EPS Distribution fined EUR 2.67 million for abuse of dominance

On 23 December 2016 the Council of the Commission for Protection of Competition adopted a decision finding that the national electricity distribution system operator EPS Distribution LLC Belgrade abused its dominant position as the sole operator on the market for electricity distribution in Serbia. A pecuniary measure for protection of competition in the amount of approximately RSD 330 million (equal to approximately EUR 2.67 million) was imposed on this undertaking, to be paid into the budget of the Republic of Serbia. This is in addition to behavioral measures aimed at providing equal business conditions on the relevant market.

This is so far the highest fine imposed for abuse of dominant position on relevant market in Serbia.

During the course of the proceedings, the Commission determined that the aforesaid undertaking abused its dominant position by placing certain commercial electricity suppliers and, in particular, its sister company EPS Supply, in a more favorable position vis-à-vis their competitors. Such behavior was, among other things, a consequence of the non-transparent business policy of EPS Distribution.

While contracting access to the electricity distribution system, EPS Distribution imposed a commitment to deposit security instruments on all commercial suppliers except its sister-company, EPS Supply. At the same time, EPS Distribution discriminated between different suppliers in terms of the amount of the deposited security instruments, by setting the amount for some suppliers based on the monthly value of services provided, while for others the amount was based on a trimonthly value. In addition, almost all commercial suppliers of electricity were obliged to deposit their security instruments in just one commercial bank, chosen by EPS Distribution. During a brief period, EPS Supply also enjoyed a much longer grace period for settling its liabilities towards EPS Distribution, compared to all other commercial suppliers.

Therefore, the Commission found that the EPS Distribution abused its dominant market position by: (1) applying dissimilar business conditions to equivalent transactions with different market participants, which resulted in a less favorable position of some individual market participants in relation to their competitors, and (2) by imposing these unfair business conditions to the market participants it imposed to the market participants the obligation of cooperation with only one commercial bank selected by the EPS Distribution.

In particular, the Commission found that EPS Distribution violated provisions of the Law on Protection of Competition in the following 2 ways:

  1. The application of dissimilar business conditions to equivalent transactions with different market participants, which business conditions consisted of the following:
    • The obligation of depositing of collateral: According to the Commission, when negotiating access to the system for distribution of electricity (“System“), EPS Distribution has imposed to all users of System, except Public company “Electric Power Industry of Serbia” Belgrade, the obligation of depositing of collateral as security for the payment of bills for the System access services. In addition, according to the Commission, EPS Distribution was arranging different payment terms with some market participants, in particular company EPS Supply Belgrade was given the opportunity of extended repayment period for payment of System access services, compared to other market participants;
    • Selection options of type of collateral: According to the Commission, when concluding agreement on access to the System (the “Agreement“), EPS Distribution to some participants of the System gave a choice between two types of collateral as follows: (1) the bank guarantee, and (2) guarantee deposit. On the other hand, it conditioned certain users of the System with accepting only the guarantee deposit;
    • The difference regarding the calculation of the amount of collateral: According to the Commission, EPS Distribution acted unequally towards users of the System in terms of contracting and calculating the amount of collateral intended for the payment of bills for System access services. In particular, EPS Distribution made difference in terms of calculating the amount of security imposed in the Agreements to some users of the System, in a way that it to some users of the System calculated the amount of collateral on the basis of monthly consumption, while to other market participants it calculated the amount of collateral based on quarterly consumption (this for 3 participants on the market).
  2. Unfair business conditions, which consisted of the following:
    • The obligation of doing business with commercial bank selected by the EPS Distribution: According to the Commission EPS Distribution imposed unfair business conditions, by imposing obligation of depositing a dedicated (guarantee) deposits with a single bank selected by EPS Distribution. In particular, EPS distribution did not enable market participants freedom of choice of the commercial banks in which to lay collateral to secure payment of bills for the System access services.

The abovementioned conduct resulted in increased costs of electricity with which commercial suppliers supply the end consumers.

The Commission especially took into account the cooperation and overall conduct of EPS Distribution during the proceedings. This included, in particular, the amendment of the disputed acts and a demonstration of intent to fully eliminate the harmful effects of the prohibited market behavior.

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