Managing the Intersection of Utilities Regulation and EC Competition Law

Abstract

Utilities regulation in the Member States is always subject to the application of EC competition law. However, this undermines the effectiveness of utilities regulation and a more flexible standard should be devised by the European Courts. The Court of First Instance has an opportunity to do so in two pending appeals where the Commission found an infringement of Article 82 EC after the actions of the dominant firm had been endorsed by the national telecommunications regulator. The grounds for affording greater latitude to regulators are threefold: first the regulator should be free to make decisions on economic grounds that support dynamic over allocative efficiency; second it should also be free to make decisions on non-economic grounds to prioritise other objectives at the expense of competition; and third the present scope of EC competition law is so wide that in several instances the Commission acts in a regulatory manner, stepping over tasks best left to the regulator. No general principle is recommended to demarcate the borderline between competition law and sector regulation but a case-by-case assessment should be carried out to determine whether the application of competition law would cut across the policy choices reached by the utilities regulator, and competition law should not apply when it would harm the regulatory goals.

Control of the Administration and competition policy

“…45 One way of protecting markets against abusive actions by the administration is through supra-national regulations (particularly EU regulations in our case) that protect the values closest to the general interest and thus, favour the common good. 46 A clear example of this situation can be found in the European Union in the form of the so-called Services Directive. 47 This Directive has led to a real shake-up in the organisation of professional services for benefit of consumers.…”

The 'Regulatory Authority Dixit' Defence in European Competition Law Enforcement

“…Nazzini notes that AG Mazák suggested a different approach, with respect to refusal to supply, in particular (i) to look at the margin squeeze as a form of vertical foreclosure tactic similar to that carried out by refusal to supply, (ii) to take into consideration the risk that if there is not a duty to deal, "to impose a duty to charge upstream and downstream prices that allow as efficient downstream firms to compete effectively would reduce the dominant undertaking's investment incentives" and, most interestingly (iii) to take into consideration an "a fortiori", a very subtle, argument: if the duty to deal is not a pre-condition, and the company in theory could refuse to supply, "why can it not harm them by charging upstream and downstream prices that make it difficult for them to compete?" (R. Nazzini, cited, p 274 government and of the incumbent operator, the Commission's ability to use competition law to oversee the markets is necessary to ensure that markets are liberalised and incumbents are not protected by regulators" 94 . However, he also argued that the power of the EC and the application of competition law, in particular when NRAs act according to normative schemes set up by EU law in regulated sectors, should encounter a reasonable limit in line with a wider interpretation of the principles of subsidiarity, proportionality, legal certainty and loyal cooperation (all principles recalled by Telefónica's lawyers in the CFI appeal).…”

The Public–Private Distinction, Autonomy and Free Movement: Unpacking the Assumptions

“…24 The public-private distinction has been challenged in other ways: for example, competition law scrutiny can sometimes aim for regulatory outcomes or even challenge State measures (Heimler 2009, Monti 2008, Neergaard 1998, Baquero Cruz 2007, and directives are increasingly addressed to private actors. 25 At this point, EU law may be approaching the stage that Kennedy would call continuumisation: the public-private distinction is, in individual cases, overcome by a sort of a balancing process, determining where private action merits legal scrutiny and when it does not.…”