Back
CEZ Group
...
Media Press releases
CEZ Will Appeal Against Ruling of the Bureau for Protection of Economic Competition

3. 2. 2000

Others

CEZ Will Appeal Against Ruling of the Bureau for Protection of Economic Competition

The power-generation company CEZ was served last week the ruling of the Bureau for Protection of Economic Competition claiming that CEZ had misused its dominant position to the detriment of the mining company Mostecka Uhelna by reducing its purchases of lignite from that company due to the lower demand for electricity in the last year. For this breach of law, CEZ was penalized with a penalty amounting to CZK 10 million.

 

The power-generation company CEZ was served last week the ruling of the Bureau for Protection of Economic Competition claiming that CEZ had misused its dominant position to the detriment of the mining company Mostecka Uhelna by reducing its purchases of lignite from that company due to the lower demand for electricity in the last year. For this breach of law, CEZ was penalized with a penalty amounting to CZK 10 million. This ruling of the Bureau for Protection of Economic Competition demonstrates that the former speculation of a penalty up to 10 % of the net sales in the last completed fiscal year, i.e. approximately CZK 5.5 billion, or division of the company could not have been made by the Bureau for Protection of Economic Competition.

CEZ lawyer - the attorney Dr. Jaroslava Vankova, Integrated Legal Office - however, considers the course of the administration proceedings as biased, the ruling as distorting and the ruling itself as illegal. CEZ will appeal with the Bureau for Protection of Economic Competition against this ruling and, in case the appeal is not sustained, open a legal case and ask the court to re-examine legality of the ruling because CEZ does not agree with the Bureau's ruling.

The Bureau for Protection of Economic Competition did not prove any breach by CEZ of the Protection of Economic Competition Act, which would be of a specific character, therefore, it decided only based on a generally formulated, so-called general clause (as per which "... the dominant position shall not be misused by the competitor to the detriment of other competitors, nor to the detriment of the public interest ...").

"We believe the Bureau's ruling in the matter of the alleged breach by CEZ of the Protection of Economic Competition Act can have a considerable adverse impact for the future. For any dominant competitor to avoid acting which could by penalized by the Bureau, such competitor would probably be forced to buy from its suppliers not only evenly, but also regardless of their prices, and such competitor would be forced to buy also the goods which are evidently not needed. At that, the supplier lodging with the Bureau a submission containing evidently false data and giving contradictory information at the subsequent hearing will probably be blameless. This is a turned-over situation, in which the Bureau for Protection of Economic Competition is misused to discriminate a dominant company acting in compliance with usual business principles by a company which evidently tried to get for itself the best conditions compared with other competitors," said Dr. Jaroslava Vankova, CEZ Lawyer.

According to Dr. Jaroslava Vankova, CEZ Lawyer, CEZ had presented to the Bureau trustworthy evidence that CEZ had discussed with all mining companies the lower consumption of electricity and the resulting need to reduce purchases of coal. The fact that CEZ could not have fully foreseen the rate of decrease of electricity consumption at domestic market, was sustained in its opinion also by the Ministry of Industry and Trade. The mining companies Severoceske Doly and Sokolovska Uhelna responded in a market-orientated way to this situation and reduced their prices of part of their supplies so that such price reduction provided for generation and exports of electricity for competitive prices. That is why the volumes of purchases from these companies could be met. Mostecka Uhelna, however, did not want to grant any price reduction in spite of the fact that its price had been the highest from the very beginning and the difference became even sharper. On the contrary, Mostecka Uhelna tried from the very beginning to get the most out of the given situation and forced CEZ to give it better conditions compared with the other mining companies.

Mostecka Uhelna did not take part at all in the transaction "coal for exports", on the contrary, the company demanded that the reduction in purchases of coal be solved by means of a proportional reduction of purchases from all mining companies, which would have prevented any exports of electricity. Besides, Mostecka Uhelna would have gained unjust profits to the detriment of the companies which had reduced their prices to maintain volumes of their sales and, consequently, volumes of their production.

 

Ladislav Krizpress, spokesman of CEZ, a. s.