2001/519/EC: Commission Decision of 13 June 2000 on the compatibility of a concentration with the common market and with the EEA Agreement (Case COMP/M.1673 — VEBA/VIAG) (Text with EEA relevance) (notified under document number C(2000) 1597)
Date: 2000-06-13
Institutions: European Commission
Subjects: Germany, dominant position, economic concentration, electrical industry, merger control, restriction on competition

10.7.2001

EN

Official Journal of the European Communities

L 188/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 13 June 2000

on the compatibility of a concentration with the common market and with the EEA Agreement

(Case COMP/M.1673 (cid:151) VEBA/VIAG)

(notified under document number C(2000) 1597)

(Only the German text is authentic)

(Text with EEA relevance)

(2001/519/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

and VIAG Aktiengesellschaft intend to merge within the
meaning of Article 3(1)(a) of the Merger Regulation.

Having regard to the Treaty establishing the European
Community,

Having regard to the Agreement on the European Economic
Area, and in particular Article 57(2)(a) thereof,

Having regard to Council Regulation (EEC) No 4064/89 of 21
December 1989 on the control of concentrations between
undertakings (1), as
last amended by Regulation (EC) No
1310/97 (2), and in particular Article 8(2) thereof,

Having regard to the Commission decision of 4 February 2000
to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission,

(2)

On 4 February 2000 the Commission decided, pursuant
to Article 6(1)(c) of the Merger Regulation and Article
57 of the Agreement on the European Economic Area
(EEA Agreement), to initiate proceedings in this case.

(3)

The Advisory Committee discussed a draft of
Decision on 24 May 2000.

this

I. THE PARTIES AND THE PROPOSED TRANSACTION

the

Advisory

Committee

on

(4)

After
consulting
Concentrations (3),

Whereas:

(1)

On 14 December 1999 a merger proposal was notified
to the Commission under Article 4 of Regulation (EEC)
No 4064/89 to the effect that VEBA Aktiengesellschaft

(1) OJ L 395, 30.12.1989, p. 1; corrected version: OJ L 257,

21.9.1990, p. 13.

(2) OJ L 180, 9.7.1990, p. 1.
(3) OJ C 192, 10.7.2001.

oil,

gas,

natural

levels of

PreussenElektra

a diversified group with businesses

in
VEBA is
electricity,
chemicals,
telecommunications, water, waste disposal, steel trading,
logistics and property management. The group operates
the electricity industry through its
at all
subsidiary
(hereinafter:
AG
PreussenElektra). PreussenElektra is one of the largest
its traditional
German interlinked power companies;
supply
of
L(cid:228)nder
comprises
Schleswig-Holstein and Lower Saxony and large parts of
Hessen. With RWE and Bayernwerk AG, which is part
of VIAG,
in addition, together with the other
west German interconnected power companies, taken
over Vereinigte Energiewerke AG (VEAG)
following
In any event, PreussenElektra
German unification.

northern

it had,

area

the

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10.7.2001

controls VEAG jointly with RWE and Bayernwerk.
Outside the interconnected supply area, the VEBA group
has further controlling interests,
in regional
supply companies in the new L(cid:228)nder (e.dis and Avacon).

inter alia,

strengthening of a dominant position is unlikely. This
holds true for the gas (C) and steel trading (D) sectors.

in

are

oil,

the

the

the

gas,

together

grouped

electricity,

VIAG is an international conglomerate which operates
in
chemicals,
natural
telecommunications, packaging, water, waste disposal,
aluminium, steel trading and logistics sectors. Its energy
activities
affiliate
Bayernwerk AG (hereinafter: Bayernwerk), which is also
one of
large German interconnected power
companies. Bayernwerk too operates at all levels of the
electricity industry. Its traditional network and supply
territory covers most of the southern Land of Bavaria.
As well as VEAG (see recital 4), Bayernwerk together
with Southern Energy, an equity investment company
belonging to the American Southern Company, jointly
controls Berliner Kraft- und Licht (BEWAG) AG. The
east German regional supplier TEAG, which supplies an
area
power
territory, is also part of the VIAG group.

interconnected

Bayernwerk’s

outside

The parties intend to merge VIAG, as the transferor
entity, with VEBA, as the transferee entity, pursuant to
Article
Law
(Umwandlungsgesetz). This is therefore a merger in the
legal sense.

Conversion

2(1)(1)

the

of

A. ELECTRICITY

(10)

The merger proposal
to the creation of a
leads
dominant duopoly for VEBA/VIAG and RWE on the
German national market for the supply of electricity at
the interconnected level.

1. Relevant product market

II. CONCENTRATION

(11)

VEBA and VIAG are
two hitherto independent
undertakings which intend to merge. This is therefore a
concentration within the meaning of Article 3(1)(a) of
the Merger Regulation.

III. COMMUNITY DIMENSION

In previous decisions (5),
the Commission made a
distinction between the following relevant product
markets in the electricity industry: generation,
i.e. the
production of electricity in power stations; transmission,
i.e. the transport of electricity over high voltage lines;
distribution, i.e. the transport of electricity over medium
and low voltage lines; and supply,
i.e. the delivery of
electricity to final consumers. In a further decision (6), a
in electricity, was
further product market,
distinguished, although the market was not conclusively
defined.

trade

(5)

(6)

(7)

(8)

billion).

EUR
turnover

25,1
(EUR 33,5 billion)

The parties had a worldwide combined turnover of
more than EUR 5 billion in 1998 (4) (VEBA: EUR 42,8
VEBA’s
VIAG:
billion;
Community-wide
and
VIAG’s (EUR 18,2 billion) are both more than EUR 250
million.
its
Community turnover in Germany. According to its own
figures, VIAG did not generate more than two thirds of
its Community turnover in any one Member State. The
notified merger therefore has a Community dimension.

In 1998 VEBA generated two thirds of

IV. APPRAISAL UNDER ARTICLE 2 OF THE MERGER
REGULATION

(9)

Both parties operate in many sectors. It must therefore
be assumed that the merger would create a dominant
position for VEBA/VIAG in the electricity sector in
Germany (A) and strengthen dominant positions in the
In other sectors the creation or
chemicals sector (B).

(4) Turnover was calculated on the basis of Article 5(1) of the Merger
Regulation and the Commission notice on calculation of turnover
(OJ C 66, 2.3.1998, p. 25). Turnovers generated before 1 January
1999 were calculated using the average ecu exchange rate and
converted into euro on a one-to-one basis.

(12)

(13)

The Commission’s previous decisions assessed market
relations mainly in the British and French electricity
In more recent decisions, which relate to
industries.
concentrations on the German market,
it has largely
been possible to leave the definition of the market open.
The structure of the electricity industry is important for
the definition of the market, since it tells us what the
supply side and the demand side consist of.

The electricity sector in Germany is subdivided vertically
into national interconnected companies, regional power
supply
local
distributor companies (in particular municipal electricity
undertakings).

companies

suppliers)

(regional

and

(5) Case IV/M.1346 (cid:151) EdF/London Electricity; Case IV/M.1606 (cid:151)

EdF/South Western Electricity.

(6) Case IV/M.1557 (cid:151) EdF/Louis Dreyfus.

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(14)

The electricity generated by the interconnected power
companies and that imported by power importers is
delivered to different customer groups over the extra
high voltage and high voltage networks (380/220 kV),
i.e.
the transmission system. As well as the regional
supply companies, the transmission system supplies the
larger municipal
electricity
traders and the larger industrial special customers, who
draw their electricity direct from this voltage level.

electricity undertakings,

(15) Moreover, the interconnected power companies, because
of their vertical integration through affiliates, operate on
all downstream markets (see recitals 16 et seq.).

(19)

(16)

The regional supply companies deliver electricity via
low voltage (under 20 kV) and sometimes medium
voltage (20 to 110 kV)
lines to municipal electricity
undertakings and also to final customers. In so doing,
they operate for the most part as distributors of the
electricity generated by
interconnected power
companies. They also generate electricity themselves on
a small scale, but this they sell to their own customers
via low voltage and medium voltage lines.

the

It takes place at all voltage levels. Thus,

selling of electricity at one’s own risk and for one’s own
in
account.
traders with no generating
addition to independent
capacity or network of
their own, electricity traders
include, on the supply side and to some extent on the
interconnected companies, other
demand side as well,
power
importers.
Agency activities,
the supplying of electricity by
service stations and retail chains which do not bear the
marketing risk (this being borne
instead by the
generator) are not trading activities.

station operators

and electricity

i.e.

a

forms

in view of

separate market

The power supplied at interconnected level (see recital
14)
the
characteristics of the product (i.e. the voltage level) and
of
It
the specific customer groups interested in it.
the generation of power at
comprises (in Germany)
interconnected level and electricity imports, which are
delivered over extra high voltage and high voltage lines
regional
to
different
distributors,
electricity
undertakings, electricity traders and large industrial
special customers. This market will be examined in what
follows. Where the parties operate on downstream
markets, the effects of the merger on those markets are
taken into account in the competition assessment of the
effects at interconnected level.

customer
the

municipal

groups,

larger

such

as

(17) At

It

the lowest distribution level, municipal electricity
undertakings supply only final consumers over
low
voltage lines. The municipal electricity undertakings,
too, generate some electricity themselves, but they use it
to cover their own needs.
is mainly power from
combined heat and power stations. How far this market
level should be further subdivided by type of
final
consumer was left unresolved in earlier Commission
decisions (7). There is at any rate reason to suppose that
market conditions for the supply of small customers (8)
(household, commercial and agricultural customers with
a connected load of less than 30 kW and an annual
power consumption of less than 30 MWh) from low
voltage networks are different from those for the supply
of industrial special contract customers from medium
voltage and higher network levels, and that these are
therefore to be classified as different product markets.

