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EU: Commission probes E.On and GdF

THE EUROPEAN Commission is investigating E.On and Gaz de France (GdF) for allegedly colluding to stay out of each other's home market. The Commission's August announcement followed raids on both companies' offices, made in 2006.

The Commission said the agreement "may concern, in particular, supplies of natural gas transported over the Megal pipeline". The pipeline, which is jointly owned by the two companies, transports gas across southern Germany between the German-Czech Republic and German-Austrian borders on the one side and the French-German border on the other side. It is the only pipeline that delivers Russian gas to France.

The Commission said the proceedings against the companies were not part of the energy-sector competition inquiry, whose final report was presented in January. That report found "serious distortions of competition" in the EU's gas and power sectors.

News of the probe into GdF and E.On, Germany's largest energy firm, followed the announcement that the Commission would also investigate possible anti-market collusion by Electricité de France and Franco-Belgian power group Suez over long-term supply agreements with large industrial electricity users. Those two companies have been in negotiations about a possible merger for the past year.

GdF and E.On could face the enforced break-up of their companies or fines up to 10% of their turnover if they are found guilty. E.On says the probe probably refers to an agreement it made with GdF in 1974 and which was no longer relevant.

Germany, Austria, Greece, Luxembourg and Slovakia recently wrote to the Commission to outline their opposition to the proposed break-up of Europe's integrated energy firms. Another letter to the Commission from France's energy minister Jean-Louis Borloo also recently stated France's opposition to further liberalisation.

The case shows that "clear battle lines are now being drawn between those that are for further liberalisation within the European Union and those that are resisting the changes", says Global Insight, a consultancy. "The Commission [...] is adamant about the need for unbundling. Confirmation of its suspicions of collusion in the case of E.On's and GdF's ownership of the Megal pipeline will only serve to harden its resolve."

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