94/153/EC: Commission Decision of 21 February 1994 relating to a proceeding under Article 85 of the EC Treaty (IV/30.525 - International Energy Agency) (Only the Spanish, German, English, French, Italian and Portuguese texts are authentic)

COMMISSION DECISION of 21 February 1994 relating to a proceeding under Article 85 of the EC Treaty (IV/30.525 - Interational Energy Agency) (Only the Spanish, German, English, French, Italian and Portuguese texts are authentic) (94/153/EC)
THE COMMISSION OF THE EUROPEAN COMMUNITIES
,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (1), as last amended by the Act of Accession of Spain and Portugal, and in particular Articles 6 and 8 thereof,
Having regard to the application submitted to the Commission on 12 October 1993 by the Chariman of the Industry Advisory Board of the International Energy Agency (hereinafter: 'the IEA') for the benefit of all the IEA Reporting companies, pursuant to
Article 8
(2) of Regulation No 17, requesting renewal of the exemption under Article 85 (3) by Commission Decision 83/671/EEC (2),
Having regard to the publication (3) pursuant to Article 19 (3) of Regulation No 17 of a summary of the concerted practices between oil companies which are needed to carry out the emergency oil allocation system of the International Energy Program  ('IEP') and relevant changes which have occured since Decision 83/671/EEC, in which the Commission granted an exemption pursuant to Article 85 (3) for those concerted practices, for a period ending on 31 December 1993,
Having consulted the Advisory Committee on Restrictive Pratices and Dominant Positions pursuant to Article 10 (3) of Regulation No 17,
Whereas:
I. THE FACTS  (1) The IEP results from an agreement signed on 18 November 1974. 23 countries, members of the OECD, now participate in the IEP. The objectives of the IEP are set out in Commission Decision 83/671/EEC. The IEP aims at responding to oil  supply disruptions by ensuring the availability of oil stocks for use in emergencies, and by restraining demand and allocating available supplies among the participating countries on a equitable basis according to an allocation process.
The implementation of the IEP is described in the Notice (4) pursuant to Article 19 (3) of Regulation No 17 and in Decision 83/671/EEC.
(2) Since Decision 83/671/EEC, the following changes have occurred:
(a) At present 18 oil companies and one association of oil companis (compared to 16 oil companies and two associations in December 1983) are members of the Industry Advisory Board (IAB). The IAB assists the IEA in ensuring the effective operation of  emergency measures.
The oil companies and the association are all members of the group of 'reporting companies' of which there are at present 41.
(b) Some changs have occurred in the allocation process. There have been two amendments to the IEA's Emergency Management Manual, which was last published in December 1982. One of the two amendments clarified the intention that, in oil transactions  which might occur as part of the activation and operation of the IEA's Emergency Sharing System, prices should be based on conditions prevailing for comparable commercial transactions. The other admendment sets out procedures for resolving, during an  emergency, any large discrepancies in the oil supply data submitted by different member countries.
(c) Another important new contingency arrangement, which does not affect directly the Emergency Sharing System, is the Agency's co-called 'Coordinated Emergency Response Measures' (CERM) mechanism. Under the CERM, IEA member governments have agreed to  give early consideration, during an energy crisis, to the coordinated use of their oil stocks and to additional demand-restraint measures.
(d) Concerning the types of activities which constitute part of the allocation process (Types 1, 2, 3), there have been changes related to Type 1 and Type 2 activities. In order to take into account the changes in the structure of the oil market, as  well as technical improvements in the computer capabilities available to the Secretariat for crisis-management purposes, the Emergency Sharing System was improved in 1986. It was decided to extend the prescribed period for the solicitation, processing  and implementation of 'closed-loop voluntary offers' by reporting companies and non-reporting companies for the re-arrangement of oil supplies in response to an emergency and to accelerate the process for the approval of those offers by the Allocation  Coordinator. Thus, under the 'Wider Window' proposal 'closed-loop voluntary offers' can be submitted to the ISAG (Industry Supply Advisory Group) or the IEA Secretariat at nearly any time during an allocation cycle, not just at specified times.
(e) As to the situation in the oil market, there have been significant developments over the past ten years. During the 1970s, the OECD countries were able to reduce their energy dependence through the reduction of consumption, the exploitation of new  areas (Alaska, North Sea) and the development of other sources of energy (nuclear, renewable energy). But since 1985 there has been a trend towards increased oil imports. This is likely to continue, with the IEA forecasting that coverage of OECD demand  by net imports will rise from 60 per cent or so at present to possibly 70 per cent during the first decade of the next century. Most of the increase in oil imports will come from the major producing regions, which are subject to an endemic political  uncertainty, thus increasing OECD countries' vulnerability to oil supply disruptions. The IEA will, therefore, need to maintain, update and periodicallytest its emergency response capabilities.
