Brussels to probe Eni and RWE

Concerns over the regulatory threat to Europe’s large integrated energy groups were heightened on Friday, after the European Commission said it had launched a formal antitrust investigation against RWE and Eni.

The German group and its Italian rival are suspected of abusing their dominant market position – an accusation that, if upheld in a formal ruling, could lead to painful financial penalties, or even an order to break up the groups into separate units.

In the case of RWE, the Commission said it was investigating concerns that the group had prevented rivals from entering the German gas market by effectively refusing them access to its gas pipeline network. It added that RWE had a dominant position in the market for transporting gas through North Rhine-Westphalia, Germany’s most populous federal state, where the group is based.

Eni faces accusations that it undermined competition from other gas suppliers through “capacity hoarding and strategic underinvestment in the transmission system”, the Commission said.

Companies breaking EU competition laws can be fined up to 10 per cent of their global annual turnover, and though the maximum penalty is rarely enforced the Brussels regulator has drastically ratcheted up the financial pain for offenders in recent years. Eni faces an additional threat, because it has a previous Brussels conviction for its participation in a cartel – which means its fines would be doubled.

RWE and Eni were among energy groups whose offices were raided by EU antitrust enforcers a year ago. Though the Commission declined to give further details on its case against the other groups raided at the time – Eon of Germany, Gaz de France, Distrigas and Fluxys of Belgium and Austria’s OMV – it is expected they too will become the subject of formal probes in the coming months.

The big energy groups have been on the back foot ever since the Commission held a sweeping antitrust review last year that found severe market distortions and a lack of competition.

Senior Commission officials believe competition is undermined by groups that own crucial bits of the transmission infrastructure such as pipelines and power networks but are also active in distributing and selling gas and electricity. Brussels suspects some integrated groups use their grip on the grid to block new entrants from the market – and so keep prices for consumers and businesses artificially high.

The Commission has yet to decide whether to propose new legislation to break up integrated power groups, and any such move would require the backing from member states keen to protect their national champions. However, Neelie Kroes, EU competition commissioner, has warned repeatedly that she could also order a split as part of an antitrust ruling.