…but will Kroes be able to break up the energy giants?

Competition Commissioner Neelie Kroes hinted strongly last week that she would use all the tools of competition policy to deal with companies abusing their dominant positions.

"If companies are found to have violated anti-trust rules, the Commission can propose far-reaching structural remedies," she warned. She referred to the investigations into some of the EU’s biggest energy companies which, she said, would be helped by knowledge from a sector-wide inquiry into the market. The final results of the inquiry had highlighted cases of market foreclosure where incumbents were making it hard for new competitors to enter the market. Collusion between incumbents and market-sharing and abuses of energy-balancing markets, where suppliers have to buy extra energy to meet their commitments to customers, were also noted.

Although the Commission will not confirm which companies it is investigating, it has launched dawn raids at the premises of E.ON, RWE, EnBW and Vattenfall and is believed to be looking at GdF.

Kroes said that the information that the Commission had obtained, both through the investigations and the sectoral inquiry, would enable her to "focus on the most serious problems" in the energy market and propose "sufficient remedies". She high-lighted the conditions imposed on the GdF-Suez merger as one example. Here the Commission insisted that GdF had to relinquish operational control over the Belgian transmissions system operator Fluxys and impose strict limitations on the directors of the company to avoid GdF retaining effective management of the firm.

The opportunity to rule on mergers gives the Commission the possibility to set strict conditions and prevent any further concen-tration of market power in a sector which is still very dominated by incumbents and large vertically integrated companies. But in anti-trust cases it is unlikely that the Commission would go as far as to order the break-up of major EU companies which enjoy strong government support. Instead Kroes is more likely to impose fines in cases of price-fixing and bans on certain types of behaviour. As one energy sector analyst put it, the principle of proportionality (ie, using the lightest regulatory approach to achieve the desired result) underlies EU competition law and compulsory unbundling would be a very tough option for Kroes to pursue.

Competition Commissioner Neelie Kroes hinted strongly last week that she would use all the tools of competition policy to deal with companies abusing their dominant positions.