Brussels has slapped fines totalling more than €1.1bn (£1bn) on the German and French energy companies E.ON and Gaz de France Suez over a secret pact to carve up national gas markets between them.
The fines, announced today by Neelie Kroes, European competition commissioner, are the first to be levied on the energy sector and the second-biggest fines imposed by the commission. The firms have each been ordered to pay €553m. The clandestine deal agreeing not to compete against each other in their home markets stemmed from 1975 when GDF and Ruhrgas, now a subsidiary of E.ON, jointly built a pipeline to pump imported Russian gas from Germany to France.
The commission said secret letters exchanged at the time committed the French company not to market gas in Germany and vice versa. "Consumers in two of Europe's largest gas markets paid more, while the companies profited at their expense," said Kroes.
Both companies said they would take the case to court. GDF Suez argued that the business rules when the pipeline was built were "very different from that of the energy market today".
But Kroes made it clear that the fines related to malpractices only from 1999 to 2005 and not to the 30-year period when both companies allegedly created a gas cartel in Germany and France.
The European energy market was liberalised in 2000 but the illegal practices by the two companies did not end until 2005, the commission said.
Separately, the commission is also investigating GDF Suez over alleged market-distorting practices in France, where it is suspected of abusing its control of pipelines and liquefied natural gas terminals to shore up its dominance of the market. The company is alleged to have exploited its stranglehold on the pipelines to deny rivals the ability to import gas.
The company has promised to reduce its control, while declining to admit any blame, the commission said.
The commission added it would now examine the pledges from GDF Suez and gave interested parties two months to make their views known.
"The proposed commitments could make it easier for would-be competitors to enter the French gas market," Kroes said. "This improved access to infrastructure for competitors is essential for effective competition."
Through Ruhrgas, E.ON dominates Germany's gas market, while GDF Suez is by far the leading player in France and the world's second-biggest utility company. The commission told both companies of the charges against them a year ago after opening its investigation into the collusion in 2006.