(18)

in the process of
Electricity trading is a market
It was only made possible by customers
formation.
being given a choice in the wake of
liberalisation.
Electricity trading is understood as the buying and

(7) For example Case COMP/M.1720 (cid:151) Fortum/Elektrizit(cid:228)tswerk

Wesertal.

(8) The

customer group comprises

customers who were
described as (cid:145)tariff customers(cid:146) prior to liberalisation, since they were
supplied in accordance with the general tariffs (BTOElt) and the
general supply conditions (AVBEltV).

those

2. Relevant geographic market

(20)

(21)

The relevant geographic market consists of an area in
which the undertakings concerned are involved in the
in which
supply and demand of products or services,
the
sufficiently
homogeneous and which can be distinguished from
neighbouring areas.

competition

conditions

are

of

In the notification, the parties assume that the market
for the supply of electricity at the interconnected level is
a Community-wide market. They base their assessment,
inter alia, on the fact that the Community’s Electricity
Directive created uniform ground rules for generation.
In their view, the fact that customers in the European
Union were increasingly changing to Community-wide
tendering and that the UCPTE network (9) provides a
link between the transmission systems of
the large
continental Member States was also evidence of a larger
than national market.

(9) European Transmission System Operators are represented by the
Union for the Coordination of Production and Transmission of
Electricity (UCPTE).

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(22)

(24)

(25)

2.1. The market is not supranational

of

links

fact
i.e.

capacity

for the supply of electricity at

the
that
the
network
is limited and that

The Commission’s investigations have shown, however,
that
the
the market
is not supranational. This is due
interconnected level
the
the
to
chiefly
with
interconnectors,
neighbouring countries,
therefore,
simply for technical reasons,
imports are low. Thus,
according to the notification, the quantity of electricity
imported in 1998 was 38,5 TWh, or approximately 8 %
of German power supply. According to the calculations
the European Transmission Systems Operators
of
(ETSO) (10),
imports into Germany in the period 1
October 1998 to 30 September 1999 were about 28
TWh. With electricity consumption at 479,0 TWh, the
proportion of imports would thus be just under 6 %.
On the Commission’s estimate, the actual proportion of

is probably lower

still, since some of

imports
the
electricity imported into Germany is not made available
to the German market. Rather, it is transit power, which
simply crosses Germany and is delivered to other target
countries. Thus, France’s EdF,
instance, delivers
electricity via the German interconnected network and
Switzerland to Italy’s ENEL. Consequently, in view of the
high import barriers,
the sale of
electricity at interconnected level are at best national.

the markets

for

for

(23)

on

dependent

generators

Foreign
the
are
interconnectors’ available capacities for imports into the
German market. According to market participants,
these capacities are extremely limited. The
however,
the
following table shows
individual
imports into
Germany.

interconnectors available for

the rated capacities of

Table: Capacities for connection with other countries (Source: UCPTE, 1998)

Undertaking

(GW)

Connection capacity

Capacity

Countries

VEBA

VIAG

BEWAG

RWE

VEAG

VEW

Energie Baden-W(cid:252)rttemberg (EnBW)

Hamburgische Elektrizit(cid:228)ts-Werke AG (HEW)

Other

5,0

6,6

0

13,9

7,0

3,2

10,3

0

0

Germany, total

46,0

NL, DK, S

A, CZ

(cid:151)

NL, F, L, A, CH

DK, PL, CZ

NL

F, A, CH

(cid:151)

(cid:151)

(cid:151)

The arithmetical addition of the individual transmission
capacities of all
the interconnectors between other
countries and Germany gives a total of approximately
46,0 GW. According to the parties, this rated capacity
does not yet include the network connections between
Luxembourg and Germany.

GW in imports at any one time. The reason for the
clearly lower effective import capacity, they say, is the
loop flow associated with simultaneous transmissions to
and from other places.

Even the parties do not assume, however,
this
arithmetical transmission capacity reflects the physical
reality and that the capacity of the interconnectors for
electricity imports into Germany determined in this way
the
is
downstream networks permit a maximum of about 15

available. Rather,

assume

fully

they

that

that

(26)

Taking account of measured flows, a plan was worked
out at international level which provides, inter alia, for
calculations of available capacities between countries to
be given (11). According to these calculations, which on
the German side were carried out by RWE on behalf of
the Association of German Interconnected Companies

(10) ETSO study: Proposal for the implementation of the cross-border

(11) International exchanges of electricity,

rules proposal by the

tariffs for the year 2001, 27 March 2000.

European Transmission System Operators.

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(Deutsche Verbundgesellschaft),
transmission capacity is 13,4 GW.

the maximum import

Republic a transmission charge
((cid:145)T-component(cid:146)) of
the
0,125 Pf/kWh becomes payable, provided that
quantity of power transmitted cannot be netted out (see
point 2.4 for more details).

interconnector

(27) Most of the market participants interviewed, however,
regarded even this maximum figure as still too high. As
a result of inevitable loop flows and voltage and stability
problems, maximum import capacity,
in the view of
most market participants, is between 7 and 10 GW. The
market participants interviewed pointed out, moreover,
that
a
considerable extent, through long-term contracts, for the
interconnected power
companies, which own the
in particular the interconnector
interconnectors. Thus,
on the German-Danish border, which on the German
side is operated by PreussenElektra,
is already 50 %
blocked by long-term contracts. Of the capacity, which
ording to the parties is 1 200 MW, only 500 MW are
awarded at auction.

capacity was

reserved

to

(28)

the interconnectors will be
The parties contend that
freed up by simultaneous
imports and exports of
electricity, so that capacity equivalent to the balance of
imports and exports
is again made available. The
the power flow carried out by the
measurement of
UCPTE clearly shows, however, that the balance of the
power flow to an interconnector clearly points in one
direction, so that there is either a clear export surplus or
a clear import surplus. Further electricity supplies of
equivalent amount and travelling in the same direction
as this balance are at all events ruled out as the
interconnector’s capacity is reserved up to this amount.
Thus certain quantities are currently exported from
France to Germany, but only limited quantities are
imported from Germany into France, since the legal
framework necessary for liberalisation has not yet been
completed. In the Netherlands, the electricity price level
is currently higher
than in Germany, so there are
deliveries from Germany to the Netherlands, but not the
other way around. At other interconnectors too, exports
or
is
currently hardly any freeing up.

clearly predominate,

so that

imports

there

(29)

The possibility cannot be excluded that exports and
hence the freeing up of the interconnectors in favour of
electricity imports will increase in future, especially in
view of the increasing liberalisation of the electricity
markets in the countries bordering on Germany. Such
an increase in exports depends, however, on many
factors. For want of specific pointers to the future
development of exports,
it is premature, however, at
this stage to take account of such an, as yet, uncertain
development in the context of this merger proceeding.

(30) What is more, imports especially from foreign suppliers
of electricity will be further impeded by the fact that for
Federal
cross-border

electricity

supplies

into

the

(31) Accordingly not only the low import ratio but also the
limited import capacity of the interconnectors and the
additional costs (including those associated with using
the interconnectors) show that the geographic market is
in no way supranational.

2.2. The competition assessment is predicated on a
national market: the market will not be smaller
than national in the foreseeable future

(32) Given that many energy supply companies are not yet
delivering to customers in their competitors’ previously
protected supply areas, even though they are entitled to
do so, it is questionable whether at the interconnected
level there is already a national market. Prior to the
liberalisation of the electricity markets the activity of
every energy supply company was limited to its own
supply area. Accordingly, the geographic market for the
supply of electricity at the interconnected level was not
than the group of customers that could be
bigger
reached via the generating company’s
transmission
network.

(33)

that

signs

the Commission found

In more recent decisions (12), which examined the
effects of a merger on already liberalised electricity
markets,
the
generation of electricity in Germany could constitute a
national market but left the precise definition open. The
Commission takes the view that
for the
in
supply of electricity at
Germany will develop into a national market in the near
future. The decisive factor here is that ground rules have
the
in
time
third-party
through-transmission of
factors
networks,
affecting the market (see points 2.3 and 2.4).

to which must be added other

been
adopted
electricity over

the interconnected level

the mean

the market

for

2.3. Ground rules for through-transmission

(34)

The German Law updating the legislation on power
supply (Gesetz zur Neuregelung des Energierechts) (13)
liberalisation and deregulation of
has
Law transposes Directive
electricity markets. The
96/92/EC concerning common rules for the internal

led to the

(12) For

example Case

IV/M.1720 (cid:151) Fortum/Elektrizit(cid:228)tswerk

Wesertal.

(13) BGBl. 1998 I No 23, 730.

