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European Union fines E.On AG and GDF Suez euro553 million each for Megal pipeline for breaking antitrust regulations

By Amarendra Bhushan for CEOWORLD Magazine Updated:July 8, 2009

The European Union antitrust regulators slapped more than 1 billion euros in fines on two giant gas companies E.ON AG of Germany and GDF Suez of France (770 million dollars) saying they had been fixing the market.

The two companies built a Megal pipeline in 1975 and prevented anyone else using it until 2005.

The Megal line is composed of two routes from the German-Czech and German-Austrian borders to the German-French border. It carries about 777 cubic feet per year.

Commission investigators raided the premises of the two companies in 2006, and the EU watchdog launched an anti-trust inquiry in July 2007.

The German company says a 1975 agreement allows both to protect their investments in the pipeline through “agreements about distribution.” They added, however, that deal was formally ended in 2004, insisting the relationship was legal.

According to the EU Antitrust, the two companies ”decided in 1975 to build the Megal pipeline in Germany to import Russian gas to France and Germany.

They agreed not to sell the transported gas on each others domestic markets and maintained their deal on the market share after the liberalisation of the European gas market, giving it up as late as 2005”. It is the first sanction imposed by the Antitrust to companies which are active in the energy sector.

E.ON, through its subsidiary E.ON Ruhrgas AG, and Gaz de France, which is now part of GDF Suez, are the leading suppliers of natural gas in Germany and France and two of the largest players in the European gas industry.

In the first ever anti-trust fines imposed in the energy sector, the commission fined EON and GDF Suez 553 million euros (769 million dollars) each — the second-biggest financial sanction Brussels has imposed in a cartel case.

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