Judgment on excessive pricing published

Background 

The case was Denmark's largest ever competition law related damages case, involving more than 1,000 claimants and a combined damages claim exceeding DKK 11.5 billion/EUR 1.5 billion (including statutory interest).

The case concerned an alleged abuse of dominance by the former Elsam, now part of Ørsted, in the form of excessive prices on the wholesale electricity market in Western Denmark in 2003 - 2006.

The case was initiated before the Danish Maritime and Commercial High Court ("DMCHC") in 2007 and had thus taken more than 18 years. 

The case was initially brought as a so-called "follow-on" damages action based on certain infringement decisions by the Danish competition authorities, but those decisions were ultimately set aside by the High Court of Western Denmark ("HCWD"). The claimants, however, decided to continue the damages case as a co-called "stand-alone" action. The DMCHC's judgment is therefore the result of an independent and comprehensive assessment of the alleged abuse.

See also Plesner's previous news article about the judgment here.

Judgment 

The claimants sought to establish the existence and extent of the alleged excessive prices using a complex economic model designed to estimate the counterfactual prices on an hourly basis in the relevant period. 

However, the DMCHC found that the claimants had failed to show that Elsam had charged excessive prices, and therefore ruled in favor of Ørsted already for that reason.

This was, inter alia, because the claimants' abuse model compared the modelled counterfactual prices with the actual prices on an hourly basis without accounting for the fact that, in many hours, Elsam was forced – due to the characteristics of the market – to produce and sell electricity at prices below its costs. 

Furthermore, the claimants' model incorrectly treated any difference between the actual and modelled counterfactual prices as excessive, without assessing whether the actual prices were significantly higher than the modelled counterfactual prices. 

Important precedent for future excessive pricing cases

The judgment is an important contribution to the (quite limited) case law on the application of the prohibition against excessive pricing. 

As part of its reasoning, the DMCHC found that a test for excessive prices which is based on an economic model with simplified assumptions – that, all else equal, cause the modelled counterfactual prices to be underestimated in some cases and overestimated in others – must include a mechanism to account for the effect of those simplified assumptions. Otherwise, the modelled counterfactual prices – which, in the present case, were hourly prices, but in other cases could be modelled at e.g. the product or customer level – cannot meaningfully be compared to the actual prices to identify potentially excessive prices. 

The DMCHC also found that a price cannot be considered excessive merely because it exceeds the counterfactual price under effective competition. Instead, a test for excessive prices must include an assessment of whether the actual prices were significantly (and persistently) above the benchmark prices.

These principles would appear to be generally applicable.

The claimants have decided not to appeal the judgment, which is therefore final.

The non-confidential version of the judgment (in Danish) is found here

Plesner's previous news article about the judgment is found here