Through FTI Consulting’s subsidiary, Compass Lexecon, we provide expert economic advice on competition policy issues in the energy sector. Our staff of economists, econometricians and industry experts use a combination of leading industrial organisation theory and sophisticated economic and econometric analyses to analyse a variety of issues that often arise in antitrust cases, including defining relevant markets, assessing the potential effects of alleged anti-competitive behaviour, performing complex merger simulations, evaluating merger-related efficiencies, and estimating damages. Major energy companies active in wholesale markets are our clients. Our professionals have deep knowledge of economics and institutional structures across all segments of the energy industry, including the specific characteristics of the wholesale segment.
Our Service Offerings
Approval for an energy merger in Europe comes from either the European Commission or a national authority. Through our subsidiary, Compass Lexecon, we are often involved in such mergers because we offer a unique combination of competition economics and energy industry expertise. We assist our clients with an analysis of the relevant energy market in which the transaction takes place and market share calculations. We assess the competitive framework and possible theories of harm based on unilateral or coordinated effects, as well as potential efficiencies following the transaction. Our team performs merger simulations to estimate price effects of the merger and can provide an assessment of the remedies, such as the divestment of certain assets that are needed to countervail any anti-competitive effects.
Abuse of Dominance
Companies that are dominant may abuse their dominant position by excluding others from the market or artificially raising prices to dampen competition. To corroborate such abuse of dominance, a competition authority first has to prove the dominant position by determining the relevant market, both at the product level as well as at the geographic level in which the company competes. Secondly, it has to collect evidence on the actual abuse. The Energy experts in FTI Consulting’s subsidiary, Compass Lexecon, are competition economists with significant experience in advising companies on abuse of dominance investigations. We can advise on market definition, especially in light of the evolving interconnectedness of wholesale electricity markets, and we can assess the potential effects of the alleged abusive behaviour on competitors and consumers.
Companies can distort fair competition by cooperating with competitors, for instance, by fixing prices or dividing the market so that each company has a monopoly in part of the market. On behalf of our clients — energy companies, regulators, or even governments — FTI Consulting’s subsidiary, Compass Lexecon investigates those companies suspected of collusive behaviour. Our credentials are without peer. Because we have top professionals in competition economics and energy economics, we can study the market characteristics and market outcomes to assess whether the market is prone to reaching and sustaining a cooperative agreement. We analyse whether cooperation is harmful to competition, we can assess the actual degree of harm, and we can analyse whether there are pro-competitive effects that could not be reached without the agreement.
Unlike abuse of dominance or anti-competitive agreements, a sector enquiry investigates a market as a whole. The reasons for an enquiry may vary. For example, a market might not work well because of problems that make competition less effective. In energy markets, one may think of too high concentration resulting from the pre-liberalisation period or the potential negative effects of long-term contracts. Energy professionals in Compass Lexecon, a subsidiary of FTI Consulting, have helped clients face sector enquiries. For example, our experts have advised many companies and regulators on the ongoing enquiry into capacity mechanisms. We have experts who previously worked at competition authorities and energy regulators and, as a result, advise our clients on likely areas of review. We assist in responding to requests for information or other surveys and provide analysis and arguments from an economic perspective.
European governments are not permitted to provide financial assistance to their national companies or, if they are, it is subject to very strict scrutiny and requirements in order to minimise their impact on competition in the single European market. The Energy professionals at Compass Lexecon, a subsidiary of FTI Consulting, provide support in the economic analysis required by energy companies or governments seeking state aid clearance from the European Commission. Our economists have significant experience in advising parties seeking state aid clearances, for instance, by testing whether financial support is consistent with the European Commission’s economic principles for state aid measures, and in assessing the impact of proposed arrangements. We have provided support in state aid cases related to power purchase agreements in Eastern European countries, on renewables support mechanism, as well as on capacity mechanisms.