The Bundeskartellamt has today published a discussion paper on the assessment of long-term gas supply contracts under competition law. The long-term contractual commitment of the municipal energy providers (in particular municipal utilities) to the established gas transmission companies, as well as the absence of effective transmission possibilities, has prevented the opening-up of the gas markets to competition. This does not, however, apply to long-term contracts between gas import companies and producers.

Bundeskartellamt President Dr Böge: “The practice of committing distributors to long-term contracts has virtually led to a foreclosure of the German markets for domestic and foreign suppliers. With this paper the Bundeskartellamt is sending out a signal in favour of more competition in the gas sector, which is still growing at a very slow rate even in the seventh year of liberalisation." Dr Böge continued by saying: ”Liberalisation will only be a success if firstly an effective mechanism of transmission is ensured and, secondly, if sufficient demand quantities remain open to competition. Without a loosening of the long-term contractual commitments transmission regulation will come to nothing."

After conducting extensive investigations in the proceedings initiated against 16 gas transmission companies the Bundeskartellamt has now presented a paper with “principles of evaluation of long-term gas supply contracts” in which it bases its arguments on the following key points: Supply contracts with terms of more than two years and a requirement satisfaction of over 80 per cent are just as inadmissible as supply contracts with terms of over four years and a requirement satisfaction of over 50 per cent. The percentage levels must be based on actual requirements rather than on a reference quantity established by the companies. Several supply contracts between a supplier and customer are regarded as one contract to prevent market foreclosure effects caused by splitting contracts into different periods. Simultaneously tacit extension clauses in gas supply contracts are not to be accepted. So-called “English clauses“ which entitle established suppliers to switch to more favourable rival offers are also considered inadmissible under competition law because of their foreclosure effect.

Due to their cross-border dimension the Bundeskartellamt’s proceedings conform with European competition law (Art. 81 EC Treaty, Regulation 1/2003). Consequently the Bundeskartellamt will remain in close contact with the EU Commission.

In a discussion with specialists and the entire sector the Bundeskartellamt plans to assess its ideas on market liberalisation, above all for their practicability.

It invites the market participants and the interested professional public to comment on the paper, available at www.bundeskartellamt.de, by 28 February 2005.