Legal uncertainty and competition policy in deregulated industries

The case of long term contracts

Summary : The case of long-term vertical contracts in the EU electricity markets is a topical example of the difficulties faced by Competition authorities with the liberalization of network industries. Their ambiguous effects on the competitive structure, investment and consumer welfare in the long term made them logically become a priority for antitrust enforcement. However, due to the lack of precedents and the on-going modernization of EC competition law, the legal uncertainty currently perceived in the market place is strong. This article proposes to explore the implications deriving from the strategy implemented by the European Commission to cope with these trade-offs. The article comes up with three conclusions. First, legal uncertainty is largely overstated as both the methodology to analyze these contracts and its implementation principles are clearly emerging. Second, more legal certainty became possible because the coping strategy of the European Commission was to replicate methodologies it had devised in other sectors, especially beer and ice-cream, which upgrades legal certainty but does not guarantee the efficiency of future competition enforcement. Third, this methodology could even go counter the objectives of the European Union in terms of market building and security of supply in electricity.

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