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Annual Report 2012

Annual Report 2009 ECA Annual Report 2012

Dear reader,

The Competition Authority's scope of activities is broad and covers all the different sectors of the economy. If one looks at the European Union as going from Lisbon to Tallinn, then our actions can be described by the expression "from birth to death." After all, both health care and funeral services are parts of the economy. Out of the important events of the year 2012, we will remember in particular the energy sector, which is the focus of attention of both the public and the government. Why is this area so important? In addition to electricity, heating, food, drinking water, etc., are after all, necessary for life. The main reason is that we are living in the era of expensive energy. Only 15 years ago, oil cost 10 to 15 dollars a barrel, today, its price is almost 100 dollars. Similar figures also reflect the stock market price of electricity, which, for instance, at the starting time of the Finnish electricity market in the early 2000’s, the price was 15 € / MWh, while today it is on the level of 40-50 euros.

Prices in some areas are growing so fast that they attract a lot of attention and it is perfectly logical that they require the taking of steps to find solutions for development of the sector. At the other extreme are the prices for communications services, which have been dropping from year to year. When prices are falling, then the public interest in the topic also becomes more lukewarm. It becomes perfectly logical that there is no need to worry about it, as a simple mobile phone can be picked up for a few dozen euros, and for a few euros you get a month of unlimited domestic chatter and the monthly fee of unlimited mobile internet usage not costing much more. For the price of one tank of petrol one can use the mobile Internet and chat endlessly on the phone for an entire year - thus it becomes clear that what makes the consumer more worried is the accelerating prices of energy.

It is of course pointless to look for the reasons or for culprits. Disputes continue on whether high oil prices are caused by the speculative nature of financial markets, or are they a serious sign that the resources are running low and the high price reflects the continuing actual supply-demand relationship. However, it can be argued that such a rapid development of the telecommunications sector can only take place under fertile conditions for free competition. After all, it is free competition that puts the human thought into motion and causes technology to evolve. In communications, this is exactly what has taken place in the best way. A one hundred year old truth in the economy is that price agreements and abuse of a dominant position in the market are the inhibiting factors in the development of an economy. One would not want to imagine what the development would have been if the major phone manufacturers would have agreed on the prices or if each country had only one mobile operator. Even worse, what if the whole communication sector were under the control of one carrier?

The power industry has also taken a direction towards free competition; a good example of this is the opening of the electricity market at the beginning of the year 2013. Another example is the steps towards the creation of competition in the natural gas market. The EU is a model for the rest of the world, in particular in the development of competition in the electricity market. While this process has not always taken the most desirable direction and the high prices do not make the consumer happy, the best result can be found only in the conditions of free competition.

The Competition Authority's job is to keep pace with change. There are areas where there is no competition and a strong need for regulation remains, but there are examples where, by ensuring free competition, the best outcomes have been achieved. It is the latter conditions where market forces need to be given a chance to manage things and too much interference must be avoided.

With best wishes,

Märt Ots
Director General