ECJ confirms abuse of dominance in case of potential anti-competitive effects

In 2008 the European Commission (“Commission”) issued a decision to the Greek government ordering the implementation of measures to put an end on anticompetitive effects resulting from the dominant position of the public electricity undertaking and sole owner of all power stations operating on lignite Dimosia Epicheirisi Ilektrismou AE (“DEI”).

Background

DEI was created in 1950 as a public company. On the basis of a legal reform in 1996 it was converted into a company limited by shares whose sole shareholder remained the State. Due to further legal developments and in particular to Directive 96/92/EC of the European Parliament and of the Council of 19. December 1996 concerning common rules for the internal market in electricity, DEI was restructured in 2001 into a limited liability company, in which the State may not hold less than 51% of the shares. Since then the Hellenic Republic has been holding 51.12 % of DEI’s shares.

DEI was granted all exploration and exploitation rights for lignite mines with reserves up to 2,200 mio. tonnes. Rights regarding other public deposits with reserves of up to 220 mio. tons, which also supply DEI amongst others, were conferred to private third parties. Further rights for approximately 2,000 mio. tons have not been allocated yet. 60 % of the electricity in Greece is produced through lignite power station. Hence, DEI could hold a market share of 97 % in the lignite supply market as well as 85 % in the wholesale electricity market.

Decision of the Commission

In 2003 the Commission received a complaint regarding the infringement of Art. 106 in conjunction with Art. 102 TFEU. Consequently, the Commission decided in 2008 that foreclosure on access to primary fuels for the generation of electricity had resulted from the allocation of the exploration and exploitation rights to DEI. Moreover, the Commission concluded that barriers to enter the Greek wholesale electricity market and the lignite supply market as well as the dominant position of DEI in both markets had been strengthened by the State measures.

Annulment of the decision by the Court

However, the decision of the Commission was annulled by the Court on 20 September 2012 in Case T-169/08, DEI v Commission. The Court evaluated the decision mainly based on the question if the Commission must establish an actual abuse of a dominant position or whether potential abuse of a dominant position by the relevant company or if the distortion of competition due to State measures is sufficient to constitute an infringement against Art. 106 read in conjunction with Art. 102 TFEU. However, according to the Court such measures taken by the State cannot be imputed to DEI since the allocation and maintenance of the relevant exclusive rights was a State measure and not a decision of the company itself. Moreover, the Court decided that the Commission had not proven adequately to what type of abuse regarding Art. 102 TFEU the allocation of the above mentioned rights would lead. Hence, the decision of the Commission was annulled.

Decision of the ECJ

Nevertheless, the ECJ decided as the final instance on 17 July 2014 in its case C-553/12 P, Commission v DEI, to annul the decision of the Court and consequently to confirm the original decision of the Commission. According to this judgment, a Member State violates Art. 106 in conjunction with Art. 102 TFEU if allocated rights to a company strengthen the risk of an abuse of a dominant position in a certain market. An actual infringement in the sense of Art. 102 TFEU is not required to establish a breach of Art. 106 TFEU. Therefore, it is sufficient for the Commission to determine potential anticompetitive effects, such as market entry barriers, that result from State measures. Contrary to the findings of the Court, the ECJ established herewith that the Commission does not have to prove an actual abuse of a dominant position in order to establish an infringement.

Authors:

Dr. Christina Hummer
Ori Kahn