position by charging excessive prices. The original decision of the Danish court is available at <www.​kfst.​dk/​Afgoerelsesdatab​ase/​Konkurrenceomraa​det/​Kendelser-fra-Konkurrenceanken​aevnet/​2006/​Elsams-prisadf%C3%A6rd > accessed 1 December 2015. The summary in English is available at <http://​en.​kfst.​dk/​Indhold-KFST/​English/​Judgements/​20061114-Decision-by-the-Danish-Competition-Appeal-Tribunal--Elsam-AS-abuse-of-dominant-position> accessed 1 December 2015. In 2010 the Authority once again investigated high electricity prices in Nord Pool, but this time found no infringement of competition rules. The investigation concerned bidding behaviour of Energy E2 A/S in Eastern Denmark. The original decision in Danish is available at <www.​kfst.​dk/​Afgoerelsesdatab​ase/​Konkurrenceomraa​det/​Afgoerelser/​2010/​Undersoegelse-af-Energi-E2s-prisindmeldingss​trategi-til-Nord-Pool> accessed 1 December 2015. The summary in English is available at <http://​en.​kfst.​dk/​Indhold-KFST/​English/​Decisions/​20101222-Energy-E2-did-not-impose-excessive-prices> accessed 1 December 2015.

In the French electricity market, for instance, mark-ups above marginal costs are necessary as a result of an electricity generation predominantly comprising of nuclear power plants with low marginal costs. See Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (Chap. 2 n 98) 193 and Chap. 2 footnote 100.

Ibid 259.

Ibid 195.

Ibid.

Elsam A/S (2005, 2007) and Energy E2 A/S (n 366).

The Italian day-ahead electricity market is split into 22 price zones and four smaller geographic markets. Sicily, badly interconnected with mainland Italy, forms one of them (Macro-Sicily). See DG Competition Report on Energy Sector Inquiry (Chap. 2 n 1) Annex B, para 2. Despite market splitting, final consumers face a single electricity price (PUN) which is calculated from the weighted average of all zonal sale prices. In 2010, the Italian Competition Authority launched two antitrust investigations, one against Enel Holding and the generation subsidiary of Enel for abuse of a dominant position and the other one against Edipower’s shareholders and their holding companies for collusion. In the first investigation, AGCM alleged that Enel withheld productive capacity in order to create supply shortages and set higher prices in the day-ahead market. In the second investigation, Edipower ‘tollers’ were accused of coordinating their supply strategies in order to exploit the vital role of the San Filippo del Mela plant during peak hours so as to keep prices high both on the day-ahead and on the balancing market. See Autorità Garante della Concorrenza e del Mercato (Italian Competition Authority), ‘Electricity market: Enel, Edison and other companies from the sector under investigation’ Press Release, 2 February 2010 <www.​agcm.​it/​en/​newsroom/​press-releases/​1873-electricity-market-enel-edison-and-other-companies-from-the-sector-under-investigation.​html> accessed 1 December 2015. Both cases were closed when the investigated companies offered commitments. Enel introduced a bid cap of 190 EUR/MWh on its capacity bids in the day-ahead auction from 1 January 2011 to the end of 2013. Edipower’s ‘tollers’ committed to entrust the management of the San Filippo del Mela plant to Edipower and thus reduce the risk of coordinated practices. Moreover, Edipower agreed to run this plant under a special regulatory regime for plants which are considered indispensable by the TSO. See Autorità Garante della Concorrenza e del Mercato (Italian Competition Authority), Decision No 21960 – Enel – Dinamiche formazioni prezzi mercato energia elettrica in Sicilia, and Decision No 21962 – Tolling Edipower, 22 December 2010, available at <www.​agcm.​it/​concorrenza/​intese-e-abusi.​html> accessed 1 December 2015. See also AGCM, ‘I721 – A423 – Edipower Tolling and Enel – Dynamics in the Setting of Electricity Market Prices in Sicily (Closure of Investigation)’ Press Release, 10 January 2011 <www.​agcm.​it/​en/​newsroom/​press-releases/​1924-i721-a423-edipower-tolling-and-enel-dynamics-in-the-setting-of-electricity-market-prices-in-sicily-closure-of-investigation-html> accessed 1 December 2015.