The beginning of a busy year for CNC: Endesa is fined for abuse of its dominant position as electricity distributor

Following to a complaint presented by the National Federation of Employers of Electrical and Telecommunications of Spain (Federación Nacional de Empresarios de Instalaciones Eléctricas y Telecomunicaciones de España - “FENIE”), the Spanish competition authority (Comisión Nacional de Competencia – “CNC”) has condemned Endesa Distribución Eléctrica S.A. for two offences of abuse of a dominant position and applied two fines of 14,967,960 and 8,158,000, respectively.

As referred to in CNC press release, both offences relate to the electrical installations market which includes the carrying out of the necessary works (connection, hook-up, extensions, etc) to connect the distribution grid to the reception facilities of the end users. Spanish rules and regulations distinguish between installation activities which are reserved to the distributors of electricity from those activities that may be freely developed in a competitive environment by licensed companies.

In the case of the first offence, Endesa was found to have taken advantage of its position in the distribution market to distort competition in the related market for electrical installations, in which it also operates, by means of abusive use of information on supply applications (using the identity of the customer who needed an installation and all the technical details of the point of supply), to which it had privileged access due to its condition of electricity distributor, in order to offer to carry out the electrical installation work for the largest customers in this market, thus cherry-picking the largest and more profitable customers.

This practice rendered more difficult for the rest of the operators present in the installations market to compete with Endesa in its distribution areas for the most attractive part of the market in a situation of minimum equality of conditions. CNC has applied a fine of €14,967,960 on Endesa for this offence.

This article was written by lawyer Mónica Pinto Candeias.

This is not the first time that competition authorities have imposed fines for conduct of this kind. In 2011 the distributors in the E.ON, Gas Natural, Fenosa and Hidrocantábrico groups were fined for similar conduct, as was Endesa itself in 2006 for similar conduct on the island of Mallorca (this condemnatory decision was confirmed by the Supreme Court on February 2011).

With respect to the second offence, the CNC considered that Endesa had abused its dominant position by charging customers for carrying out linking and connection works for the installation of electricity. Spanish law provides that such works must be done by the distributor at its own cost, and no charge can be imposed upon consumers. However, according to CNC, over a specific period of time, Endesa charged customers for this work which has been considered an exploitative abuse. For this offence, CNC imposed a fine of €8,158,000 on Endesa.

Comment

From the information publically available, 2011 was a busy year for CNC as several proceedings for restrictive practices and abuse of dominant position have been concluded, and the authority imposed fines totaling more than €97 million.

Among those proceedings, we highlight the Spanish Association of Fluid Pump Manufacturers cartel (Asociación Española de Fabricantes de Bombas de Fluidos or “AEFBF”) in which CNC condemned the AEFBF along with 19 manufacturers and distributors of fluid pumps, in a total of €18 million, for engaging in anti-competitive practices. In the second half of 2011, the CNC imposed fines totaling €16.3 million in the maritime transportation sector for price-fixing and fines of €47 million in the civil construction sector for bid rigging. In November, the CNC concluded proceedings against companies in the asphalt sector opened following inspections into the corporate headquarters in 2009, and imposed fines totaling €16 million on twelve undertakings for fixing prices in asphalt and related products.

Further in 2012, the CNC imposed a fine of approximately €2 million on Transmediterránea, and its subsidiary, Europa Ferrys, for obstructing a surprise inspection during which the companies allegedly failed to make information and senior-level personnel readily available.

The first quarter has not ended yet and CNC has already adopted 8 condemnatory decisions for restrictive practices and abuse of dominant position, anticipating an active year of 2012. Although many of these decisions refer to proceedings initiated in 2009/2010, when compared with other national competition authorities, the number of proceedings concluded by CNC displays the effort and hard work continuously developed by this competition authority in defense of competition and consumers’ welfare. The policies of transparency and due access to decisions followed by CNC are amongst international best practices.

Albeit the politic and economic turmoil Spain in facing, the intense activity in 2011 and the prelude of 2012 do not display any reduction of CNC control and scrutiny on undertakings and their compliance with competition rules. CNC clearly understands the role of competition to a sustainable economic growth.