EC starts formal ČEZ probe

The European Commission (EC) has officially launched formal anti-trust proceedings to investigate whether state-owned energy company ČEZ abused its dominant position on the domestic energy market.

The formal investigation, announced July 15, is the end result of a probe launched in 2009 when the EC raided and sealed ČEZ's offices and seized employees' laptops and mobile phones. The EC has restricted current proceedings to ČEZ's abuse of its market position and did not include the initial charges that the firm had partnered with other companies to dominate the market and limit the trade of brown coal. The current proceedings also do not directly state that ČEZ unfairly raised wholesale electricity prices.

"The commission has concerns that ČEZ's behavior, in particular the hoarding of capacity in the transmission network, may have resulted in preventing the entry of competitors into the Czech wholesale electricity market," the EC said in a statement.

ČEZ has taken a decidedly positive tack in response to the investigation. CEO Martin Roman said the EC's decision to limit the inquiry "is yet another confirmation that in the Czech Republic we have an open, fully liberalized and working electricity market."

"If you were accused of stealing and killing, and then they said, 'OK, you only killed someone,' you'd be happy that at least it was only one thing and not the original two," said Radovan Kubáč, an associate specializing in commercial law at the Schönherr law firm in Prague. "It's still quite serious because the fine for abuse can be very high."

If ČEZ is found guilty, ČEZ could have to pay up to 10 percent of its annual revenue in fines, he said, and would likely be asked to sell off some of its assets to open the market.

However, the official launch of the investigation after the two-year probe does not necessarily mean the EC has found damning evidence, Kubáč said. It only indicates the EC still has questions about ČEZ's practices and wants more access to files and information.

"It might be possible that, after proceedings are started, ČEZ provides evidence that completely changes the EC's opinion," he said. "You cannot judge the future findings of the EC based on the fact that it started proceedings."

In the meantime, the EC cannot in any way hinder ČEZ's normal business operations, Kubáč said. If at the end of the investigation, which has no set finish date, the EC finds evidence the firm violated anti-trust law, it will issue a statement of objection to which ČEZ will have a chance to respond in its defense.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com