The competition enforcement in regulated sectors Märt Ots Estonian Competition Authority 17.11.2017

Institutional framework in EU member states Competition – according to the EU legislation there shall be a competition authority in each of the member state. There shall be independent energy and telecommunication regulatory authority. There shall be a regulatory body in railway and airport services. There are sectors where the member state can decide whether to have a regulator or not: water, district heating, etc.

9/16/2018 Administrative reform – merger of competition authorities and regulators Merger of different authorities 2008 Competition Authority Energy regulator: electricity, gas, district heating (Energy Market Inspectorate) Telecom regulator: telecom and postal services (part of the former Communications Board). Since 2014 at Technical Supervision Authority. Railway regulator (functions of the Railway Department of the Ministry of Economic Affairs and Communications). Water regulator (the former task of local municipalities) 2011 Regulation of airport tariffs (new task based on EU legislation) 2011

ECA today Competition Electricity Natural gas District heating Water Post Railway Airports Telecom – under Technical Regulatory Authority since 2014.

Competition regulation Cartel investigation – criminal proceeding Market dominance Merger control Market analyses

Competition Policy - new trends under the Ministry of Justice Since 2015 ECA under the Ministry of Justice The general competition policy is transferred to the Ministry of Justice More attention to the evaluation of draft legislative acts from the perspective of free competition Competition neutrality aspects – both on national and municipal level Market analyses

Market analyses Public transport in intercity bus sector Pharmaceutical sector Energy subsidies Liberalisation of district heating Economic regulation of water sector Quality regulation of DC links. Improvement of security of gas supply Access to the oil shale resources Healthcare sector Etc. In general terms the economic policy has been liberal in Estonia. Not too many market restrictions. Uber is not a case in Estonia.

Mergers Number of merger cases 2013 – 29 2014 – 21 2015 – 31 2016 – 35 2017 – 33 (as of 10.11) Compulsory notification previously 1 - 2 complex merger cases per year, this year 4

Abuse of dominant position according to the Estonian Competition Act Any direct or indirect abuse by any undertaking or several undertakings of the dominant position in the goods market is prohibited, including: directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; limiting production, service, goods markets, technical development or investment; offering or applying dissimilar conditions to equivalent agreements with other trading parties, thereby placing some of them at a competitive disadvantage; making entry into an agreement subject to acceptance by the other parties of supplementary obligations which have no connection with the subject of such agreement; forcing an undertaking to concentrate, enter into an agreement which restricts competition, engage in concerted practices or adopt a decision together with the undertaking or another undertaking; unjustified refusal to sell or buy goods.

Exclusive rights or essential facility (infrastructure) according to the Estonian Competition Act The infrastructure business is regulated with the competition act. An undertaking with special or exclusive rights or in control of an essential facility shall: Permit other undertakings to gain access to the network, infrastructure or other essential facility under reasonable and non-discriminatory conditions for the purposes of the supply or sale of goods. Third party access. Maintain separate records on revenue and expenditure related to each product or service on the basis of consistently applied and objectively justified principles of calculation which shall be clearly specified in the internal rules of the undertaking. The calculation of revenue and expenses must enable to assess whether the price of a product or service is in a reasonable ratio with the value of the product or service. Separation of accounts and reasonable prices.

Price regulation - Competition Act Two main approaches. The price regulation only in case of sector specific regulation. No need of price regulation in accordance to the competition legislation. High prices will atrack competitors to the market. USA approach. The price regulation according to the competition legislation. Approach in a number of EU MS.

Challenges of the Combined Authority More ambitious view from the competition authority to the regulated sectors. Market is the best regulator. The regulator can never be as efficient as the market is. No need for telecom regulator. Possible to regulate under competition law. 2008 staff of telecom regulator 35, today 5 (Technical Regulatory Authority). Liberalisation of postal sector 2008 staff of post regulator 15, today 1. Possible to regulate under competition law. Liberalisation of district heating on discussion. Sector liberalisation instead of stronger regulation.

Electricity and gas The third EU energy liberalisation package (directives 2009) puts a number of competition tasks on the regulators. Competition issues on power generation, wholesale and retail. A number of tasks on regulation of network operators: price regulation, third party access, cross border capacity allocation, network development plans, service quality, etc. Avoiding situations where the regulator has no tools, but competition authority lacks interest to deal with regulated sectors. Competition regulation: abuse of market dominating position on wholesale and retail. Concrete cases.

Water and District Heating No EU rules on price regulation, in many Member States regulated by to the competition act, in some Member States „municipal services“ Water – natural monopoly. Clear need for price regulation. Conflict of interest before - local government both the owner and regulator. The prices were too low. Market analyse proposing of establishment of sector regulation according to the competition regulation. District heating - „DH zoning“ in Estonia, the tariffs of all DH utilities shall be fixed by the regulator. Third party access regulation according to the competition regulation.

Telecom Well functioning competitive market in Estonia. Sufficient number of service providers 3 mobile operators 3 larger fix line service providers 4G connections – the total territory EU regulation foresees the existence of the telecom regulator Regulation of mobile termination rates Regulation of access to the transmission lines, etc. Depending on market situation, in Estonian case the sector could be ex-post regulated.

Postal services Liberalised market. Regulation of Universal Postal Service (price of stamps) according to the sector specific regulation. Third party Access to the Network according to the competition regulation.

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