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EU power giants hit by major penalties

EUROPEAN Union regulators yesterday fined E.On AG and GDF Suez 553 million euros (US$768 million) each for refusing to compete against each other for 30 years.

The fines are the second-largest for an illegal cartel and the first time the EU has fined an energy cartel.

The European Commission said Germany's E.On and France's GDF Suez agreed in 1975 not to sell imported Russian natural gas to each other's home markets after jointly building the MEGAL pipeline from Russia to Western Europe.

GDF immediately said it "strongly disputes the European Commission decision" and would appeal the fine to the EU courts.

EU Competition Commissioner Neelie Kroes said the practice was one of the worst antitrust problems because it deprived German and French customers of choice and price competition in two of the EU's largest gas markets.

"The commission has no alternative but to impose high fines," she said.

The market sharing deal only ended in 2005, the EU said.

E.On and its subsidiary E.On Ruhrgas is the largest supplier of natural gas in Germany, while GDF Suez is the biggest seller of gas to French customers.

They jointly own and operate the MEGAL pipeline which transports Russian gas across southern Germany.

Regulators said the two companies in 1975 "explicitly agreed in two letters that GDF would not sell any gas transported over the MEGAL in Germany and neither would Ruhrgas in France."

Both companies already dominated the gas market in their home nations, the EU said.

GDF then had a legal monopoly to import natural gas into France which ended in August 2000. Ruhrgas was "de facto protected from competition" with agreements with other German suppliers that became illegal in April 1998.

The EU executive said the companies were aware that they were breaking antitrust rules ahead of an August 2000 EU deadline to open up energy markets to new rivals.

It said their contacts after 1999 confirmed that they had an illegal market-sharing agreement.

GDF rejected the charges, saying the legal climate "was very different from that of the energy market today."


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