The European Commission slapped more than one billion Euro in instant fines on two giant gas utility companies on July 7, saying they had been fixing the market. E.ON of Germany and GDF Suez SA of France must pay 553 million Euro each. The EU executive body in Brussels said it was the first fine it had ever imposed in the energy sector. Both companies promptly denied the charge and said they would appeal, Deutsche Presse-Agentur (dpa) reported. The two companies built a pipeline, codenamed Megal, to carry Siberian natural gas right across Germany in 1975. Until 2005 they had a deal that neither would use the pipeline to sell into the other’s market. This had suppressed competition. It also effectively prevented cheaper gas suppliers renting the pipeline and entering the business, the Commission charged.
The fines are among the biggest in history, but are still tiny compared to the annual turnover last year of the two companies: 87 billion Euro worldwide at E.ON and 68 billion Euro at GDF Suez.
The German company involved, Ruhrgas AG, is now part of the huge E.ON group, while Gaz de France later merged into GDF Suez. “This decision sends a strong signal to energy incumbents that the commission will not tolerate any form of anti-competitive behaviour,” EU Competition Commissioner Neelie Kroes said. “Market sharing is one of the worst types of antitrust infringement.” But GDF Suez said it was in “complete disagreement with the commission’s conclusion,” adding, “GDF Suez reiterates that it has always sought to develop and strengthen its presence in Germany.” It said it would go to court to appeal the fine. E.ON’s Ruhrgas division also announced an appeal. Ruhrgas chief executive Bernhard Reutersberg said, “The commission has made out market-sharing arrangements between companies that never happened.” He said agreements with Gaz de France had been solely to secure their joint investment. The commission started an investigation after surprise inspections in 2006 at E.ON and Gaz de France offices in Germany and France. The Megal pipeline is jointly owned and operated by the two, transporting gas from Russia from lines in the Czech Republic and Austria to homes, offices and factories in southern Germany and France. The commission said Germany and France had gas monopolies when it was built in 1975 but under market liberalisation in 2000, monopolies became illegal. However the two companies met regularly and stuck to their old accord.