Record fine of 370 million was imposed upon RWE Trangas

The decision is not enforceable, the participant of the proceeding has right to appeal

On 10^th August 2006 the Office for the Protection of Competition of the Czech Republic (hereinafter as “the Office”) imposed by its decision, which has not come in force yet, the highest fine in its history upon one undertaking within one administrative proceeding. The fine imposed upon RWE Transgas amounts to 370 million Czech crowns (cca 13,2 million EUR) for abuse of dominant position on the market for natural gas.

RWE Transgas infringed the Act on the Protection of Competition by offering a portfolio of contracts since 2004 to local distribution system operators (hereinafter referred to as „LDSOs“), terms and conditions offered to consolidated LDSOs (those belonging to the RWE group) being more favourable than those offered to non - consolidated LDSOs (those not belonging to the RWE group) - their direct competitors.  

Furthermore according to the Office´ s decision RWE Transgas has restricted possibility to supply gas outside the territory which is covered by separate LDSOs since 1.1.2005 by setting a system of contracts regulating conditions of gas supply only to balance zone of separate LDSOs. Such conduct effectively prevents from development of competition environment on a gradually liberalizing market.

Moreover the Office considers as an abuse of dominant position RWE Transgas’s conduct consisting in setting prices of gas for eligible customers at the same level as the regulating body did for protected customers whereas the costs for eligible and protected customers are different.

Apart from the fine there were imposed also remedial measures that will keep RWE Transgas from differentiating between consolidated LDSOs and their direct competitors – non-consolidated LDSOs. Removal of barriers to competition consists in setting conditions which enable to supply gas to a balance zone of the respective LDSO. There has to be set up such remedial measures that enables customers to choose a supplier of gas irrespective of its balance zone.  

The Office has inquired into market for natural gas since summer 2005. In this period the Office received several complaints from eligible customers (in the commencement of the proceeding there were 35 complainants and all of them are major customers) that have theoretical possibility to choose its supplier of natural gas since 1.1.2005. The investigation did not deal with regulated prices for protected customers – households and small entrepreneurs. These prices are not set by RWE Transgas but by Energy Regulatory Office.

On 23^rd Novemebr 2005 the administrative proceeding was commenced and was conducted under the European competition law in so far that the final statement had been consulted with European Commission. In the course of proceedings the Office communicated its objections to RWE Transgas and draws its attention to possibility to offer commitments removing competition concerns and thereby to avoid imposition of a fine. RWE Transgas did not sufficiently accept this proposal and filed an action before the Regional Court in Brno against unlawful interference of an administrative authority (which was dismissed by the court) and in the end RWE Transgas filed a competence complaint before Supreme Administrative Court.

In a given case is possible to label the conduct of the dominant undertaking as very serious because it constitutes significant barrier for other gas suppliers to development of their businesses on gradually opening market.

According to the Office, intention of the RWE Transgas´s conduct has been strengthening of LDSO´s position in their balance zones, contrary to contemplated and progressing liberalisation in gas sector. In consequence of the RWE Transgas´s conduct the protected customers were also affected due to the lack of possibility to choose a supplier.  There were created such conditions, which almost foreclosed possibility of fully competitive bids.

In calculation of the fine the Office took into account as an aggravating circumstance that RWE Transgas did not terminate its conduct which was subject of Office´s objections. RWE Transgas refused necessary changes and insists on conditions which proposed unilaterally. The Office considers as a mitigating circumstance that this was first administrative proceeding against RWE Transgas for breach of competition rules.

Press and personnel department