Legal uncertainty and competition policy in European deregulated electricity markets : the case of long-term exclusive supply contracts

Abstract

The case of long-term exclusive supply contracts in the EU electricity markets is a highly topical example of the difficulties faced by competition authorities with the deregulation of energy markets. The ambiguous effects of these contracts on foreclosure, investment and consumer welfare in the long term made them logically become a priority for antitrust enforcement. However, due to the lack of precedents and the on-going modernization of EC competition law, the legal uncertainty currently perceived in the market place is strong. By analyzing the recent decisions of community and national competition authorities across energy industries, this article comes up with four conclusions. First, a new methodology to assess foreclosure effects in a market building context is emerging. Second, legal uncertainty in electricity is largely overstated as antitrust enforcement aligns across energy industries and quickly converges with enforcement in sectors where competition is more mature. Third, the European Commission is increasingly taking a unified approach under Art 81 and 82 EC for long term exclusive dealing in energy. Fourth, the antitrust strategy of the European Commission demonstrates both the limits of the application of a rule of reason in energy and the importance of the politics of liberalization.