Introduction

It has been one year since the Competition Protection Agency instigated antitrust proceedings against 16 natural gas distributors and the commercial association for natural gas distribution, which allegedly exchanged sensitive commercial information and engaged in price fixing on the market for natural gas distribution to household customers (for further details please see "Natural gas market falls under further scrutiny").

The proceeding was closed in July 2014 with no decision adopted against the distributors. However, in the meantime, the investigation into Geoplin (Slovenia's largest natural gas supplier) continued and recently resulted in an infringement decision establishing that Geoplin had abused its dominant position in the natural gas market.

Geoplin is one of the most important companies in the Slovenian energy sector, as it acts as an agent and intermediary between the Slovenian natural gas market and neighbouring countries and is the largest trader of natural gas.

Long-term agreements for natural gas supplies are abuse

The agency's January 5 2015 decision found that Geoplin had been abusing its dominant position on the market for natural gas distribution to industrial customers since (at least) July 1 2007.

The infringement consisted of Geoplin tying industrial customers to long-term (five to 10-year) agreements that imposed pre-defined supply quantities and minimum supply volume obligations. The agreements also anticipated penalties and other fees for quantities not yet consumed by customers and prevented industrial customers from using or reselling surpluses. According to the agency's director, Mr Krašek, the agreements would have been valid had they been for a shorter period (ie, one or two years).

During the proceedings, Geoplin proposed commitments which were subject to a public consultation initiated by the agency in June 2015. The agency found that the proposed measures were an ineffective remedy to the situation.

As such, Geoplin must immediately adopt all measures necessary to stop the infringement and notify the agency of the measures it has adopted within three months. Most importantly, Geoplin must amend all of its agreements containing the illicit provisions.

The agency believes that the natural gas market will now open up and that industry should finally be able to buy natural gas at prices comparable to those in other EU member states, which will result in enhanced competitiveness for Slovenian undertakings and lower prices for consumers.

No penalty imposed thus far

As Geoplin's agreements breached Article 102 of the Treaty on the Functioning of the European Union and its Slovenian equivalent, Article 9 of the Competition Protection Act, the agency has initiated misdemeanour proceedings, under which a fine of up to 10% of Geoplin's annual worldwide turnover can be imposed.

Although the agency has provided no guidelines or enforcement policies which set forth rules on the amount of fine that can be expected, based on recent fining decisions it is anticipated that the fine will be at the high end of the 10% range.

The agency, unsatisfied by the response of Geoplin's employees during its dawn raid, already has fined Geoplin almost €1 million (2% of its annual turnover) for obstruction of its investigation.

Geoplin has appealed the agency's decision. In the meantime, the administrative court has already dismissed Geoplin's proposal for an interim decision to suspend enforcement of the agency's decision. More information about the appeal should be available in the course of 2015.

For further information on this topic please contact Eva Škufca at Schoenherr by telephone (+386 1 200 09 80) or email (e.skufca@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.