Mergers: Commission clears E.ON’s acquisition of Innogy, subject to conditions

vestager

Ms. Margrethe Vestager, Member of the EC in charge of Competition. European Union, 2019 Source: EC – Audiovisual Service

This article is brought to you in association with the European Commission.


The European Commission has approved, under the EU Merger Regulation, the acquisition by E.ON of Innogy’s distribution and consumer solutions business as well as certain of its electricity generation assets. The approval is conditional on full compliance with a commitments package offered by E.ON.

Commissioner Margrethe Vestager, in charge of competition policy, said: “It is important that all Europeans and businesses can buy electricity and gas at competitive prices. Today, we can approve the acquisition of Innogy by E.ON because the commitments offered by E.ON will ensure that the merger will not lead to less choice and higher prices in the countries where these companies operate.”

E.ON and RWE, which controls Innogy, are both energy companies based in Germany. They are active across the energy supply chain, from generation and wholesale to distribution and retail supply of electricity and gas. They are each active in several Member States but their activities mostly overlap in Czechia, Germany, Hungary, Slovakia and the UK.The two companies are engaged in a complex asset swap. Following this asset swap, E.ON will focus on the distribution and retail supply of electricity and gas, whereas RWE will be primarily active in upstream electricity generation and wholesale markets.

Today’s decision follows an in-depth investigation of E.ON’s proposed acquisition of Innogy’s distribution and consumer solutions business as well as certain electricity generation assets of Innogy.

The Commission approved on 26 February 2019, under the EU Merger Regulation, another part of the asset swap, namely RWE’s acquisition of certain generation assets held by E.ON (case M.8871).

The Commission’s investigation

During its in-depth investigation, the Commission gathered extensive information and received feedback from competitors and customers of the merging companies, as well as from other stakeholders.

Following its investigation, the Commission had concerns that the transaction, as initially notified, would have significantly reduced competition in the following markets:

  • German market for the supply of electricity for heating purposes: the merger would eliminate an important competitive constraint as the merging companies are the two largest suppliers of heating electricity and smaller retailers typically face material barriers to enter/expand.
  • German market for the supply of electric vehicle charging stations on motorways: the companies are two of a very limited number of suppliers who operate (or plan to operate) electric charging stations on German motorways and in many instances their stations are in direct competition as they are located close to each other.
  • Czech market for the retail supply of gas (to all customers) and electricity (to households and small businesses), the companies are strong suppliers and closely compete. The merger would remove the effective competitive constraint that they currently exert on each other.
  • Hungarian market for the retail supply of electricity to unregulated businesses: the companies are two of three major retailers active in the country and exert a significant competitive pressure on each other that would be lost with the merger.

 

The in-depth investigation did not confirm the following concerns that the Commission initially had relating to the retail supply of electricity:

  • In Germany, the market is highly fragmented with a large number of credible retailers and new companies regularly entering the market. The Commission found no evidence of a loss of significant competition as a result of the transaction.
  • In Slovakia, the merging companies have traditionally focused on different regions within the country and have therefore exerted a limited competition on each other. The Commission found no evidence that the companies would increasingly compete against each other in the future in the absence of the merger.

The proposed remedies

To address the Commission’s competition concerns, E.ON offered the following commitments:

  • To divest most of E.ON’s customers supplied with heating electricity in Germany and, at the option of the purchaser, all assets that may be needed to operate effectively in the market;
  • To discontinue the operation of 34 electric charging stations located on German motorways. These stations will be operated by a new third party supplier in the future;
  • To divest E.ON’s business in the retail supply of electricity to unregulated customers in Hungary, including all assets and staff;
  • To divest Innogy’s entire business in the retail supply of electricity and gas in Czechia, including all assets and staff.

The Commission found that the divested assets and the discontinued charging stations, each constitute viable businesses that would enable suitable buyers to compete effectively with the merged entity in the relevant markets in the future.

The Commission therefore concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. This decision is conditional upon the full compliance with the commitments.

Companies and products

E.ON, based in Germany, is an energy company currently active across the whole energy chain. Following the completion of the asset swap with RWE, E.ON will focus on the distribution and retail supply of electricity and gas. E.ON is active in several European countries.