Crude OIl and NGL (Natural Gas Liquids) Production
>(5)()"(6)(7)(7)(6)(7)(7)" ID="4">(million tonne)" ID="1">93> ID="2">142> ID="3">116> ID="4">135"> ID="1">702> ID="2">780> ID="3">740> ID="4">761"> ID="1">2 924> ID="2">3 090> ID="3">3 189> ID="4">3 180" ID="4">(million barrels/day)"  ID="1">2> ID="2">3> ID="3">2,5> ID="4">2,9"> ID="1">15> ID="2">16,6> ID="3">15,9> ID="4">16,4"> ID="1">63> ID="2">63,3> ID="3">65,6> ID="4">65,4""
>
Imports and exports of crude oil and NGL
"(million tons)>(8)()"> ID="1">EG countries (9)" ID="1">Imports> ID="2">527> ID="3">450> ID="4">471> ID="5">502"> ID="1">Exports> ID="2">44> ID="3">80> ID="4">67> ID="5">71"" ID="1">OECD countries (10)" ID="1">Imports> ID="2">1 251>  ID="3">934> ID="4">1 040> ID="5">1 104"> ID="1">Exports> ID="2">63> ID="3">171> ID="4">174> ID="5">211"">
>
(3) The application for an extension of the exemption, for a further period of no less than the years from 1 January 1994 onwards, is motivated by the need to allow oil companies to cooperate in carrying out the Emergency Sharing System. Indeed  the Emergency Sharing System relies heavily upon the oil industry to coordinate any necessary redistribution of the available oil supplies, in accordance with the sharing formula set out in the IEP Agreement.
II. COMMENTS FROM THIRD PARTIES  (4) Following the publication of the notice pursuant to Article 19 (3) of Regulation No 17, no comments were received from third parties.
III. LEGAL ASSESSMENT   A. Article 85 (1)  (5) For the same reasons as those previously outlined in Decision 83/671/EEC, to which reference should be made, the consent of the oil companies to cooperate with one another and the IFA in the framework of the IEP and in the  operation of the IEA emergency oil allocation system is a concerted practice which falls within the scope of Article 85 (1), notably because:
(a) The concertation between the oil copanies has the object and effect of taking into account and balancing allocation rights and obligations. This means in some cases directing oil to destinations where it would not have gone had the IEA system not  been activated.
(b) The oil companies' behaviour when exchanging information within the framework of the IEA may alter the market conditions from what they would be without such exchanges of information.
(c) The possible effects of thse restrictions on competition may be appreciable. The undertakings start to concert on allocation actions when a 7 % shortfall in oil supplies available to all IEA countries or to one of them has occurred or may reasonably  be expected to occur. In the event of activation, several million tonnes of oil may have to be redistributed each month.
(d) The joint effort of the oil companies to redistribute available oil may have an appreciable effect on trade between Member States. The usual flow of oil supplies may be modified in order to meet allocation rights and obligations according to the  situation of each participating country.
B. Article 85 (3)  (6) On the basis of the information at its disposal, the Commission has come to the conclusion that the advantages of the concerted practice of the oil companies continue to constitute a sufficient basis for the application of Article  85 (3). The changes which have occurred since 1983 do not affect the validity of the exemption. They aim at improving the reallocation process and take into account the changes in the structure of the oil market and the technical improvements.
(a) The concerted practice does contribute to improving the distribution of the relevant goods and to promoting economic progress by reducing the inconvenience and sharing the difficulties in case of supply disruptions.
(b) The concerted practice allows the consumer a fair share of the resulting benefit, as the concerted practice is experted to minimize the impact of the shortage of the general economny of the participating countries, with an immediate benefit to  consumers.
(c) The concertation between companies to achieve the allocation needed does not go beyond what is necessary for the fulfilment of the objectives of the IEP.
(d) The concerted practice does not afford the undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. Competition between the oil companies will continue in all other respects apart from  their obligation to observe allocation rights and to fulfil allocation obligations.
IV. ARTICLES 6 AND 8 OF REGULATION No 17  (7) The appliction for renewal of the exemption granted by Decision 83/671/EEC was submitted by the Chariman of the IAB before 31 December 1993, the date the Decision expires. Pursuant to Article 6 (1) of  Regulation No 17, this Decision should take effect from 1 January 1994.
(8) Article 3 of Decision 83/671/EEC obliged the oil companies to inform the Commission at the earliest possible moment of:
1. any change adopted by the Governing Board or National Emergency Sharing Organizations to the rules governing the emergency oil allocation system and the participation of oil companies therein;
2. any consultations with oil companies provided for in Article 19 (6) and (7) or Article 55 (3) of the International Energy Program or submission by the companies to the Interantional Energy Agency or national governments pursuant to the foregoing  rules of data such as that on imports, exports, indigenous production and investories;
3. the declaration of the beginning of any emergency;
4. any proposals or arrangements for a test run of the emergency oil allocation system or of the data system.
The exemption was granted subject to the obligation that the Commission should have access for its representatives to any consultations with oil companies provided for in Article 19 (6) and (7) or Article 55 (3) of the International Energy Program which  may take place, and to any meeting of the Industry Supply Advisory Group or its subgroups or of the Industry Advisory Board or its subcommittes which might take place when the emergency oil allocation system was being implemented or when test runs were  being carried out. The Commission's representatives were to have made available to them upon request all documents and other information in connection with such consultations, meetings and test runs in the possession or under the control of any company  to which the Decision applied, and all documents and other information in such possession or control in connection with Type 2 and Type 3 activities and with Type 1 activities that were reported to the Commission.
The reporting requirements have been fulfilled throughout the period of exemption and should be imposed again for the extended duration of the exemption pursuant to Article 8 (2) of Regualtion No. 17.
(9) Pursuant to Article 8 (1) of Regulation No 17, a Commission decision in application of Article 85 (3) of the Treaty must be issued for a specified period. In the present case an extension of the Decision for a period of ten years appears  appropriate.