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market
in electricity (hereinafter called the Electricity
Market Directive) into national law. In Germany there is
no restriction of customers to a particular size, as is
allowed under Article 19 of
the Electricity Market
Directive. Rather, the Law opens up competition to all
customer groups, including final consumers of any size.
The German
territorial
agreements ((cid:145)demarcations(cid:146)) and exclusive rights of way
in (cid:145)licensing agreements(cid:146) with municipalities from the
prohibition on agreements in restraint of competition
(Articles 103, 103a of the old Law on Restrictions of
Competition (GWB)). This rule was abolished by the
Energy Industry Law as amended (EnWG), with effect
from 29 April 1998.

Law originally

excluded

the Bundesrat

(the upper house of

of
the German
Parliament), regulate the form of contracts under Article
6(1) EnWG and can lay down criteria for determining
the remuneration for through-transmission. The Federal
Ministry of Economic Affairs, however, has not used
it has
this power, since rather than use State control
preferred a voluntary solution by the trade associations
concerned. In Associations Agreement I of May 1998,
the Federal Association of German Industry (BDI), the
Industrial Energy Association (VIK) and the Association
of German Power Stations (VDEW) created the basis for
freely negotiable agreements between undertakings in
the electricity industry and their customers. Associations
I expired in August 1999. Since January
Agreement
2000, Associations Agreement
II, which runs for a
period of two years, has been in force.

(35) Delivery to third parties within the previously closed
supply territories is made possible in two ways (cid:151) either
by
by
additional
through-transmission.

cables

lines

and

or

(36)

(37)

To ensure non-discriminatory through-transmission, the
Electricity Market Directive provides for the grid to be
operated as a separate entity and for separate accounts
in respect of grid operation (14). The
to be kept
possibilities are to transfer ownership of the grid to an
owned operating company, to operate the grid through
an independent company, or to separate grid operation
and generation and sales only at the organisational and
accounting levels. The German legislator has opted for
the last variant.

the EnWG,

The general right to through-transmission, laid down in
is based on the idea of
Article 6 of
negotiated access to the grid. Under Article 6(1) EnWG,
operators of power supply networks must make the
supply network available to other undertakings on
less favourable than those
conditions which are not
actually or implicitly applied by them in comparable
cases for services within their undertaking or vis-(cid:224)-vis
affiliated or associated undertakings. Under the Law
updating the legislation on power supply, it is possible
cases,
to refuse
except (a) where there are insufficient powers to protect
electricity generated from lignite (lignite protection
clause in Article 4(3)) or electricity from combined heat
and power stations (Article 6(3)) and (b) pursuant to the
reciprocity clause (Article 4(2)).

through-transmission in individual

(38) Article 6(2) EnWG provides that the Federal Ministry of
Economic Affairs can, by regulation with the approval

(14) Articles 7(6) and 14(3) of the Directive.

(39)

(40)

(41)

such as

In the Commission’s view (15), individual provisions of
Associations Agreement II make it more difficult for
market participants
independent electricity
traders
to operate nationally compared with large
energy supply undertakings. Under the Agreement two
trading zones are being set up in Germany. The north
zone comprises the transmission networks of VEAG,
PreussenElektra, VEW, HEW and BEWAG, while the
south zone covers the territories of EnBW, RWE and
Bayernwerk. If power is delivered from one trading zone
to the other or over the border to or from another
country, a transmission charge ((cid:145)T-component(cid:146)) of 0,125
Pf/kWh (0,25 Pf/kWh for
interzonal
boundary) becomes payable, provided that the quantity
of power transmitted cannot be netted out. (cid:145)Netting out(cid:146)
means setting off the quantity which crosses the border
in one direction against a quantity which crosses it in
the other direction. The relevant balance is determined
for each (cid:145)energy balance group(cid:146)
((cid:145)Bilanzkreis(cid:146)), with
several undertakings delivering and drawing electricity
via the group.

crossing the

In addition,
the accounting procedures for balancing
energy make it more difficult for market participants to
operate nationally. This includes the electricity which in
the event of fluctuations in a customer’s offtake is made
available by an interconnected power company (see
recital 122).

The
II,
imperfections of Associations Agreement
however, do not alter the prognosis that in the near
future the market will be national. In particular, it is not
accurate to talk of separate geographic markets, whether
the two
in the form of
of
trading

the old supply areas or of
the

zones. However,

features

said

that

it has

(15) After a preliminary examination, the Commission has informed
the associations
reservations about Associations
Agreement II from the standpoint of Article 82 of the EC Treaty.
It has reached the provisional conclusion that the T-component
system leads to discrimination against
individual customers of
transmission services. In particular, according to the Commission,
foreign suppliers of electricity are also discriminated against.

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Official Journal of the European Communities

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Associations Agreement II will have to be taken into
account in the competition assessment.

the structural change resulting from this merger,
matter for the competition part of this examination.

is a

2.4. Other factors

(42)

(43)

II

yet

has

not

been

supply

energy

former

through

investigations,

In particular, given that

to
customers outside

the
(cid:145)provision(cid:146). According

The investigations in this case have shown that
the
through-transmission of electricity still takes place on a
the
limited scale only.
provisions on through-transmission in Associations
II are currently applied by only a small
Agreement
proportion of
companies, market
participants still have reservations about the handling of
through-transmission
requests. Through-transmission
requests are, however, still necessary where Associations
Agreement
implemented.
Consequently, electricity is still supplied at present to
interconnected areas
customers outside
the
largely
Commission’s
the
former
interconnected areas with a requirement of
approximately 90 GWh are supplied by provision, while
only customers with a requirement of approximately 60
GWh are eligible for through-transmission. Typically,
provision involves the new supplier having a direct
relation with the customer, with whom he therefore
concludes a power-supply contract, although he buys
the necessary electricity (cid:145)on the spot(cid:146) from his own local
deal.
separate
supplier
Several market
under
participants pointed out
the market was going
that
through a shake-up and that provision would be used
instead of through-transmission for a transitional period
only. As soon as Associations Agreement II takes effect
throughout the country, it will, in the opinion of many
to sell generated
market participants, be possible
electricity
a
anywhere
through-transmission basis.

Germany

on

in

a

II

(and

that,

the
through-transmission requests

instead of Associations Agreement
is

Even if today, on account of the slow implementation
delayed
of Associations Agreement
to the
processing of
extent
II,
Associations Agreement
national
I
competition still means that energy suppliers largely
limit their activities to their own supply areas, the initial
basic requirements for a national market are satisfied.
Accordingly, for the purposes of examining the present
merger, the Commission assumes a national market, at
least at interconnected level. How far there can be, or
continue to be, genuine competition on this market,
given the ground rules that first have to be present and

applied),

(44)

(45)

II

The restrictions of through-transmission resulting from
the preferential transmission of lignite-based electricity,
laid down in Article 4(3) of
the Law updating the
legislation on power supply, or from the establishment
of the north and south trading zones under Associations
Agreement
lead to the
(see below) do not
for the
geographical division of
supply of electricity at the interconnected level along
the boundaries thus created. Admittedly, VEAG’s lignite
protection clause does provide
for
frustrating through-transmission in the new L(cid:228)nder, but
its
application has been challenged in numerous
lawsuits currently before the courts. There are also
reasons for supposing that the clause is hard to apply
successfully in practice.

the German market

legal basis

a

the establishment of

exchanges, on which electricity will

the Frankfurt and
Furthermore,
Leipzig
be
physically traded nationwide, points to the creation of a
national market. Because of
the delay in adopting
Associations Agreement II, which is seen as an essential
requirement for the national supply of electricity, the
exchanges are not yet up and running. Trading on both
will begin this autumn at the latest. For a transitional
period, there will be serious obstacles as a result of
certain provisions in Associations Agreement II (see the
competition assessment for more details), but these will
become less important as time goes by.

(46)

In what follows, therefore, it is assumed that the market
for the supply of electricity at the interconnected level
covers the entire territory of the Federal Republic of
Germany.

3. Competition assessment

(47)

in
It can be assumed that
VEBA/VIAG and RWE holding a dominant position on
the German national market for the supply of electricity
at the interconnected level.

the merger would result

3.1. Present market structure

3.1.1. The German market for electricity supply at

interconnected level is already highly concentrated and
the potential for competition is restricted by other
factors

(48)

By far the largest proportion of electricity in Germany is
interconnected firms. These
generated by the eight

L 188/8

EN

Official Journal of the European Communities

10.7.2001

(50)

RWE,

operate

in Germany:

Verbundgesellschaft.

include those energy suppliers which have at
their
disposal both their own electricity generation capacities
and their own extra high and high voltage networks, i.e.
transmission networks. The following interconnected
companies
VEBA
(PreussenElektra), VIAG (Bayernwerk), VEW, EnBW,
BEWAG, HEW and VEAG. They are grouped into the
Deutsche
of
interconnected power companies are connected to one
another and to the extra high voltage networks of
bordering countries. Interconnection agreements govern
the supply of other interconnected firms with electricity.
Protection against
the possible failure of a power
station, and with it the failure of the electricity supply,
is ensured across borders and throughout Europe by
way of agreements with interconnected companies in
neighbouring countries. In addition, electricity importers
operate on the market, selling electricity directly from
the interconnected system to their customers.

networks

The

(49)

The following table gives an overview of the market
shares of the interconnected firms on the market for
electricity supply at interconnected level.

