Malta: Agreement Regarding The Distribution Of LPG In Malta Held To Be In Breach Of The Competition Rules

Last Updated: 3 January 2017
Article by Richard Camilleri and Annalies Azzopardi

Most Popular Article in Malta, January 2017

In a decision in the names Uffiċċju għall-Kompetizzjoni Ġusta v Korporazzjoni Enemalta et handed down on 4 October 2016, the Competition and Consumer Appeals Tribunal ("the Tribunal") found that the various gas distributors, the GRTU, an association which represented the said distributors, and Enemalta plc, then Enemalta Corporation ("Enemalta") had breached the competition rules by dividing Malta and Gozo into various 'territories' for the purpose of distributing LPG in cylinders. These various undertakings and association of undertakings were therefore found to have breached Article 5(1) of the Competition Act (Cap. 379 of the laws of Malta), and Article 101(1) of the Treaty on the Functioning of the European Union ("TFEU"). The Tribunal however found that Liquigas Malta Limited, which acquired the business of LPG supply and distribution from Enemalta, had never participated or formed part of this agreement.The matter arose in relation to a standard agreement signed in 1992 ("the Standard Agreement") between the various gas distributors and Enemalta, whereby each gas distributor was granted an exclusive area for distribution of LPG in cylinders.

On 3 January 2013 the Office for Competition ("OFC") submitted a report to the Tribunal, regarding an investigation it had carried out into the market for door-to-door distribution of liquefied petroleum gas ("LPG") in cylinders, and requested the Tribunal to issue a decision in line with its conclusions.

The Tribunal decided that the Standard Agreement and the conduct of the distributors and the GRTU were in breach of Article 5 of the Act and article 101 TFEU, both of which prohibit anti-competitive agreements.The Tribunal confirmed that the distributors and Enemalta were 'undertakings', whilst the GRTU was an 'association of undertakings'.The Tribunal noted that by virtue of the Standard Agreement, every distributor was given the exclusive right to distribute LPG in gas cylinders in a specified territory.Taking into account the totality of the Standard Agreements, territorial protection extended to the whole of Malta and Gozo.It resulted that each distributor honoured and respected the territories of the other distributors, as they arose from each Standard Agreement, so that no distributor was distributing cylinders outside the territory allocated to him.Moreover, the GRTU, through the press releases it issued and the directives it gave the distributors, acted in the name of the distributors in order to protect the territorial exclusivity and keep the Standard Agreements in force.The Tribunal therefore concluded that the Standard Agreement constituted an agreement between undertakings whilst the conduct of the distributors and the GRTU constituted concerted practices which resulted in the prevention, restriction and distortion of competition in Malta, and therefore they were in breach of Article 5 of the Competition Act.

The Tribunal also concluded that the Standard Agreements, the conduct of the distributors and the GRTU were in breach Article 101 TFEU, which has the same effects as Article 5 of the Act, except that it refers to practices which affect trade between European Union ("EU") Member States.The Tribunal cited the European Commission Guidelines on the effect on trade concept in reaching this conclusion.It also noted that although the LPG market was liberalised and Easygas and Liquigas obtained a license to transport, distribute and sell LPG in gas cylinders, they were effectively prohibited from doing so by the distributors, with the help of the GRTU: this affects trade between EU Member States.

The Tribunal held that Enemalta, by forming part of the Standard Agreements, also acted in breach of Article 101 TFEU and Article 5 of the Act, for the period from 1 May 2004 until 31 January 2009, when the business was transferred to Liquigas.Although the Tribunal appreciated Enemalta's arguments that it entered into the agreement to ensure that vulnerable consumers had access to the service, this did not exonerate the agreement from the competition rules.It also noted that Enemalta was not exonerated from responsibility when the Malta Resources Authority was established as regulator for the sector once Enemalta continued to supply gas to the distributors in terms of the Standard Agreements.

The Tribunal however found that Liquigas never formed part of the Standard Agreement.Before it acquired the business from Enemalta, Liquigas negotiated a license for the distribution of LPG, which was then issued, and this was contrary to what was provided in the Standard Agreement regarding the exclusive distribution in favour of the distributors.Moreover, the OFC did not prove the Standard Agreements were subrogated or somehow assigned to Liquigas, or novated by the said company.It resulted that Liquigas tried to enter into a new agreement with the distributors, and there were discussions in this sense, with an agreement drafted. However the distributors, except for a few of them, failed to accept this agreement.The Tribunal noted that once Liquigas never formed part of or participated in the Standard Agreement there was no need to consider the notion of 'public distancing'.

The Tribunal moreover found that 5 gas distributors had distanced themselves from the GRTU in November 2011, and therefore found that they discontinued operating in terms of the Standard Agreement as from November 2011.

This decision is notable in particular because it is the first decision where a breach of EU competition law has been found in Malta.It is also notable for finding an association of undertakings to have breached the competition rules in Malta, and for considering the matter of public distancing.

Mamo TCV successfully represented Liquigas Malta Limited in these proceedings.The Mamo TCV team was made up of partner Dr Richard Camilleri and senior associate Dr Annalies Azzopardi.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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