On 29 June 2012, the EU's General Court ("GC") handed down its judgments on appeals brought by E.ON and GDF Suez against a Commission decision fining them for their involvement in a market-sharing agreement. In its judgments, the GC confirmed the previous Commission decision, but reduced the fine imposed on each of the undertakings from € 553 million to € 320 million.
In July 2009, the Commission had imposed a € 553 million fine on each of E.ON and GDF Suez for having concluded a market-sharing agreement covering the French and German natural gas markets, in breach of Article 101 TFEU (see VBB on Competition Law, Volume 2009, No. 7, available at www.vbb.com). The Commission found that E.ON and GDF had concluded an agreement in 1975 in connection with the construction and operation of the MEGAL pipeline in order to import Russian gas into Germany and France. Among other things, the agreement provided that the parties were not to sell gas from the pipeline in each other's respective national markets. The pipeline became operational in 1980.
Against the background of its regulatory efforts to liberalise European energy markets, the Commission began an investigation in 2006 into the arrangements between GDF and E.ON concerning the MEGAL pipeline. A Statement of Objections ("SO") was issued in 2008 and, in 2009, the Commission issued a decision fining each undertaking € 553 million for having breached Article 101 TFEU. Of particular concern to the Commission was the fact that E.ON and GDF Suez had, in effect, agreed not to enter each other's domestic markets in order to maintain their historic positions in Germany and France.
In reaching its conclusion, however, the Commission took account of certain realities. According to the Commission, the infringement constituted a single and continuous infringement containing two parts (i.e. the French and German markets) whose durations differed.
With regards to the French market, prior to the liberalisation process and the coming into effect of the First Gas Directive in 2000, GDF enjoyed a legal monopoly on the importation and supply of gas in France, which meant that the agreement could not be considered to restrict competition prior to that time. The Commission therefore took 2000 as the starting point for the French part of the infringement. With regards to the German market, despite the existence of certain demarcation agreements between energy companies and of exclusive concession agreements between those companies and local authorities, E.ON did not enjoy any legal monopoly before the liberalisation process. As a result, the Commission decided to use 1980 as a starting point for the German part of the infringement. The Commission found that both the French and German elements of the infringement had ended at the end of September 2005, when the agreement was considered to have ceased to produce any effects.
E.ON and GDF subsequently appealed to the GC in order to set aside the Commission's decision.
In its recent judgment, the GC dismissed most of the appellants' arguments and largely confirmed the Commission's decision. However, the GC found that the Commission had committed two errors in its assessment of the duration of the infringement.
With regards to the German gas market, the GC found that the Commission had erred in law by including the 1980-1998 period in the duration of the infringement. According to the GC, the simultaneous use of demarcation agreements and exclusive concession agreements (exempted until 24 April 1998), despite the absence of a legal prohibition against other third companies, effectively established de facto territorial monopolies in Germany. This explains why GDF was unable to enter the market. Consequently, the GC held that the Commission had failed to prove the existence of competition between E.ON and GDF from 1980 to 1998 which could have been restricted by the MEGAL agreement. Therefore, the GC decided to annul the relevant part of the Decision insofar as the 1980 to 1998 period was concerned. As the Commission had not taken the 1980-1998 period into account in the calculation of the fine, the annulment of the Commission's decision on this point did not impact on the calculation of the fine.
As for the end date of the French element of the infringement, the GC considered that the Commission had not adduced sufficient evidence to prove that this aspect of the infringement had continued after August 2004, the date on which E.ON and GDF Suez signed the agreement stating that they considered the territorial restrictions of the MEGAL pipeline agreement null and void. In relation to the French element of the infringement, the GC therefore decided to annul the relevant part of the decision insofar as the August 2004 to September 2005 period was concerned. By contrast, as regards the German element of the infringement, the GC held that the Commission had adduced sufficient evidence to show that the infringement continued until September 2005 in spite of the August 2004 agreement.
In order to reflect the shorter infringement period for the French element of the infringement, the GC reduced the amount of the fine imposed on both undertakings. The GC stated that applying the Commission's methodology for setting the fine would have reduced the fine imposed on each company to € 267 million. However, the GC reasoned that such a large reduction would be disproportionate in view of the relative importance of the Commission's error, which related only to the French market and to an extra 12-13 months of the infringement initially established by its method. In addition, the GC stated that its unlimited jurisdiction empowers it not only to carry out a review of the lawfulness of a penalty, but also to substitute its own appraisal for that of the Commission. Therefore, the GC decided to reduce the fine imposed on each of E.ON and GDF from € 553 million to € 320 million.
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