Table: Market shares for electricity supply at

interconnected
(electricity generation at interconnected level) (cid:151)

level
pre-merger situation

Interconnected firm

Generation (16)
(in TWh)

Market share

VEBA

VIAG

(51)

77,1

21,2 %

44,5

12,2 %

BEWAG (17)

10,3

2,8 %

RWE

VEW

VEAG

EnBW

HEW

120,4

33,1 %

19,8

5,44 %

43,9

12,1 %

35,3

9,7 %

12,6

3,46 %

(52)

Total interconnected firms

363,9

100 %

(16) Data include jointly owned power stations.
(17) BEWAG is listed as an independent electricity supply company. It

is controlled jointly by VIAG and Southern Energy.

table

above

calculates market

level and to a lesser extent

The
shares
at
the electricity
interconnected level on the basis of
generated by the interconnected companies in 1998. It
is true that electricity generation in itself constitutes not
a market, but an industrial activity. The electricity
generated by interconnected firms is supplied to the
next market
to other
interconnected firms. Customers at the generation level
are essentially electricity redistributors,
large industrial
firms as special customers, and recently also electricity
traders. The volumes of power generated by the
interconnected companies and passed on to these
customers thus at the same time also serve as a basis for
the calculation of the market shares of competitors at
interconnected level. While this method of calculation
does not take account of electricity imports, these, as
explained above, make up only a marginal proportion
of power
supplied in Germany. Moreover, most
imported electricity is supplied to the interconnected
firms, which then sell it on to their customers over the
It can be assumed that the imported electricity
grid.
corresponds
the
interconnected firm in each case. This was not called
into question during the course of the proceeding either
themselves or by third parties. The
by the parties
market shares given above would thus remain much the
same even if electricity imports were taken into account.

in volume terms

to the size of

The table shows RWE as the leading interconnected firm
with a 33,1 % share of electricity supply from the grid,
currently well ahead of VEBA with its 21,2 % share.
Other
including VIAG,
generate considerably less electrical energy and none of
them have market shares of more than 13 %.

interconnected

companies,

Correspondingly, RWE and VEBA also have a clear lead
on the other interconnected firms operating on the
market when it comes to structural data on installed
power station capacity (see table: (cid:145)Generation capacity in
installed generation
Germany(cid:146)). With 19,8 GW of
capability, RWE has only a slightly larger stock of
power stations than VEBA (17,5 GW), but
twice as
much capacity as the next largest generator VIAG. Most
other interconnected companies have installed power
generation capacity that does not exceed 10 GW.

10.7.2001

EN

Official Journal of the European Communities

L 188/9

Table: Generation capacity in Germany, minus industry and

Table: Power

supply on the German market as a whole

national railway

(cid:151) pre-merger situation

Interconnected firm

Installed generation capacity
(GW) (18)

Interconnected companies

Power supply
(TWh)

Shares

VEBA

VIAG

17,5

17,6 %

11,0

11,1 %

VEBA

VIAG

102,3

21,4 %

59,5

12,4 %

BEWAG (19)

2,9

2,9 %

BEWAG (21)

13,3

2,8 %

RWE

VEAG

VEW

EnBW

HEW

19,8

19,9 %

RWE

151,0

31,5 %

9,4

4,2

7,7

3,8

9,5 %

4,2 %

7,8 %

3,8 %

VEAG (22)

N/A

(cid:151)

VEW

EnBW

HEW

43,6

9,1 %

44,3

9,3 %

15,4

3,2 %

Total interconnected companies

76,3

76,8 %

Total interconnected companies

429,4

89,7 %

Other (regional supply
companies, municipal electricity
undertakings)

23,1

23,2 %

Other (regional supply
companies, municipal electricity
undertakings)

49,6

10,3 %

Total (20)
(Germany as a whole)

99,4

100 %

Total for Germany

479,0

100 %

(53)

In order to clarify structures on the electricity market as
a whole, the parties included in their notification data
on power supply to final consumers. These data give
power supply in 1998 as 479,0 TWh (230 TWh to
special customers, 249 TWh to ordinary electricity
consumers). The parties attributed this supply to the
interconnection companies operating in Germany on
the basis of the origin of the power supplied, without
level,
considering which firm at which market
for
example
or municipal
electricity undertaking, maintained direct contractual
relations with customers. The data provided by the
parties, based on VDEW statistics, do not
therefore
represent market shares in the strict sense, but clarify
the importance of individual energy supply companies
levels taken together and portray the
at all market
structures of the German electricity sector. The data give
the
to final
consumers:

following picture of power

company

regional

supply

supply

(54) With the volumes of power calculated in this way, RWE
leads with a share of more than 30 % of the volume
supplied. By comparison, only VEBA (21,4 %) and VIAG
(12,4 %) have shares that clearly exceed 10 %. Of the
other interconnected companies, only EnBW has a share
of as much as 9,3 % of the power supplied. The strong
position of RWE, VEBA and Bayernwerk (VIAG) on the
market for power supply, one which is even stronger
than their positions in electricity generation, is also due
to their good access to final consumers in the new
L(cid:228)nder, where these companies operate through regional
suppliers which at present mainly distribute
the
electricity generated by VEAG. What is more, electricity
though accounting for only a marginal
imports,
proportion
in Germany,
predominantly benefit the interconnected companies.

electricity

sold

the

of

(55) Moreover, account must be taken of the shareholding
structure of VEAG and BEWAG,
listed as independent
suppliers in the table. BEWAG is controlled jointly by

(18) Data include jointly owned power stations.
(19) BEWAG is listed as an independent electricity supply company. It

(21) BEWAG is listed as an independent electricity supply company. It

is controlled jointly by VIAG and Southern Energy.

is controlled jointly by VIAG and Southern Energy.

(20) Data do not include installed generation capacity belonging to

(22) Data for VEAG are proportionally contained in the figures for the

industry and the national railway.

relevant interconnected companies.

L 188/10

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Official Journal of the European Communities

10.7.2001

Southern Company and VIAG. VEAG is controlled
jointly by VEBA, VIAG and RWE (23). Accordingly, in
calculating the market position of the parties, account
must be taken of
that neither VEAG nor
BEWAG is
in competition with the interconnected
companies jointly controlling them.

the fact

the original market allocation (see point 3.2.2.4); the
expected small growth in demand and the low price
elasticity of demand (see points 3.2.2.5 and 3.2.2.6); the
barriers to entry to the market (see point 3.2.3.4); and
the interconnected firms’ holdings in undertakings at the
downstream market stage and the terms of Associations
Agreement II (see points 3.2.3.5 and 3.2.3.6).

(56)

(57)

into competition with VEAG, as

The situation with regard to VEAG is significant in yet
another respect, namely that of competition between
VEBA, VIAG and RWE. The latter cannot be expected to
enter
they might
otherwise render their joint investment in that company
worthless. In practice this means that, as far as VEAG’s
traditional supply area in eastern Germany is concerned,
no competition is likewise to be expected from VEBA,
VIAG and RWE as between one another.

electricity

seen that

the
eight
about 71 % of

If all power generation in Germany including that
generated by industry is taken into consideration, it can
interconnected companies
be
generate
in Germany.
However, it should also be taken into account that the
electricity generated by industry is essentially used by
the firms concerned and thus is not widely available to
the free market. If firms were to sell the electricity they
generate, this would require the establishment of a sales
and customer services structure, which would not be
economical for most industrial firms, given the small
amounts
that could be sold. Since the electricity
generated by industrial firms is essentially consumed by
these firms themselves,
it cannot be classed as being
available to the free market. The figures for electricity
generated by energy suppliers also have to be qualified.
The 700 or so regional and local energy suppliers
account
some 10 % of electricity generated in
Germany. This enables them to cover a proportion of
their own requirements and reduce their dependency on
the
the interconnected firms. However,
investment required for the establishment of a sales
outfit and of the limited amounts that could be sold,
they can be considered as market participants only to a
limited extent.

in view of

for

(58)

it should be noted that, although the market
Lastly,
seems to admit competition, as can be seen from events
after the beginning of liberalisation, a number of factors
limit the potential
for competition. These factors are
examined more closely in the assessment of the merger.
Attention will be drawn here especially to the following
factors: the homogeneity of electricity as a product and
the (highly concentrated) market
the transparency of
(see point 3.2.2.1);
the
strong position of
interconnected firms in the old demarcation zones and
the opportunities for basing competitive behaviour on

the

(23) See point 2.2 of the consortium agreement between Bayernwerk
AG, PreussenElektra AG and RWE Energie AG of 22 August
1990.

