ČEZ infringed competition law

The Chairman of the Office for the Protection of Competition (the Office) Mr. Josef Bednář has by its second-instance decision imposed a fine amounting to 7.5 million CZK to the company ČEZ, a.s.

This company had since 1999 concluded with its customers seven agreements on supplies of electricity containing prohibited and void provisions forbidding to reimport exported electricity back to the territory of the Czech Republic (the last of these agreements ceased to be valid in June 2003). „This case concerns a very serious infringement of the competition rules,” stressed the Chairman of the Office, Mr. Josef Bednář.

In general, provisions prohibiting reimports to the Czech Republic mean that certain product already exported to the territory of a foreign state may not be exported back to the Czech Republic. This constitutes restriction to or even elimination of access of other undertakings to the market. “Reimports contribute to creation and maintenance of competitive markets. Respecting its prohibition leads to elimination of competition, what may in the end negatively affect sales prices of certain products to the detriment of consumers,” stated the Chairman Bednář. The price of electricity represents the main pro-competitive factor that influences the choice between competing suppliers made by final customer. The effect of the prohibition to reimport electricity back to the Czech Republic could have the most significant effect in particular in border regions as in these regions the imported electricity might be demanded the most due to its immediate availability.

Provision prohibiting reimports always constitutes prohibited and void agreement, as the aim of such provisions is to restrict access of other competitors to the given market. „In the period of only gradual liberalisation of the electricity market, the negative effects on the competitive environment are multiplied,“ pointed out the Chairman Bednář. In the case of electricity it is never possible to identify the concrete source of production, i.e. where the electricity has been generated, and realisation of provisions prohibiting reimports of electricity to the Czech Republic could thus result in absolute territorial protection of the company ČEZ on the domestic market of supplies of electricity to traders with electricity and distribution companies.

The Chairman of the Office has in its second-instance decision confirmed the amount of the fine imposed by the first-instance body of the Office. The calculation of its amount has taken into account the seriousness of the anticompetitive agreement, the duration and recurrence of the anticompetitive practice and the fact that this practice has been implemented in the period of gradual liberalisation of the electricity market. The amount of the fine in this case has both sanctioning and preventive function and corresponds to the proved anticompetitive conduct of the company ČEZ. The purpose of the conducted administrative proceeding and of the decision in the case was in particular to contribute to the liberalisation of the market to the benefit of other undertakings. Direct benefits will then be apparent also with regard to final consumers of electricity in the form of lower prices resulting from fair competition conditions. 

Press and Information Department