General Court cuts E.ON and GDF fines by 40%
By Sophie Mosca | Friday 29 June 2012
E.On and GDF Suez infringed EU competition law by concluding a market-sharing agreement in respect of the French and German markets for natural gas, but their fines must be reduced because the European Commission erroneously assessed the duration of the infringement. Thus held the EU General Court, on 29 June, calling into question once again the EU executive’s calculation methods (more than ten judgements along these lines in 2011 and 2012).
On 8 July 2009, the Commission fined E.ON and GDF €553 million each for their agreement related to the joint construction of the MEGAL (Mittel-Europäische-Gasleitung) gas pipeline across Germany to deliver Russian gas to Germany and France. The agreement was initially concluded between Ruhrgas AG (now E.ON Ruhrgas, an E.ON subsidiary) and GDF (part of GDF Suez). According to the Commission, the infringement began in August 2000 for GDF, when the first directive on liberalisation of the gas market should have been transposed. Before that time, due to GDF’s legal monopoly, competition was not restricted by the agreement. By contrast, there was no monopoly on the German market and the Commission consequently found that the infringement began on 1 January 1980, when the pipeline became operational. It therefore considered that GDF should have been regarded as a potential competitor of Ruhrgas prior to liberalisation, despite the existence of certain agreements between Ruhrgas and GDF on the one hand and energy distribution companies as well as local authorities on the other, which were regarded as lawful until 24 April 1998 under an exemption. For the General Court, this system of exclusive supply areas without the exclusion of potential competitors constituted de facto territorial monopolies in Germany, as a result of which the two companies could not compete with each other until April 1998. It therefore annulled the decision on this point, which has no impact on the calculation of the fine since the date of 1 January 1980 was not taken into account for setting the amount.
With regard to the end of the infringement, the court also rejected the Commission’s conclusion that it continued until September 2005. The executive failed to take into account the agreement concluded between E.ON and GDF on 13 August 2004, under which the two parties had long considered the anti-competitive parts of the MEGAL agreement as null and void, which has the result of reducing by 12 months the duration of the infringement, but on the French market alone. Different documents prove, according to the General Court, that it continued to produce its effects in Germany until September 2005.
The fines must therefore be reduced but, given the gravity of the infringement, to a lesser extent than if the Commission’s method were applied, which would result in a 50% reduction. The General Court therefore reduced the fines by around 40%, setting them at €320 million for each of the companies.