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Antitrust: Commission fines E.ON and GDF Suez €553 million each for market-sharing in French and German gas markets

Commission Européenne - IP/09/1099   08/07/2009

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IP/09/1099

Brussels, 8 th July 2009

Antitrust: Commission fines E.ON and GDF Suez €553 million each for market-sharing in French and German gas markets

The European Commission has imposed fines totalling €1 106 000 000 on E.ON AG and its subsidiary E.ON Ruhrgas AG (of Germany) and on GDF Suez SA (of France) for market sharing in breach of EC Treaty rules on cartels and restrictive business practices (Article 81). E.ON/E.ON Ruhrgas and GDF Suez are fined €553 000 000 each. Ruhrgas AG (now E.ON Ruhrgas, part of the E.ON group) and Gaz de France (now part of GDF Suez) agreed in 1975, when they decided to jointly build the MEGAL pipeline across Germany to import Russian gas into Germany and France, not to sell gas transported over this pipeline in each other's home markets. They maintained the market-sharing agreement after European gas markets were liberalised, and only abandoned it definitely in 2005. These are the first Commission fines imposed for an antitrust infringement in the energy sector. This case is entirely separate from the antitrust case in which GDF Suez recently submitted commitments (see IP/09/1097 ).

Competition Commissioner Neelie Kroes said: "This decision sends a strong signal to energy incumbents that the Commission will not tolerate any form of anticompetitive behaviour. Market sharing is one of the worst types of antitrust infringement. This agreement deprived customers of more price competition and more choice of supplier in two of the largest gas markets in the EU. The Commission has no alternative but to impose high fines."

E.ON (€87 billion worldwide turnover in 2008), through its subsidiary E.ON Ruhrgas, and GDF Suez (€68 billion worldwide turnover in 2008) are the leading suppliers of natural gas in Germany and France respectively and two of the largest players in the European gas industry. E.ON acquired control of Ruhrgas, which then became E.ON Ruhrgas, in 2003. Gaz de France merged with Suez in 2008, after the end of the market-sharing agreement with E.ON, to become GDF Suez. The Commission authorised the transaction in 2006 (see IP/06/1558 and MEMO/06/424 ).

The Commission started an investigation following surprise inspections carried out in 2006 on E.ON and Gaz de France premises in Germany and France (see MEMO/06/205 ), opened formal proceedings in July 2007 (see MEMO/07/316 ) and sent a Statement of Objections to the companies in June 2008 (see MEMO/08/394 ).

The MEGAL pipeline is jointly owned and operated by E.ON Ruhrgas and GDF Suez. It transports gas across Southern Germany between the German-Czech and German-Austrian borders to the east and the French-German border to the west.

When Ruhrgas and Gaz de France decided in 1975 to build the MEGAL pipeline together, they explicitly agreed in two letters that GDF would not sell any gas transported over the MEGAL in Germany and neither would Ruhrgas in France. At that time, Gaz de France enjoyed a legal monopoly to import natural gas into France, which was only removed in August 2000. Ruhrgas' supply area in Germany was de facto protected from competition by a system of so-called "demarcation agreements" with other German suppliers until such agreements became illegal in April 1998.

Both parties maintained their market-sharing agreement even after European gas markets were opened to competition as from August 2000 by Directive 98/30/EC, despite being aware that the 1975 letters violated competition law. The companies met on a regular basis at various levels, discussed the implementation of the agreement in the newly liberalised market and monitored each other's actions. The parties' contacts after 1999 confirmed that there was a single and continuous anticompetitive market-sharing agreement in breach of antitrust law. Although the parties declared in August 2004 that they had long regarded the letters as "null and void", they continued until the end of September 2005 to implement the prohibition imposed on Gaz de France to supply gas in Germany that had been transported over the MEGAL pipeline.

The market sharing agreement helped EON and GDF to maintain strong positions in the German and French gas markets when they were being liberalised. The companies thus deliberately denied French and German gas consumers the benefits of the 1998 Directive, including more price competition and more choice of supplier.

Fines

The market-sharing agreement constitutes a very serious infringement of EC Treaty antitrust rules. In setting the fines, the Commission took into account the sales in France and Germany of the companies involved of gas transported through the MEGAL pipeline. Given the large size of the two groups, the anticompetitive purpose of the market-sharing agreement, their equal stake in the MEGAL pipeline and the gas volumes transported over that pipeline, the Commission sets equal fines for E.ON/E.ON Ruhrgas on the one hand and GDF Suez on the other hand.

The fines are based on the 2006 Guidelines on Fines (see IP/06/857 and MEMO/06/256 ), in force at the time the Statement of Objections was notified in June 2008. Council Regulation 1/2003 provides that companies may be fined up to 10% of their total annual turnover. Within this limit, the 2006 Guidelines provide that fines may be based on up to 30% of the company’s annual sales on markets affected by the infringement, multiplied by the number of years of participation in the infringement.

Action for damages

Any person or firm affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal. Even though the Commission has fined the companies concerned, damages may be awarded without these being reduced on account of the Commission fine. A White Paper on antitrust damages actions has been published (see IP/08/515 and MEMO/08/216 ). More information, including a citizens' summary of the White Paper, is available at:

http://ec.europa.eu/comm/competition/antitrust/actionsdamages/documents.html

See also MEMO/09/323


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