3.1.2. The extra high voltage transmission network, which is
likewise of importance to competition at interconnected
level, is over 80 % controlled by the four largest power
generators

(59) As few as eight companies together own 93 % of the
transmission network in Germany. RWE together with
VEBA and VIAG owns 52 % of the extra high voltage
network, or 81 % if VEAG, controlled by these three
companies, is included. They thus essentially control the
resources which, in the electricity market, are necessary
to competition based on transmission over the networks
of third parties. Moreover, on the basis of their existing
networks, VEBA and VIAG already
an
uninterrupted area from Scandinavia to the Alps as well
as all the new L(cid:228)nder via their controlling shares in the
east German company VEAG. Since they also own the
interconnectors linking each extra high voltage network
to the extra high voltage networks of neighbouring
countries, they control most of the infrastructure on
which their competitors are dependent if they are to
importance of
enter
ownership of
the network, especially in the light of
Associations Agreement II, is examined in greater depth
below (see point 3.2.3.3).

successfully. The

the market

cover

Table: Transmission network in Germany (Source: VDEW, 1997)

Company

Length of the transmission
networks (in km), extra
high/high voltage 380/220 kV

VEBA

VIAG

BEWAG

RWE

VEAG

VEW

EnBW

HEW

Others

6 569

5 500

16 %

14 %

136

< 1 %

9 000

11 500

2 000

2 100

360

2 121

22 %

29 %

5 %

5 %

1 %

7 %

Germany as a whole

40 150

100 %

10.7.2001

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Official Journal of the European Communities

L 188/11

3.2. Effects of the merger: creation of a dominant

duopoly

(60)

(61)

Following its investigations the Commission has come
to the conclusion that the notified merger would create
a situation of
joint market dominance by the two
leading suppliers VEBA/VIAG and RWE on the German
market for electricity supply at interconnected level.

The German market for electricity supply from the grid
presents numerous characteristics which would be likely
to lead, in a situation of greater concentration resulting
from the merger of VEBA and VIAG,
to conscious
parallel behaviour by VEBA/VIAG and RWE and thus to
joint market dominance. The merger would create two
strong vertically integrated blocks, which in every
respect would have a strong lead on competitors on the
market. This lead would be even stronger if the planned
merger of RWE and VEW were to go ahead.

(62) On 30 December 1999 RWE and VEW notified their
intention to merge
Federal Cartel Office,
to the
responsible for carrying out investigations. A decision
will be taken on this merger at about the same time as
on the planned merger between VEBA and VIAG. Since,
according to the Federal Cartel Office, the firms have
offered commitments in respect of the electricity sector,
and thus it is conceivable, not to say probable, that this
case will be declared exempt within the applicable
forecast period, this change in market structure must be
taken into account in the assessment of the planned
merger of VEBA and VIAG.

(63)

In the Commission’s view, however, what matters is not
whether the merger between RWE and VEW goes ahead
or not. The addition of VEW would, of course,
strengthen the position of RWE and hence of
the
duopoly overall. And as a member of the duopoly the
new entity would have a slight edge on VEBA/VIAG.
to invalidate the
But
finding that there is a dominant duopoly. RWE alone is
already in a comparable position to VEBA/VIAG. While
VEW would strengthen RWE’s position even further, the
sizes
remain
of VEBA/VIAG and RWE would
comparable after any merger of RWE with VEW.

this edge would be too small

3.2.1. On the German market for electricity supply at

interconnected level, the merger would create two
comparable blocks that would have a substantial lead
on the other suppliers

competitive

supply from the interconnected system in Germany, and
similar power generation capacity. Their combined
position in both areas would place them well ahead of
their competitors. This suggests that they may have a
common interest in anticompetitive parallel behaviour.
situation
Aggressive
characterised by a balance of power affects the income
of all concerned without significantly increasing sales
volumes. Peaceful parallel behaviour, on the other hand,
not only avoids all these disadvantages but also allows
symmetrical oligopolies to maximise the profits of all
involved to much the same extent. The equivalent
market positions held by VEBA/VIAG and RWE suggest
that such a situation obtains in the present case.

behaviour

in

a

(65)

The following table gives an overview of the market
the interconnected companies on the
positions of
relevant product market as they would be if the merger
took place.

Table: Market shares for power supply at interconnected level
level) (cid:151)

generation at

interconnected

(electricity
post-merger situation

Interconnected company

Generation (24)
(TWh)

Market shares

VEBA

VIAG

BEWAG (25)

77,1

44,5

10,3

21,2 %

12,2 %

2,8 %

VEBA + VIAG

131,9

36,3 %

RWE

VEAG

Total duopoly VEBA/VIAG and
RWE

120,4

33,1

43,9

12,1 %

296,2

81,5 %

VEW

19,8

5,44 %

RWE + VEW

140,2

38,5 %

Total duopoly VEBA/VIAG and
RWE/VEW

316,0

86,8 %

EnBW

HEW

Total interconnected
companies

35,3

12,6

9,7 %

3,46 %

363,9

100 %

(64)

VEBA/VIAG and RWE would have broadly similar
i.e. turnover on the market for power
market shares,

(24) Data include jointly owned power stations.
(25) BEWAG is listed as an independent electricity supply company. It
is controlled jointly by VIAG and Southern Energy. For purposes
of examining the duopoly, BEWAG’s figures were included among
those of VEBA/VIAG.

L 188/12

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Official Journal of the European Communities

10.7.2001

(66)

From the above table it can be seen that VEBA/VIAG
would have a market share of 36,3 %. This includes
BEWAG’s market share of 2,8 %, since BEWAG, as
explained above,
is controlled jointly by VIAG (and
would be controlled jointly by VEBA/VIAG following
the merger). Between them, VEBA/VIAG and RWE
would have a market share of 69,4 %. Since, in addition,
VEAG is already controlled jointly by VEBA, VIAG and
RWE, its market share should also be added to that of
the duopoly, giving the two blocks a combined market
share of 81,5 %. If in view of the intended merger the
market share of VEW is included, an aggregate market
share of 86,8 % is obtained for the duopoly.

(67)

The post-merger situation on the entire German market
for electricity supply would be as follows:

Table: Electricity supply on the German market as a whole (cid:151)

post-merger situation

(68)

(69)

The above table shows that the duopoly would have a
77,2 % market share of total power supply in Germany.

The
following table
capacities in Germany.

shows post-merger generation

Table: Generation capacities

in Germany (cid:151) post-merger

situation

Interconnected company

Installed generation capacity
(GW) (28)

VEBA

VIAG

BEWAG (29)

VEBA + VIAG

RWE

VEAG

17,5

11,0

2,9

31,4

19,8

9,4

17,6 %

11,1 %

2,9 %

31,6 %

19,9 %

9,5 %

Interconnected company

Power supply
(TWh)

Market share

Duopoly VEBA/VIAG and RWE

60,6

60,9 %

VEBA

VIAG

BEWAG (26)

VEBA + VIAG

RWE

VEAG (27)

Total duopoly VEBA/VIAG and
RWE

102,3

21,4 %

59,5

13,3

12,4 %

2,8 %

175,1

36,6 %

151,0

31,5 %

N/A

(cid:151)

326,1

68,1 %

VEW

43,6

9,1 %

RWE + VEW

194,6

40,6 %

Total duopoly VEBA/VIAG and
RWE/VEW

369,7

77,2 %

EnBW

HEW

44,3

15,4

9,3 %

3,2 %

Total interconnected firms

429,4

89,7 %

Other (regional supply
companies, municipal electricity
undertakings)

49,6

10,3 %

(70)

Total for Germany

479,0

100 %

VEW

RWE + VEW

Total duopoly VEBA/VIAG and
RWE/VEW

EnBW

HEW

Total interconnected companies

Other (regional supply
companies, municipal electricity
undertakings)

4,2

24,0

64,8

7,7

3,8

76,3

23,1

4,2 %

24,1 %

65,2 %

7,8 %

3,8 %

76,8 %

23,2 %

Total (30)
(for all of Germany)

99,4

100 %

3.2.2. Numerous structural factors mean that, after the

merger, a significant degree of competition between
VEBA/VIAG on the one hand and RWE on the other
hand could no longer be expected

significantly

VEBA/VIAG and RWE would in future no longer
compete
This
against
prediction is made on the basis of the following market
characteristics, which basically
favour oligopolistic
parallel behaviour.

another.

one

(26) BEWAG is listed as an independent electricity supply company. It
is controlled jointly by VIAG and Southern Energy. For purposes
of examining the duopoly, BEWAG’s figures were included among
those of VEBA/VIAG.

(28) Data include jointly owned power stations.
(29) BEWAG is listed as an independent electricity supply company. It
is controlled jointly by VIAG and Southern Energy. For purposes
of examining the duopoly, BEWAG’s figures were included among
those of VEBA/VIAG.

(27) Data for VEAG are proportionally contained in the figures for the

(30) Data do not include installed generation capacity belonging to

relevant interconnected companies.

industry and the national railway.

10.7.2001

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Official Journal of the European Communities

L 188/13

3.2.2.1. E l e c t r i c i t y i s a h o m o g e n e o u s

p r o d u c t , w h i c h i s s o l d o n a
t r a n s p a r e n t m a r k e t

industry, or at any rate among the vertically integrated
companies.

