The competitive effects of Gasum’s cross-subsidisation

Situation

In 2019, the Finnish Energy Authority (FEA) found that Gasum, a state-owned gas company, had breached the Natural Gas Market Act and engaged in cross-subsidisation. According to the FEA, Gasum had benefited from a cross-subsidy by systematically transferring financial assets from its regulated natural gas transmission business to its businesses operating in a competitive market, in connection with Gasum’s corporate restructuring.​

The FEA proposed that the Market Court impose a penalty fee of around 80 million euros on Gasum. The FEA asked Copenhagen Economics to provide an economic expert assessment on the competitive effects of the alleged cross-subsidy.

Outcome

In November 2022, the Market Court repealed the FEA’s decisions and proposal for a penalty fee to Gasum. A key reason for the decision was that, according to the Market Court, the Natural Gas Market Act does not explicitly prohibit cross-subsidisation but rather views its prevention as “desirable”. The FEA appealed the decision to the Supreme Administrative Court.  ​

In March 2024, the Supreme Administrative Court repealed the Market Court’s decision largely in accordance with the FEA’s requirements. The proposal for a penalty fee was returned to the Market Court for reconsideration.  

Main points

• Copenhagen Economics supported the FEA by assessing the competitive effects of Gasum’s alleged cross-subsidisation. Partner Tuomas Haanperä acted as an expert witness before the Market Court. ​
• We found that cross-subsidies – in the form of financial contributions a company would not have obtained on market terms – may distort competition in several ways, not limited to price competition. The magnitude of the subsidy and prevailing market conditions are key factors to consider when assessing the competitive effects of a cross-subsidy.

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