RWE Transgas fined 240 million CZK

Chairman of the Czech Competition Authority (Úřad pro ochranu hospodářské soutěže - ÚOHS) Martin Pecina has imposed a fine of CZK 240,000,000 on RWE Transgas, the dominant gas supplier for an abuse of dominant position. First-instance decision of ÚOHS from August last year has been confirmed in main points.

In the period from November 5, 2004 to  August 8, 2006  the above mentioned company was not allowing the providers of competing regional distribution networks to enter into an agreement about the conditions of sale/purchase of natural gas and in this way was not  allowing them to effectively compete with providers of regional distribution networks of RWE holding. Companies Jihočeská plynárenská and Pražská plynárenská were therefore put in disadvantageous position in the competition for so-called eligible customers.

RWE was also refusing to supply the natural gas elsewhere than into so-called balance zones of individual regional distributors and this way was blocking and restraining the establishing of the competitive environment. In situation when regional distributors are buying the natural gas when entering the balance zone, they are forced de facto to accept the conditions set unilaterally by one party of the proceeding. For example, Jihočeská plynárenská has been interested in supplying outside its balance zone but it has been  repeatedly refused by RWE Tansgas. Competitor in dominant position has been therefore creating artificial barriers for other competitors to enter into the market, resp. creating barriers of expansion for existing competing regional distributors in the market.

The above mentioned behavior of the party to this proceeding needs to be evaluated as even more serious as it has been committed in the very beginning of the gas industry liberalization in the Czech Republic. It has negatively influenced market that was gradually opening to competition and where every exclusionary practice of competitor in dominant position could slow or in other way endanger the coming of the positives for the consumers connected with liberalization and better competition.

Sector with key importance for the provision of energy to consumers and also for economics as a whole has been influenced at the same time.. Sector, where any kind of anticompetitive behavior has very serious consequences. Such behavior can directly or indirectly influence various areas of life of any company or consumer.

As regards the amount of fine, it has been reduced by 130 million CZK in comparison to the first instance decision. Chairman has based his decision on number of reasons.  Decision of RWE, that its sister companies (regional distributors) will not carry business outside the balance zone, cannot be considered as a breach of law. Further the proceeding regarding possible breach of law has been ceased in question whether RWE eligibly setthe price for storage of the gas for the category of eligible consumers in the same way as the price for category of protected customers in 2005. Such possible breach of law has not been clearly and sufficiently proved.

As regards the reduction of the fine amount, mainly the fact that the subject to this proceeding started in principle immediately after changes in its senior management and after fine has been imposed on it as first degree decision to cooperate, has been taken into account. After the meeting with ÚOHS as well as the Energy regulation authority (ERU), company has presented and later signed with its customers contracts in line with competition law.  The office has found, that the anti competitive behavior of the company, because of the administrative procedure has been started in the first place and for which this extremely high fine has been imposed, ceased before this date and the liberalization of the gas market may now proceed.

The final penalty can be therefore considered as proportional, not discriminating or liquidating. However, it is still the highest penalty ever lawfully imposed on one company in one administrative procedure.

External Relations Department