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Business

EU regulators hand hefty fine to E.ON and GDF Suez

Text by NEWS WIRES

Latest update : 2009-07-08

The European Commission has fined France's GDF Suez and Germany's E.ON 553 million euros each for agreeing to stay out of each other's markets, in breach of EU rules.

REUTERS - European Union antitrust regulators imposed a combined fine of more than 1.1 billion euros ($1.54 billion) on German utility E.ON and GDF Suez on Wednesday for secretly carving up gas markets.

 

The European Commission, the EU's antitrust watchdog, fined each company 553 million euros for agreeing in 1975 not to compete with one another on their national gas markets when they jointly built a pipeline to import Russian gas.

 

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

 

"This decision sends a strong signal to energy incumbents that the Commission will not tolerate any form of anticompetitive behaviour," EU Competition Commissioner Neelie Kroes said.

 

She said the agreement had deprived customers of price competition and choice of supplier in two of the largest gas markets in the 27-nation EU.

"The Commission has no alternative but to impose high fines," she said.

 

The biggest Commission fine on a single company was the 1.06-billion-euro penalty imposed on chipmaker Intel Corp in May. Glass maker Saint-Gobain was fined 896 million euros last year for price fixing.

 

The biggest cartel fine was the more than 1.3 bln euros on a group of companies in the European car glass market last November.

 

The Commission's case against E.ON and GDF Suez was launched after raids were carried out on the two companies. It focuses on their jointly-owned MEGAL pipeline from southern Germany to the French-German border.

 

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.

 

E.On, the world's biggest utility by sales, had said the alleged anti-competitive practices were linked to agreements that expired in 2004 and that the business had been competitive for many years.
Gas supplier Gaz de France merged with Suez last year to form GDF Suez, Europe's biggest utility by market capitalisation ahead of EDF and E.ON.

 

Gerard Mestrallet, the head of GDF Suez, said last week the French power group would appeal against any fine imposed by the Commission.

 

"If it was the case, we would appeal but let's wait and see calmly," Mestrallet told reporters at a business forum in Paris.

 

GDF Suez has said the investigation is based on "putative" facts that took place before the opening of Europe's energy market.

 

E.ON settled separate EU antitrust charges last year by agreeing to sell its power grid and some generation plants. RWE agreed to dispose of its gas transmission network to settle another antitrust case.

 

E.ON posted first-quarter adjusted earnings before interest and taxes (EBIT) of 3.1 billion euros. GDF Suez had 5.3 billion euros in earnings before interest, tax, depreciation and amortisation (EBITDA) in the same period.
 

Date created : 2009-07-08

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