Refusal of utility company to deliver electric grid services and electrical energy for street and road lighting did not constitute abuse of a dominant position

07 February 2008

Henrik Nilsson, Sanna Berg

In a ruling on 15 November 2007, the Swedish Market Court found that the refusal of an electric utilities group to provide electrical energy for street and road illumination did not constitute a breach of the Swedish Competition Act (1993:20). Although the company was considered as dominant on the relevant market, the majority of the Court ruled that it had not been demonstrated that the refusal to supply had a negative impact on competition.

The electric company group Ekfors KraftAB (“Ekfors”) holds an electric grid concession within certain parts of övertorneå and Haparanda municipalities (“the municipalities”) in northern Sweden. Under the provisions of the Swedish Act on Electricity (1997:857), a net concession confers a legal monopoly regarding the provision of high-voltage net for transmission of electrical energy to users within the current concession area.

According to longstanding informal agreements between the municipalities and Ekfors, the company would supply street light services between 15 August and 15 May annually. In 2002 Ekfors notified the municipalities of a pending price increase. When eventually invoiced in 2004, prices had more than doubled. The municipalities refused to pay more than what they considered a reasonable amount. Come the beginning of the 2006 street light season, the dispute had not been resolved and on 15 August Ekfors failed to turn the lights on. Since then, street lights have been off with a few individual exceptions.

According to the Court, Ekfors’ possession of the existing street light facilities implicated that the company had a dominant position on the market. Ekfors had a de facto monopoly as Ekfors was the owner of the only existing facilities that can provide street lighting on the relevant market. Ekfors also had the grid concession, so other possible entrants would have to pay connection setup fees and grid tariffs to Ekfors.

On the other hand, the Court found that there was a solitary position also on the vendee side, a monopsony, as the municipalities were the sole buyers of the entire street light service provided by Ekfors. Thus, the municipalities had strong purchasing power and the situation could be described as if both the municipalities and Ekfors were necessary trading partners for each other. The purchase power of the municipalities is further reinforced by the possibility to construct facilities for the street- and road lights themselves.

Regarding the price dispute, the Court held that the disputed amounts did not appear to be unduly high.

Regarding the question if Ekfors’ refusal was to be considered as an abuse the Market Court found that for a company to be forced to deliver it is necessary to show that the refusal to supply in some way risks having a negative effect on competition. It is incumbent on the party who claims that competition is effected to prove that is the case. According to the Court the municipalities had not been able to describe where the problems in competition lie, and what the problem actually consisted of. Further, the Court stated that since the municipalities had a strong purchase power, Ekfors’ actions appear to seek to remove itself as a supplier. In separate proceedings, the Ekfors group has been ordered under trustee management – a ruling presently under appeal.

According to the Court the street and road lighting is further not to be considered an essential facility, which the municipalities had claimed.

Sources: Swedish Market Court’s decision on 15 November 2007in case 2007:26, available at http://www.marknadsdomstolen.se/ (in Swedish only)