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Competition & EU law insights

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| 2 minutes read

Denmark: Too plugged in - Danish Energy Producers found to have coordinated pricing in the power markets

The energy company Effekthandel ApS (“Effekthandel”) and 49 energy producers, each supplying reserve-capacity to the electricity system in western Denmark, have infringed the Danish Competition Act by illegally coordinating prices and bids in auctions.

The initial suspicion of coordination of prices between the companies was brought to the attention of the Danish Competition and Consumer Authority (“DCCA”) in January 2021, when Energinet, the sole purchaser of emergency power capacity in Denmark, discovered that on certain days, 44 identical price bids had been submitted by 44 different providers through Effekthandel.

In Western Denmark, Manual Frequency Restoration Reserve (“mFRR”) is sold in auctions for each hour of the day, and it is in connection with these auctions that the illegal anti-competitive agreements were entered into. The purpose of the auctions is for the winners to be ready in the awarded hours to supply electricity to the system if the capacity is needed. This must be done within fifteen minutes. Capacity is used to avoid imbalances in the electricity system, for example, in the event of deflection at electricity producers.

The Danish Competition Council (“DCC”) found on 25 October 2023 that the energy producers had entered into an agreement with Effekthandel, pursuant to which Effekthandel was to handle their pricing in auctions held by Energinet. The coordination, to the benefit of the energy producers, resulted in Effekthandel distributing the revenue from the auctions among the power plants based on their submitted capacity, thus ensuring that the energy producers were paid regardless of whether their individual bid won the auction or not. In addition, Effekthandel also received a commission from the power plants' earnings on mFRR.

Emails from Effekthandel to the participants, in which the coordination in the market was regularly communicated, including descriptions of the purpose of the pool arrangement to raise prices in the market, were relied on as evidence by the DCC. In addition, shared emails had also been sent monthly by Effekthandel to the energy producers, providing information on each energy producer's submitted capacity as well as a distribution key for each power plant's payments for the sale of mFRR.

The fact that prices had been coordinated by Effekthandel and that the 49 energy producers did not directly discuss prices and bids with each other did not change the assessment by the DCC that the energy producers had participated in an illegal agreement restricting competition.

The decision demonstrates the importance of limiting communication between competitors, and specifically that indirect communication between parties through a third party may be enough for the DCC to establish that a coordination of prices has taken place. 

The DCC has decided to bring the case before the courts in order to determine the size of a possible fine to be imposed on Effekthandel and the 49 energy producers for infringing the Danish Competition Act.

Moreover, the State Prosecutor for Special Crime Unit is currently assessing whether the companies involved could be held liable under criminal law. Under Danish competition law, this is only possible if the infringement constitutes a cartel as opposed to “just” an illegal horizontal cooperation.

If you need more information or further guidance in this area, please contact Morten NissenAlexander Brøchner or Nanna Sofie Krabbe



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