Antitrust: Commission Opens German Gas Market to Competition by Accepting Commitments

IP/09/410

Brussels, 18th March 2009

Antitrust: Commission opens German gas market to competition by accepting commitments from RWE to divest transmission network

The European Commission has adopted a decision that renders legally binding commitments offered by RWE to address concerns raised in the course of an investigation under EC antitrust rules (see MEMO/06/205). The Commission had concerns that RWE may have abused the dominant position on its gas transmission network to restrict its competitors' access to the network, thereby violating Article 82 of the EC Treaty. The Commission's suspicion related to a possible refusal to supply gas transmission services to other companiesand to behaviour aiming at lowering the margins of RWE's downstream competitors in gas supply ("margin squeeze"). In reaction to the Commission's concerns, RWE offeredto divestits entire Western German high-pressure gas transmission network. In the light of RWE's commitments, the Commission has now closed its investigation.

Competition Commissioner Neelie Kroes commented: "This very substantial set of remedies will fundamentally change the landscape of German gas markets,with the prospect of more competition and more customer choice. I am particularly satisfied that the divestment constitutes a clear-cut and lasting solution to the concerns the Commission raised, ensuring that RWE will no longerbe able to use the control of its network to favour its own gas supply affiliate over its competitors."

The Commission had initiated investigations into the German energy market in May 2006 (see MEMO/06/205), as a follow-up to the energy sector competition inquiry (see IP/07/26 and MEMO/07/15). Antitrust proceedings against RWE were opened in May 2007 (see MEMO/07/186). In the course of its investigation, the Commission came to the preliminary view that RWE might have infringed EC Treaty rules on the abuse of a dominant market position (Article 82), notably by two types of behaviour:

-firstly, RWE may have refused access to its network, notably by various means related to RWE TSO's capacity management. RWE may have pursued a strategy aimed at systematically keeping the transport capacity on its gas network for itself

-secondly, RWE may have intentionally set its transmission tariffs at an artificially high level in order to squeeze RWE’s competitors’ margins. Such a 'margin squeeze' has the effect of preventing even a competitor as efficient as RWE from competing effectively on the downstream gas supply markets or limiting competitors' or potential entrants' ability to remain in or enter the market.

To address the Commission's competition concerns, RWE committed to divest its existing Western German high-pressure gas transmission network, including the necessary personnel and ancillary assets and services.

Without control over the transmission network, RWE will no longer be able to favour its own supply business. The Commission also ensured that the purchaser of the network will have no incentives to favour its own supply business, since the network can only be divested to purchasers which do not give rise to prima facie competition concerns.

On 5December 2008, the Commission consulted interested parties on the commitments proposed by RWE to address the Commission's concerns of anticompetitive behaviour on the German gas markets (see MEMO/08/768). The respondents confirmed that the commitments were necessary and proportionate to remedy the concerns.

RWE will carry out the sale of its network under the supervision of a trustee. All buyers have to be approved by the Commission.

Background

The Commission's decision (a so-called "commitment decision") is based on Article 9 of Council Regulation 1/2003 on the implementation of the EC Treaty's antitrust rules. This decision, which does not conclude whether there is an infringement, legally binds RWE to the commitments it offered and ends the Commission's investigation. If RWE were to break its commitments, the Commission could impose a fine of up to 10% of RWE´s total turnover without having to prove any violation of the EC Treaty's competition rules.

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