(71)

(72)

to

further
technological
goods, unlike heterogeneous

Electricity is a homogeneous product, and as such is not
development.
subject
Homogeneous
goods,
largely possess the same physical or subjective features.
Price is the main factor of competition that influences a
suppliers.
customer’s choice between various power
services,
such as quality,
Other
research,
reliability,
than secondary
are of no more
importance when it comes to decisions about purchases.
There is also a tendency towards further standardisation
of traded electricity. This is taking place, for example,
against the background of the Central European power
index (see following recital).

factors
etc.

in

are

the

prices

power

suppliers

differences

operating
the

consumers, market

The market is subject to far-reaching transparency of
production costs and selling prices. There are numerous
publications which collate current electricity prices
in
by
offered
Germany (31). Despite
price
components, for example price per kWh, or yearly or
monthly charges, and differing durations of contracts or
periods of notice, these overviews serve as a quick guide
favourable
and allow customers to identify the most
offers. Although the abovementioned publications and
electricity price guides are aimed first and foremost at
final
sufficiently
transparent for customers at interconnected level. The
interconnected companies try themselves to promote
market transparency (32). For example, PreussenElektra,
together with Dow Jones and other market participants,
has developed the Central European power index (CEPI).
in
CEPI
PreussenElektra’s
territory. The aim is to make the
electricity market more transparent. The parties have,
moreover, expressly referred to the practice whereby
special contract customers often present competitors’
price quotations in order to obtain more favourable
prices from a company. Associations likewise provide
their members with price comparisons. The market is
made
that
transparent
VEBA/VIAG and RWE can make good estimations of
the market positions of all suppliers on the market for
power generation on the basis of
vertical
integration. Production costs and network use costs,
which determine the variable costs and hence essentially
the
the prices quoted, are thus known throughout

is an index which reflects the price level

even more

their

fact

the

by

(73)

(74)

is

true that where price is

It
the main factor of
competition on a concentrated market, this does lead to
very intense competition in the first instance. However,
at the same time, this also increases the interest of the
market participants in avoiding competition, since every
time a company undercuts a competitor’s prices, this
also means a reduction in its own profits. A situation of
in which each market participant
hidden competition,
is
cannot be certain about
In such a situation, a company is more
different.
inclined to make competitive moves,
in the hope of
winning contracts. The circumstance of competitive
moves on prices being immediately felt by all market
participants is a factor which in the medium term may
reduce price competition. This holds true at all events
for the relationship between companies with similar
market shares and cost structures (i.e. similar retaliation
(on cost structures in the present case, see
potential)
point 3.2.2.2).

the success of

its offer,

The drop in electricity prices, that, according to the
information contained in the notification, has reached
the
between 10 % and 50 % since liberalisation of
electricity markets, does not contradict this expectation.
Although it shows that price competition is possible on
the German electricity market,
it must be viewed in
context. First, the market is still in the initial phase of
the liberalisation process, in which firms are positioning
themselves on the German market described above. This
phase is limited in time. Second, the abovementioned
drop occurred within the market structure as it was
before the merger. A market structure such as would
the notified merger would considerably
exist after
reduce the potential
for competition and with it the
incentive for price competition between VEBA/VIAG
and RWE.

3.2.2.2. V E B A / V I A G a n d R W E h a v e

c o m p a r a b l e c o s t s t r u c t u r e s o w i n g
t o a s i m i l a r l y c o m p o s e d s t o c k o f
p o w e r s t a t i o n s a n d a n u m b e r o f
j o i n t l y o p e r a t e d l a r g e p o w e r
s t a t i o n s

(31) For example IWR-Stromtarifrechner at www.Stromtarife.de; Focus

Heft 39/99, pp. 319 et seq.

(32) See the website of PreussenElektra (www.preussenelektra.de) on

the Central European power index.

(75)

Future parallel behaviour is further favoured by the fact
that VEBA/VIAG and RWE have similar corporate

L 188/14

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10.7.2001

structures. They are vertically integrated at all levels of
the electricity industry. They have both comparable
financial strength and comparably large transmission
networks, together with a comparably large stock of
power stations covering all load ranges, as can be seen
interconnected power
from the table below. Other

companies, on the other hand, are, owing to their
limited capacities either in the base load range or in the
medium and peak load range, dependent on the
purchase of electrical energy from other producers for
the
are
range
under-represented.

in respect of which they

load

Table: Stock of power stations by load range (VDEW statistics: capacity and work, 1998)

Undertaking

Base load (33)

Medium load

Peak load

Total

(in GW)

Load range

VEBA

VIAG

BEWAG (34)

VEBA + VIAG

RWE

VEAG

Total duopoly VEBA/VIAG and RWE

VEW

RWE + VEW

Total duopoly VEBA/VIAG and RWE/VEW

EnBW

HEW

12,0

4,0

1,1

17,1

15,3

8,0

40,4

2,5

17,8

42,9

4,7

2,2

2,3

2,6

0,9

5,8

4,2

0,1

3,6

3,4

0,8

7,8

1,7

2,8

10,1

12,3

0,8

5,0

2,1

3,8

10,9

14,4

0,8

0,2

1,5

1,7

17,9

10,0

2,8

30,7

21,2

10,9

62,8

5,4

26,6

68,2

7,0

4,1

(76) No less than some 25 % of the electricity produced in
Germany is generated by power stations operated jointly
by more than one interconnected company. Many base
load power stations, and in particular nuclear ones, are
interconnected companies
operated jointly by the
VEBA/VIAG and RWE.

(cid:151) KNG Kraftwerks-

und Netzgesellschaft mbH,
Rostock: the company operates a hard-coal power
station in Rostock, of which RWE Energie AG owns
24,6 %, VEBA 24,6 % and Bayernwerk 21,1 %. The
electricity produced belongs to VEAG, which also
holds an interest in the company,

The power stations jointly operated by VEBA/VIAG and
RWE include:

(cid:151) Kernkraftwerke Grundremmingen Betriebsgesellschaft
mbH, Grundremmingen: the company operates the
Grundremmingen Block B and C nuclear power
station; the energy that is produced belongs to the
shareholders RWE Energie AG and Bayernwerk in
proportion to their shareholdings of 75 % and 25 %,

(33) Including hard coal.
(34) BEWAG is listed as an independent electricity supply company. It
is controlled jointly by VIAG and Southern Energy. For purposes
of examining the duopoly, BEWAG’s figures were included among
those of VEBA/VIAG.

(cid:151) Kernkraftwerke

Lippe-Ems GmbH: KLE GmbH
operates the Emsland power station; RWE Energie
AG owns 12,5 % of the company, and VEBA owns
a further 12,5 %. The company is controlled by the
majority shareholder VEW Energie AG (75 % of the
shares). The electricity generated belongs to the
shareholders in proportion to their shareholdings,

(cid:151) Bayerische

Wasserkraftwerke

AG:
Lech-Elektrizit(cid:228)tswerke AG, a member of the RWE
group of companies, and Bayernwerk directly and
indirectly hold 50 % of the capital of the company
that operates hydroelectric power plants in Bavaria.
The company is controlled by Bayernwerk. The
electricity purchasing rights are essentially vested in
the shareholders,

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Official Journal of the European Communities

L 188/15

plants

power

hydroelectric

(cid:151) Rhein-Main-Donau AG: 22,5 % of the company that
the
operates
is held (indirectly) by
Rhine-Main-Danube Canal
Lech-Elektrizit(cid:228)tswerke AG as a member of
the
RWE group; Bayernwerk has a 77,49 % stake and
controls the company. Lech-Elektrizit(cid:228)tswerke also
holds 40 % of a subsidiary of RMD, Mittlere
Donau-Kraftwerke AG,

on

(cid:151) Untere Iller AG: the company operates hydroelectric
power
by
is
Lech-Elektrizit(cid:228)tswerke and 60 % by Bayernwerk
AG,

owned

plants.

40 %

It

does

(cid:151) Hochtemperatur Reaktor Gesellschaft mbH:
not

the
company
operational
companies, but instead serves study purposes. RWE
Energie AG has a 20,3 % stake in it, and member
companies of the VEBA group 36,5 %.

operate

any

(77)

Besides having a comparable stock of power stations,
both groups of undertakings are comparably assured,
through long-term supply contracts, of import capacities
from abroad which are imported via the captive
interconnectors which are reserved in the long term.

3.2.2.3. T h e r e a r e i n t e r r e l a t i o n s h i p s

b e t w e e n V E B A / V I A G a n d R W E
w h i c h m i g h t e n c o u r a g e p a r a l l e l
b e h a v i o u r

(78)

VIAG has a direct shareholding in the interconnected
power company VEW, so that, through the proposed
merger between RWE and VEW, VIAG would obtain a
direct shareholding in RWE/VEW.

(79) Moreover,

the two groups of undertakings have the

following joint shareholdings.

(cid:151) VEAG AG:

the interconnected power company
VEAG generates electricity from lignite in the new
L(cid:228)nder. RWE Energie AG owns 26,25 % of VEAG,
VEBA 26,25 % and Bayernwerk 22,5 %. These three
shareholders control VEAG jointly. The remaining
shares are held by the other interconnected power
companies VEW, EnBW, BEWAG and HEW. VEAG
also operates the transmission system in the new
L(cid:228)nder. Price moves by a member of the oligopoly
would, owing to the resulting loss of custom, have a
negative impact on the joint enterprise and hence
on the income earned by that oligopoly member
from the
enterprise. A single oligopoly
member cannot by itself determine policy in VEAG
(see also recital 56).

joint

west

German

interconnected

(cid:151) LAUBAG AG: LAUBAG is owned as follows by the
power
seven
companies: PreussenElektra 30 %, Bayernwerk 15 %.
BBS-Braunkohle-Beteiligungsgesellschaft mbH holds
55 % of
the shares. BBS is owned 18,2 % by
Energiebeteiligungs-Holding (consisting of BEWAG,
HEW, VEW and EVS, which belongs to EnBW),
71,8 % by Rheinbraun AG, a subsidiary of RWE,
and 10 % by RWE Energie. LAUBAG is the largest
lignite producer in eastern Germany and, as VEAG’s
supplier, forms an economic unit with VEAG.

