UNAPACE/ENEL (Start of investigation)
PRESS RELEASE
The Italian Antitrust Authority investigates Enel contracts with clients who are soon to have access to the liberalized electrical energy market.
At the meeting of the Italian Antitrust Authority on 12 November, it was decided to initiate an investigation of Enel for alleged anticompetitive behaviour connected with the stipulating multi-year contracts to supply electrical energy to clients with high levels of energy consumption.
The relevant market, as regards this investigation, is the supplying (distribution and sales) of electrical energy throughout Italy. In the EC Directive 96/92 supply is to be progressively opened to competition within the single national markets starting from 19 February 1999. In the first phase, the market will be liberalized for those clients (so-called "suiable clients") who used more than 30 Gwh in the previous year. Enel which is responsible for 83.7% of the electricity supplied to the Italian market has a dominant position.
Among the clauses in the contracts which were examined during the investigation, there were two in particular which appeared to be restrictive to competition: (i) the clause relative to the extention of the period of exclusive supply of electrical energy which passes from 1 to 3 years and (ii) the clause that establishes that Enel has the right of pre-emption, in the case a client of its receives a more advantageous offer from a competitor.
The lengthening of the time of the exclusive relationship to a minimum of 3 years (renewable to 6) allows Enel to lock into long-term contracts those "suitable clients" which would otherwise be able from 19 February 1999, in a liberalized market, to stipulate contracts with suppliers other than Enel. This clause seems to constitute an abuse of dominant position.
This restriction assumes particular importance placed in conjunction with the anvantages to be derived from the clause allowing Enel pre-emption rights, which futher restricts the rights of those clients, who have stipulated contracts similar to those examined, to choose an alternative supplier. In fact, the agreements state, on the one hand, that the parties can renegotiate the supply contract, if during the period of the contract there take place significant modifications in the way the electricty market functions (an obvious allusion to the possibility of better conditions being offered by an alternative supplier because of the process of liberalization). On the other hand the agreements state, that where there is a real alternative offer, the client cannot exit the contract with Enel as his supplier of electrical energy unless it (the client) can demonstrate that the terms offered by Enel are in fact less economically convenient.
The right of pre-emption at the conditions offered by the competitor which Enel has placed in these contracts is more than enough to discourage any new entrant into the national electricity market thus hindering its opening.
The combined effect of these two clauses (length and pre-emption) appears particularly undesirable from the point of view of opening up the Italian electricity market to competition if we consider both the temporal element which overlaps the initial period as set out in the EC Directive 96/92 and Enel's dominant position in the relevant market. In fact, in the Directive itself, it is specifically stated that during the process of progressive liberalization of the market of electrical energy of the EU, of which each national market is part, "all abuses of dominant position or predatory behaviour" must be avoided.
The investigation, which has been initiated as stated in Art. 86 of the EC Treaty (abuse of dominant position) and will be concluded by 20 May 1999.