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29th Mar 2024

Energy giants to challenge EU fine

  • Neelie Kroes: "The Commission has no alternative but to impose high fines" (Photo: EUobserver)

Major European gas suppliers, E.ON Ruhrgas and GDF Suez have said they are planning to challenge the EU executive's fine for cartel-type practices, announced on Wednesday (8 July).

The European Commission, the EU's top regulator, slapped a €553 million fine each on Frances's GDF Suez SA and Germany's E.ON Ruhrgas AG for colluding on market share of natural gas in national markets.

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The penalty refers to a deal struck by the two companies back in 1975 not to sell Russian gas transported by the Megal pipeline to Germany and France in each other's markets, following their joint investment in the pipeline.

According to the commission, the energy giants kept the deal in place even after the EU's gas markets were liberalised and only ended their arrangement in 2005.

"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," competition commissioner Neelie Kroes commented.

She argued that the EU executive had no alternative to imposing high fines, so as to send "a strong signal to energy incumbents that the commission will not tolerate any form of anticompetitive behaviour."

But although analysts point out that it is the highest cartel penalty after the €896 million levy on French Glassmaker Cie de Saint-Gobain SA, it accounts for less than one percent of the companies' sales in 2008. Under EU law, Brussels is entitled to levy a maximum 10 percent fine.

"It's a significant fine, but if you look at the effect on the companies' fair value, it's relatively limited," Stephan Wulf, a Frankfurt-based analyst at Oppenheim Research GmbH told Bloomberg. "There won't be any significant changes in the competitive environment as a consequence," he added.

The companies indicated they are planning to fight the decision it shortly after the verdict was announced on Wednesday.

GDF Suez said it "cannot accept the charges that have been made against it," and will be filing an appeal of the commission's decision with the European Union's Court of First Instance, according to Dow Jones. The German gas utility E.ON Ruhrgas also hinted it would try to advert the fine.

E.ON Ruhrgas and GDF Suez are two of the largest players in the European gas industry, with the German supplier enjoying an €87 billion turnover in 2008 and the French giant selling €68 billion worth of energy last year.

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