Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, September 25, 2009

Long-Term Contracts and Competition on European Gas Markets - Has the Commission Struck the Right Balance

Posted by D. Daniel Sokol

Aldo Spanjer, Leiden Law School asks Long-Term Contracts and Competition on European Gas Markets - Has the Commission Struck the Right Balance.

ABSTRACT: This article examines whether the balance currently struck by the European Commission between long-term contracting and the introduction of competition will ensure a sustainable level of competition on European gas markets, i.e. competition that not impedes investments. It examines whether this balance – which can be derived from a recently closed antitrust case against Distrigas – takes proper account of the benefits of long-term contracting. The current balance recognizes the possibility of efficiencies related to long-term contracts. This article uses the transaction cost economics framework to assess this balance, because this science of contract explicitly focuses on contracts and their ex-post properties. It turns out that the Commission’s balance is inadequate because the advantages of long-term contracting in terms of mitigating opportunistic regulatory behaviour are not acknowledged. One likely consequence is that the Commission will intervene, and force adaptations to long-term contracts, more often than efficient.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/09/longterm-contracts-and-competition-on-european-gas-markets-has-the-commission-struck-the-right-balan.html

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