German, French energy giants hit with EU fine

9th July 2009, Comments 0 comments

In the first ever antitrust fines imposed in the sector, the European Commission fined EON and GDF Suez 553 million euros each -- the second-biggest financial sanction Brussels has imposed in a cartel case.

Brussels -- EU regulators waded into the energy sector Wednesday, fining Germany's EON and France's GDF Suez a total of over a billion euros for agreeing to stay out of each other's markets.

In the first ever antitrust fines imposed in the sector, the European Commission fined EON and GDF Suez 553 million euros (769 million dollars) each -- the second-biggest financial sanction Brussels has imposed in a cartel case.

The EU's top competition regulator said the two had built a pipeline to import Russian gas into Germany and France in 1975 and "agreed ... not to sell gas transported over this pipeline in each other's home markets."

It said: "They maintained the market-sharing agreement after European gas markets were liberalised, and only abandoned it definitely in 2005."

Commission investigators raided the premises of the two companies in 2006, and the EU watchdog launched an anti-trust inquiry in July 2007.

Brussels said that the market-sharing agreement had helped both hold strong positions in the French and German gas markets as they were being liberalised, meaning no price cuts for consumers or wider choice of potential suppliers.

"This agreement deprived customers of more price competition and more choice of supplier in two of the largest gas markets in the EU," said EU Competition Commissioner Neelie Kroes.

"Market sharing is one of the worst types of antitrust infringement," she said in the statement. "The commission has no alternative but to impose high fines."

Both companies immediately vowed to appeal the decision.

In a statement, GDF Suez "expressed its complete disagreement with the conclusions" drawn by the commission, and said it would appeal before the EU's Court of First Instance in Luxembourg.

Bernhard Reutersberg, chief executive of EON's EON Ruhrgas unit, said: "The commission assumes the occurrence of market collusion, which never took place between the companies, not even in the period from 2003 to 2005."

"It also ignores economic parameters. Competition has long become reality on the European gas market," he said.

EON believes "the decision and especially the high fine are not understandable."

EON and GDF Suez are their countries' biggest gas suppliers and two of the biggest players in Europe's gas industry.

EON recorded worldwide turnover of 86.8 billion euros last year, through its subsidiary EON Ruhrgas, while GDF Suez, which employees around 200,000 people, had a turnover of 83.1 billion euros.

The European Commission has made cracking down on cartels one of its top antitrust priorities and has fined companies billions of euros in recent years for running such illegal clubs.

The biggest cartel fine was levied last year, when Brussels hit four glassmakers for a total of 1.38 billion euros. Four lift makers were fined a total of almost a billion euros in 2007.

The biggest individual fine on a company was the massive 1.06 billion euros imposed on computer chip giant Intel this year. US software behemoth Microsoft was fined 899 million euros last year.

The fine money is ploughed back into the European Union budget.

AFP/Expatica

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