Bundeskartellamt prohibits E.ON’s acquisition of majority stake in Ruhrgas
28.02.2002
The Bundeskartellamt has prohibited E.ON AG, Düsseldorf, (E.ON) from acquiring Bergemann GmbH, Essen (Bergemann) which would give it indirect control of Ruhrgas AG, Essen (Ruhrgas). The President of the Bundeskartellamt, Dr Böge, stated: “The merger would further strengthen dominant positions in the gas and electricity markets. Its negative effects on competition and for the consumers would be more serious both in qualitative and quantitative terms than in the case of the acquisition of Gelsenberg AG which has already been prohibited by the Bundeskartellamt. Ruhrgas’ share in the largest grid gas company in eastern Germany, VNG (37 per cent) and in municipal utilities would for example fall to E.ON as a result. In a region like Hanover competition for end consumers would come to a complete standstill.”
On 17th January 2002 the Bundeskartellamt had prohibited E.ON’s acquisition of a majority stake in Gelsenberg AG, indirectly preventing the acquisition of a minority share in Ruhrgas as this would have strengthened dominant positions in the gas and electricity markets.
At the grid gas level the merger of Ruhrgas and E.ON would strengthen Ruhrgas’ dominant position in the supply of gas distributing companies. Ruhrgas would to a great extent be able to secure its sales to E.ON affiliates and associates and deny competitors market access. It is likely that Ruhrgas, under E.ON control, would be able to further increase this share through preferential treatment in the awarding of gas supply contracts on account of joint interests.
E.ON group companies located in Ruhrgas’ transmission area (e.g. Avacon AG, Helmstedt, Schleswag AG, Rendsberg, Heingas Hamburger Gaswerke GmbH, Hamburg, and Gelsenwasser AG, Gelsenkirchen with its fully-owned subsidiary Niederrheinische Gas- und Wasserwerke GmbH, Duisburg) would be able to strengthen their dominant positions in supplying large gas end customers and local gas distributors (municipal utilities) since after the merger they would no longer have to reckon with potential competition from Ruhrgas. Moreover the position of those E-ON companies supplying electricity as well as gas (Avacon, Schleswag) would be strengthened since they would have better opportunities in future to bundle gas and electricity supplies. Direct access to gas imports and domestic production via Ruhrgas would offer them a considerably greater degree of flexibility in their terms of offer. This would create more market barriers for companies operating purely in the gas supply sector which cannot benefit from comparable synergy effects.
As a consequence of the merger Ruhrgas’ stake in the grid gas company VNG Verbundnetz Gas AG (VNG), Leipzig, amounting to nearly 37 per cent would fall under the control of E.ON. E.ON’s share in VNG, now at approx. 5 per cent, would increase to a total of approx. 42 per cent. At the gas grid level a strengthening of VNG’s dominant positions in the supply of gas distribution companies could be expected because it would secure sales to E.ON affiliates and associates.
The dominant positions of E.ON affiliates and associates located in VNG’s grid gas transmission network (e.g. HGW Hansegas GmbH, Schwerin and Ostmecklenburgische Gasversorgung AG Neubrandenburg GmbH, Neubrandenburg) in the supply of major industrial/commercial customers and local gas distributors (municipal utilities) are likely to be strengthened as a result of the elimination of potential competition from VNG.
In the electricity sector the merger would also strengthen E.ON’s and RWE’s dominant positions in the market for the supply of major industrial/commercial customers and electricity distributors. Natural gas is the most promising primary energy source for generating electricity. The merger would give E.ON considerable influence over the most important supplier of domestic primary energy, Ruhrgas. Moreover, anti-competitive effects are likely since having gained indirect control of Ruhrgas, E.ON would also have control of Ruhrgas’ stake in municipal utilities supplying electricity. Hanover’s municipal utility (Stadtwerke Hannover) would, for example, be eliminated in future as an independent external competitor for the dominant duopoly E.ON/RWE.
The commitments proposed by the companies went no further than those offered in the E.ON/Gelsenberg proceedings. They were of little significance in competition terms and thus not appropriate to prevent the strengthening of the dominant positions in the gas and electricity markets.