Innogy, controlled by RWE and based in Germany, is also an energy company active across the energy supply chain, including distribution, retail supply and energy-related activities. Innogy is active in several European countries.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

There are currently three on-going phase II merger investigation: the proposed acquisition of Lotos by PKN Orlen, the proposed acquisition of Bonnier Broadcasting by Telia Company and the proposed acquisition of Aleris by Novelis. More information will be available on the Commission’s competition website, in the public case register under the case number M.8870.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

MEPs condemn criminalisation of sex education in Poland

Myanmar military leaders must face genocide charges – UN report

How COVID-19 is helping Oman develop a future-ready workforce

Towards a seamless internal EU market for industrial goods

‘BioSolar Leaves’ are better at cleaning the air than trees, say the technology’s developers

European Citizens’ Initiative: Commission decides to register 2 new initiatives

Primary Healthcare should be strongly connected with initial education

These 3 countries are 3D-printing new homes

UN human rights chief warns of women’s rights complacency

Governments and non-state actors need to take urgent action to meet Paris Agreement goals

Not faith, ‘but those who manipulate the faithful’ driving wedge between religions, UN-backed forum in Baku told

European Commission determined to conclude EU-Mercosur trade deal this year despite French concerns

UN summits to urge ‘ambition and action’ on climate change, sustainable development: Guterres

Why improving women’s lives is the key to healthy ageing

Why the internet is yesterday’s news in China’s digital leap forward

How responsible businesses can step forward to fight coronavirus

Zuckerberg, a paella, and the mighty EU questionnaires that would stop Whatsapp acquisition by Facebook?

A more credible, dynamic, predictable and political EU accession process – Commission lays out its proposals

Taxation: Commission refers Poland to Court for failing to remove certain tax exemptions on the use of energy products by highly polluting businesses

How data is transforming the way we care for the ocean

Cybersecurity Act: build trust in digital technologies

Now is the time to seize ‘unprecedented opportunity’ of the Sustainable Development Forum, says ECOSOC President

EU–US: What is the real exchange in a Free Trade Agreement?

5 lessons for the future success of virtual and augmented reality

COVID-19 practices are constantly changing – this app helps emergency doctors cope

Covid-19: vaccines, distrust and lives

Robot inventors are on the rise. But are they welcomed by the patent system?

MEPs want ambitious funding for cross-border projects to connect people

Scientists say this ‘super plant’ could help soak up pollution on busy roads

JADE @ European Business Summit 2014: Youth Unemployment – a drive to Entrepreneurship

An introduction to ‘Eco-Medical Literacy’ and its importance in shaping expert medical professionals

Threat to biodiversity risks a flood of economic ruin

Female leaders warn about the erosion of women’s rights

Macron defends the idea of European sovereignty

How Finland is fighting fake news – in the classroom

Facebook: MEPs demand a full audit by EU bodies to assess data protection

Dieselgate: Parliament calls for mandatory retrofits of polluting cars

Amidst high trade tensions and policy uncertainty, UN cuts economic growth forecast

ECB tied in the anti-monetary German ideology

How a start-up in India is pioneering a way to tackle the global e-waste problem

Ethiopia will soon introduce visa-free travel for all Africans

In Rome you can swap plastic bottles for metro tickets

Armenia should take vigorous measures against entrenched corruption

To save biodiversity, MEPs call for binding targets at global and EU level

Who should be responsible for protecting our personal data?

Ukraine takes EU money and runs to sign with Russia

Mental health problems costing Europe heavily

Women outliving men ‘everywhere’, new UN health agency statistics report shows

ECB again to subsidize euro area banks with more than one trillion euro

Dangers of poor quality health care revealed ‘in all countries’: WHO report

As the world’s waste mounts, technology is helping communities reduce, reuse and recycle

Ukrainian civil war: Is this the beginning of the end or the end of the beginning?

Algeria must stop arbitrary expulsion of West African migrants in desert: UN migration rights expert

In 1975 NASA envisioned future life in space would look like this

Roaming market review: use of mobile phones abroad has surged since end of EU roaming charges

This is the critical number that shows when housing breaks down

The Future of Balkans: Embracing Education

What’s going on in Chernobyl today?

Quality coffee can boost local economies and benefit farmers – here’s how

Burundi: Inclusive dialogue ‘only viable option’ for resolving country’s political crisis says, UN envoy

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s