John Hemming's Web Log John's Reference Website
Tuesday, August 29, 2006
  Consultation on Gas Market Dysfunction

Having considered the fact that the price per therm of gas for January 2007 (80 NBP) is something like twice the global LNG price for the same date (37p) and almost twice that of the European Oil link gas (43p) it strikes me that the UK gas market has anti-competitive elements within it

I am considering asking the Director of Fair Trading to commence a Chapter II investigation into anti-competitive behaviour in the UK gas market in particular.

Chapter ii (1998 Act) relates as follows:
Abuse of a dominant position
The Chapter II prohibition and Article 82 of the EC Treaty prohibit the abuse by one or more businesses of a dominant position in a market.
Chapter II and Article 82 give examples of specific types of conduct that are particularly likely to be considered as an abuse where the business is in a of a dominant position. These include:
imposing unfair purchase or selling prices;
limiting production, markets or technical development to the prejudice of consumers;
applying different trading conditions to equivalent transactions, thereby placing certain parties at a competitive disadvantage; and
attaching unrelated supplementary conditions to contracts.

The mechanisms used which imply limiting production .. to the prejudice of consumers both on a pipeline import basis, but also on the use of IoG seem to me to infer a Chapter II contravention is occuring. There is a more complex question as to who is responsible for this contravention, but it seems prima facie that

a) Production (import) is limited and
b) That is to the prejudice of consumers.

I am approaching a number of market participants prior to making such a reference to find out their views beforehand.

 
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