(cid:151) Rhenag Rheinische Energie AG: Rhenag is 54,1 %
owned by RWE Energie AG and 41,3 % by Th(cid:252)ga
AG, in which the VEBA group has a shareholding of
56,29 %. Rhenag’s main business is the supply of
gas, but
it also supplies electricity as a regional
supplier. It has numerous minority shareholdings in
municipal electricity undertakings which in addition
to gas also supply electricity. The VEBA group has a
substantial
this RWE
interest
its abovementioned
subsidiary to the extent of
It
on Rhenag’s
shareholding.
supervisory
inside
board
knowledge of its corporate strategy.

in the success of

represented

therefore

and

has

is

(cid:151) In addition, there are joint shareholdings in STEAG
and shareholdings owned by Envia in municipal
electricity undertakings in the Land of Saxony.

is

business

STEAG’s main

STEAG AG:
the
generation of electricity from lignite, and it sells
most of its output to RWE Energie AG and VEW
Energie AG. STEAG is 26 % owned by Gesellschaft
f(cid:252)r Energiebeteiligung mbH, which in turn is 49,7 %
owned by RWE Energie AG and 50,3 % directly and
indirectly by VEBA. The largest shareholder is RAG
AG, with 71,5 %.

holdings

Envia, a RWE group member company, has several
minority
electricity
undertakings in Saxony in which the VEBA group
member
company Th(cid:252)ga also has a minority
holding.

in municipal

stations hardly calls, however,

(cid:151) Further joint shareholdings exist in base load power
stations in which both VEBA/VIAG and RWE own
electricity purchasing rights. The joint operation of
these power
for
concertation between the operating companies.
Instead, base load power stations are operated on a
constant supply basis so that no concertation is
required between the operators
the
increasing or decreasing of output, each operator
obtaining electrical energy according to its reserved
the jointly operated
capacity. The importance of

regarding

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Official Journal of the European Communities

10.7.2001

power stations, at least in the base load range, as
regards the possibility of one duopolist gaining an
insight into the commercial policy of the other, is
therefore negligible.

3.2.2.4. T h e p o s s i b i l i t y o f c o n t i n u i n g t o

s h a r e c u s t o m e r s a l o n g t h e l i n e s o f
t h e f o r m e r g e o g r a p h i c a l
m o n o p o l i e s f a c i l i t a t e s p a r a l l e l
b e h a v i o u r

at most be divided up among the established suppliers.
therefore defend their
The established suppliers will
share of sales and existing customer relations. In these
circumstances, the long-term benefits to be gained from
avoiding effective competition will be preferred to
in
flowing
short-term successes
competition. The
growth
accordingly favours parallel behaviour on the part of
VEBA/VIAG and RWE given the level of market
concentration attained.

from engaging
demand

forecast

small

(80)

(81)

(82)

like

VEBA/VIAG and RWE were,
all German
interconnected power companies, for decades up until
the time of liberalisation monopolists protected by law
in a supply zone demarcated from other neighbouring
suppliers. The entrenched practice of maintaining closed
supply zones facilitates parallel behaviour inasmuch as a
suitable
Each
pattern
interconnected power company continues to occupy in
its traditional supply zone a leading position with a
market share of well over 50 %. The existence of the old
demarcation zones accordingly eases the way for the
abovementioned type of parallel behaviour on the part
of the interconnected power companies.

behaviour

available.

is

3.2.2.5. T h e e x p e c t e d s m a l l g r o w t h i n

d e m a n d i n t u r n r e d u c e s t h e
i n c e n t i v e f o r t h e d u o p o l i s t s t o
e n g a g e i n a c t i v e c o m p e t i t i o n

The forecasts are for a slight increase in demand for
electricity. According to an IEA study (35), electricity
consumption is likely to rise only slowly. The IEA
foresees an annual increase in electricity consumption of
the order of 1 % between 1992 and 2010 and a 0,7 %
increase between 2010 and 2020. The forecast of slow
demand growth is endorsed by all market participants
including the parties.

Stable demand and other conditions of competition
make it easier to implement parallel supply strategies.
Whereas strong structural change means as a rule that
coordination is much more difficult to achieve and that
behaviour has to be constantly adapted and renewed,
this is not necessary where market conditions are stable.
In the case of market conditions which change at most
slightly, adjustments are relatively simple to make. With
stable market conditions, competitive moves will mainly
be directed against existing players as new customers
are few and far between. The sales volume attained can

(83)

(84)

3.2.2.6. T h e l o w p r i c e e l a s t i c i t y o f d e m a n d
l i k e w i s e f a v o u r s p a r a l l e l b e h a v i o u r

Price elasticity means the ability and willingness of
buyers to resort to substitute products or to withhold
their custom as soon as suppliers increase the price of a
product
to above the competitive level. Low price
elasticity encourages parallel behaviour in an oligopoly;
for it can then happen that an appreciable price increase
to above the competitive level
leads to a growth in
income despite a decline in sales.

Estimates by market participants point to there being
very little short-term elasticity on the relevant market,
which makes oligopolistic behaviour seem likely. They
refer to the limited alternatives available to buyers.
Whereas other goods are substitutable or dispensable,
electricity is not,
in-house production or switching to
other energy sources being possible only to a limited
extent, very costly and extremely time-consuming. The
parties have by and large not contested this assessment.
They simply maintain that
in the event of high
electricity prices customers can switch to building small
can,
plants
however, replace only a small part of the requirements
of customers at
interconnected level. Building larger
power stations is, on the other hand, very costly and as
a rule takes longer.

in-house generation. Such plants

for

3.2.2.7. V E B A / V I A G a n d R W E a r e n o t f a c e d

w i t h a n y s i g n i f i c a n t b u y e r p o w e r

(35) IEA, Energy Policy of

IEA Countries: Germany 1998 Review,

www.iea.org/pubs/reviews/files/germany/02-germ.htm.

(85)

The supply side of the electricity sales market at the
is highly concentrated. The eight
interconnected level

10.7.2001

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Official Journal of the European Communities

L 188/17

German interconnected power companies account for
the installed power station
no less than 79,8 % of
capacity. They supply nearly 100 % of the electricity
sold at the interconnected level; of this, VEBA/VIAG and
RWE account for 81,5 % or 86,8 % (taking into account
the RWE/VEW merger).

is

likely

to produce

therefore not

it can also be said that

further distributors. Although it

(86) Users, who are mostly regional suppliers (approximately
80 %), municipal electricity undertakings and large
industrial customers, have no buyer power with which
to oppose them. This is due to the fact that, with a
large number of users at the high voltage level, the
fragmented. Threatening to change
demand side is
supplier
any
substantial competitive pressure. The parties refer in
their
to the
reply to the statement of objections
combined buyer power which results, inter alia, from the
involving
(cid:145)numerous cooperative purchasing ventures(cid:146)
several
is true that
during the course of the liberalisation process a few
companies are availing themselves of the opportunity to
form purchasing pools,
the
combined demand is leading to more favourable price
quotations than the separate demand from individual
companies.
purchasing
ventures cover, however, only a part (the size of which
the
is not
demand. The fact that such pools have been formed
shows, moreover, that individual buyers do not have a
degree of market power such as would enable them to
influence
The
concentration of the supply side continues to bear no
relation to that of the demand side. The number of
regional suppliers alone comes to 80, to which must be
added further buyers. The
and
municipal electricity undertakings have so far had little
price
incentive, moreover,
negotiations. They still occupy a strong position in their
traditional supply zones and can charge their customers
high purchase prices as run-through costs.

specified, moreover, by the parties) of

cooperative

appreciable

suppliers

regional

existing

engage

extent.

tough

prices

The

an

to

to

in

(87) A further circumstance to be taken into account is the
fact that the companies at the production level have
sizeable stakes in companies at the subsequent market
level,
in the form of either a majority or a minority
holding. In the case of majority holdings, there is no
risk of a change of
In the case of
the opportunity to change initial
minority holdings,
supplier is likewise very rarely made use of in practice
(see point 3.2.3.5).

initial supplier.

3.2.2.8. S u m m a r y

(88) On the evidence of all market structure data, i.e. market
shares, production capacities and grid size, VEBA/VIAG
and RWE would tower above their competitors. Both

groups would have a comparable market position and
after the merger would, according to the Commission’s
estimates, no longer
stand to gain anything from
competing with one another.

the product homogeneity,

(89) On the basis of the future symmetrical market positions
and largely concordant corporate structures of
the
duopolists,
the market
the low price elasticity of electricity
transparency,
demand, the stagnant overall demand for electricity and
the existing interrelationships, price competition on the
part of one oligopolist is not to be expected because
any such moves are readily identifiable and unpromising
owing to the corresponding potential for retaliation on
the part of the other oligopolist.

