The German competition authority (Bundeskartellamt) has prohibited the following gas supply contracts of E.ON Ruhrgas with its distributors:
- already existing contracts which run over a long-term period (at least until 2020) and cover more than 80% of actual gas requirements
- the conclusion of contracts with a contract period of over 4 years and cover more than 50% of actual gas requirements; and
- the conclusion of contracts with a contract period of over 2 years and cover more than 80% of actual gas requirements.
The contracts have been prohibited because the German competition authority believes the contracts breach EU and German competition law by foreclosing the gas distribution market. This in turn has meant higher prices by preventing market entry. The foreclosure effect is in large part due to E.ON Ruhrgas being "by far the largest gas supply in Germany".
This decision is important for:
- suppliers in the energy industry who use long term contracts and are potentially dominant in their markets;
- customers of potentially dominant suppliers who are involved in long term supply contracts or about to renegotiate contracts.
Whilst the decision is under appeal, it nevertheless signals an aggressive stance being taken by the German competition authority to such long term power supply contracts. Other competition authorities may be tempted to follow suit. Both those selling and those obtaining energy via long term power supply agreements should consider the impact of this decision on their arrangements.
The Germany competition authority has also prohibited E.ON Ruhrgas from including tacit extension clauses in its gas supply contracts with distributors and has made it clear that it will regard multiple supply contracts between the same supplier and customer as one overall contract.
Small contracts (customers with total requirements below 200GWh) are not affected by this decision, nor are contracts at the import level.
Please click here for the German competition authority’s press release in this case.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 03/02/2006.
