EC Commences Anti-Trust Proceedings Against GDF and Eon 

On 16^th May 2006 the European Commission carried out unannounced inspections at the premises of gas companies in five member states. They had reason to believe that gas companies in Germany, Italy, France, Belgium and Austria may have violated EC-Treaty antitrust rules that prohibit restrictive business practises and/or abuse of a dominant market position. 

Following on from those inspections the European Commission (EC) decided to start formal anti-trust proceedings against E.ON, a German energy company, and Gaz de France, a French gas company, for a possible breach of the EC Treaty’s rules on restrictive business practices (Article 81). 

The EC is concerned that there may be an agreement between the two companies not to sell gas in each other’s home market even after the gas markets in Europe are liberalised. The particular area of concern is to do with natural gas transported over the MEGAL pipeline which is jointly owed by the two companies. 

The MEGAL pipeline transports Russian gas from the German – Czech border to German regions and onto France. Construction began in 1976 and it has a total length of 1077km. The gas market in the ‘70s was a very different place to where it is today and E.On have admitted that there was once an agreement with GdF in 1975 which expired in 2004, but that it has no practical relevance today.  

The fact that the EC has started proceedings against these two companies does not mean that they have concrete proof against them, but does mean that an in-depth investigation will be under way. If the companies are found guilty of infringement they could be fined up to 10% of their annual turnover for every year that they were in infringement of the treaty.  

The EC has long wanted to be seen to be facilitating the liberalisation of the European gas markets and so it is hardly surprising that they are coming down hard on any companies that appear to be standing in the way of this process.  

Recently both Germany and France were leading a resistance along with Austria, Greece and Luxembourg by sending a letter to the EC Energy Commissioner Andris Piebalgs opposing the EC’s proposal to break up vertically integrated energy utilities. 

In January the EC pushed for ownership unbundling as a way forward to implement total liberalisation in the energy sector. (See February’s MZINE) At this moment the EC is drafting its proposals to submit before the European Parliament later this year to bring about a separation of power and gas transmission and distribution networks from production and supply businesses. This should then allow fairer access to the transportation infrastructure and so making it easier for other players to enter the market. 

So, the fight is on, as the EC battles for change in the European energy markets in an attempt to bring about ‘real’ liberalisation. The promise to the consumer being lower prices and security of supply, the promise to the energy companies, a larger market place for them to buy and sell their products at a fair price and an opportunity to grow their customer base across borders. 

Researched and written by Paul Cassar, MJMEnergy Ltd.