Court says E.ON and RWE are operating "oligopoly"

Nov 12, 2008 01:00 AM

German energy giants E.ON and RWE are operating a "market-controlling oligopoly" which restricts competition, the country's highest civil court has found.
In its first major ruling on the power industry since Germany began the liberalisation of its electricity market in 1998, the Federal Court of Justice concluded that the two utilities wielded too much power. Free competition for electricity generated in Germany or imported to Germany was still absent, it ruled. The landmark decision may make it more difficult for the utilities to expand in Germany and could force them to provide better network access to foreign competitors.

The ruling followed the European Commission's move last year to open two anti-trust investigations against E.ON over allegations that the company acted to restrict competition and maintain artificially high prices. Responding to pressure from the Commission, E.ON has offered to sell its German electricity transmission business and 4,800 MW of electricity generation capacity.
"It's important that a court has recognised that two big companies have been exercising a monopolistic position," Claudia Kemfert, an energy expert at the DIW institute in Berlin, said.

People close to the company told that E.ON was also considering a sale of Thuega, a holding company for the approximately 110 minority stakes it holds in municipal utilities. E.ON and RWE have together acquired 204 stakes in local and regional power-distribution companies, a practice that the court ruled was designed to fence off distribution areas and restrict competition.
The resultant oligopoly meant that fellow utilities EnBW and Vattenfall were unable to exert "sufficient competitive pressure" on their rivals, the court said.

Referring to the court's decision, an EON spokesman said that "the situation has changed a lot since 2003".
Rolf Pohlig, RWE's chief financial officer, said the case would have few consequences.

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