(90)

The price fall ushered in by liberalisation and the price
competition that has been evident even between the
three market leaders do not militate against this analysis
(see recital 74).

3.2.3. The duopoly of VEBA/VIAG and RWE or

RWE/VEW will not face any significant competition
from outside

(91) After the merger VEBA/VIAG and RWE would face
significant competition neither from other generators
nor from traders. Apart from the limited potential for
competition from other generators and the limited
opportunities for market entry,
the underlying legal
conditions governing the pursuit of business on the
German market are generally unfavourable.

3.2.3.1. I n a d d i t i o n t o t h e e x t r e m e l y h i g h

m a r k e t s h a r e o f t h e d u o p o l y ,
i n t e r r e l a t i o n s h i p s e x i s t w i t h a l l t h e
o t h e r i n t e r c o n n e c t e d p o w e r
c o m p a n i e s a p a r t f r o m E n B W w h i c h
i n c r e a s e t h e m a r k e t p o w e r o f t h e
d u o p o l y

(92)

In order to be able to estimate the extent to which the
other interconnected power companies may restrict the
duopoly’s operational scope, the holdings which both
groups have in a number of these competitors must also
be examined.

(cid:151) VEAG/LAUBAG: it should first of all be pointed out
that VEAG cannot be regarded as a competitor of
the duopoly. The company is owned 26,25 % by
RWE Energie AG, 26,25 % by VEBA and 22,5 % by
Bayernwerk. The remaining shares are held by the
other
companies VEW,
EnBW, BEWAG and HEW. As already indicated
(recital 4), VEAG is controlled jointly by RWE,

interconnected

power

L 188/18

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Official Journal of the European Communities

10.7.2001

VEBA and VIAG. LAUBAG is the largest
lignite
producer in eastern Germany and as a supplier to
VEAG forms an economic unit with VEAG. As
already indicated (see point 3.2.2.3), LAUBAG is
owned by the seven west German interconnected
power companies.

VEAG generates electricity using almost exclusively
east German lignite and is dependent for its supplies
on LAUBAG, which in turn is dependent on the
duopoly. The latter
therefore exerts a decisive
influence over VEAG’s production costs. Owing to
the fact that it predominantly converts lignite into
electricity, the company is, moreover, hardly in a
position to cover the medium and peak load ranges
using its own production capacities. And on the
customer side, VEAG is dependent on the seven east
German regional suppliers, which in turn are owned
by one of the west German interconnected power
companies.

(cid:151) BEWAG:

the

power

interconnected

company
generates electricity in Berlin. The company is
owned approximately 26 % by Southern Company,
approximately 26 % by VIAG and 23 % by VEBA,
which has 20 % of the voting rights. The company
is currently controlled by VIAG and Southern.
BEWAG does not possess any base load power
stations and therefore has to purchase base load
electricity.

jointly

indirectly

controlled

another 15,4 % share

(cid:151) HEW: VEBA holds a 15,4 % share in HEW directly
and
through
Sydkraft, in which it has a 17,6 % interest. HEW is a
small
interconnected power company with limited
production capacities and only a small transmission
grid. All of its base load power stations are operated
in conjunction with its competitor PreussenElektra.
Vattenfall has acquired joint control of HEW by
pooling its 25,1 % interest with that held by the
municipality of Hamburg (36). Although HEW will
be
the
municipality of Hamburg, as a minority shareholder
with a seat on the supervisory board VEBA is privy
to HEW’s main decisions
Its
to obtain information on
shareholding enables it
HEW’s price
and on any quantities
strategy
for
together with the prices,
purchased,
example, VEBA’s interconnector with Denmark. A
position
strengthening
through Vattenfall’s
for
shareholding,
example,
to the availability of cheaper electricity
the
generated in Scandinavia,
infusion of fresh capital, unlikely for the time being.
HEW’s high voltage grid is not linked up to any

irrespective of

by Vattenfall

competitive

of HEW’s

strategies.

through,

owing,

and

and

is,

(36) Case COMP/M.1842 (cid:151) Vattenfall/HEW.

grids abroad, as a result of which HEW’s access to
imported electricity is largely subject to the same
restrictions as access by foreign suppliers to the
German market (see above). Vattenfall is dependent
when it comes to supplying its affiliate HEW from
Scandinavia on free capacities of the interconnectors
between Germany and Denmark or Sweden. On the
the link-up between Germany and
German side,
Denmark
duopolist
is
PreussenElektra. However, the interconnectors have
that
only limited free capacities, with the result
Vattenfall will be able to supply HEW only with
negligible
the
interconnector capacity with Sweden is useable to
only a relatively small degree.

quantities. What

is more,

operated

the

by

(cid:151) VEW: VIAG also

has

and

(direct

indirect)
shareholdings in VEW. As in the case of HEW,
VIAG has by reason of this shareholding a seat on
VEW’s supervisory board and hence is privy to its
corporate strategy. Following the proposed merger
with RWE, VEW will, moreover, cease to be an
independent supplier on the market.

(93)

(94)

at

the

supplier

currently

only
in which no interest

the
EnBW is
interconnected level
is held by
another German interconnected power company. The
acquisition by EdF of a minority holding in EnBW is
still at the planning stage. EdF intends to acquire joint
control of EnBW by pooling its minority rights with the
shares held by another shareholder. At all events there
are linkages between EnBW and the duopoly in the area
of power-station operation.

it

In the first place,

Even allowing for EdF’s strength in terms of resources,
there are no grounds for maintaining that EnBW would
be in a position to limit effectively the duopoly’s
freedom of behaviour.
is to be
expected that, since other powerful external competitors
are lacking, EnBW will refrain from strong competition
in the duopoly’s area, which covers almost the whole of
Germany, and will fall in with the duopolists’ behaviour.
the
seems obvious given the knowledge of
This
retaliatory
market-leading
of
potential
interconnected power
companies belonging to the
duopoly. Secondly, stepping up the procurement of
cheap electricity from EdF is scarcely possible in view of
the limited capacity of the interconnectors.

the

(95) Moreover, VEBA/VIAG and RWE hold interests

in
electricity generators in neighbouring countries which
confer on them rights to generating capacities. They can

10.7.2001

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Official Journal of the European Communities

L 188/19

make use of these capacities at least to a limited extent
via the interconnectors they control. RWE thus holds a
40,31 % interest
in SEO, a pumped storage station
operator.
In the Netherlands PreussenElektra holds an
87 % interest in EZH, one of the four major generators.
PreussenElektra also holds 10 % of the Swiss generator
BKW. Bayernwerk and EnBW each hold 24,5 % of Watt
AG, which is already active on the German market in
the importing sphere. RWE and EdF also each hold
20 % of the shares in Motor-Columbus, which in turn
holds 56,5 % of ATEL. BKW, Watt and ATEL own
about 23 % of Swiss electricity generating capacity.

proposed RWE/VEW merger, control over two thirds of
total installed generation capacity (see above).

(98) As has been explained above (recital 57), electricity
generated by industry is in any case available to the free
market only to a limited extent. Likewise, electricity
generated by regional and local energy suppliers is
mainly intended to meet their own requirements. The
main factor for competition is therefore the share of
installed generation capacity at interconnected level; at
this level the duopoly will control about 60 % to 65 %
(including VEW) of total capacity.

(96) After

a

over

long

have

the merger, VEBA/VIAG and RWE would
their nearest
therefore
lead
competitors. The position of these interconnected power
companies is even weaker than is apparent from their
market shares as VEBA/VIAG and RWE hold substantial
their competitors. Meaningful
interests
competition is not therefore to be expected from these
interconnected power companies.

in most of

3.2.3.2. T h e d u o p o l y w i l l c o n t r o l b y f a r t h e

g r e a t e s t p a r t o f i n s t a l l e d g e n e r a t i o n
c a p a c i t y a n d a l m o s t a l l f r e e
g e n e r a t i o n p o t e n t i a l

(97) After the merger VEBA/VIAG would control about 30 %
of total generation capacity in Germany. VEBA/VIAG
and RWE together have about 50 % of generation
capacity.
the capacity of
VEW, VEAG and BEWAG, the duopoly would, after the

is also taken of

If account

(99)

(100)

In this connection it is also significant that there is a
close, historical
link between generation and network.
As a result of this link the existing network architecture
does not allow the complete substitution of all power
stations in an interconnected area through supplies of
electricity from outside. It follows that interconnected
companies have
to some degree non-substitutable
generation capacity and thus assured markets. The
greater the generation capacity that is tied into existing
networks through a merger, the bigger the electricity
markets will be that are protected from competition for
structural reasons.

stock of power

the
It can also be perceived on an examination of
enterprises’
the free
generation potential or overcapacity for all load ranges
is predominantly held by members of the duopoly. The
following survey provides an overview of overcapacity
of the individual interconnected generating companies.

stations

that

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Table: Free generation potential of power stations by load range (VDEW statistics: capacity and work, 1998)

Undertaking

Free generation potential (1997)

Base load (37)

Medium load

Peak load

VEBA

VIAG

BEWAG (38)

VEBA + VIAG

RWE

VEAG

Total for duopoly VEBA/VIAG and RWE

VEW

RWE + VEW

Total for duopoly VEBA/VIAG and RWE/VEW

EnBW

HEW

21,2

4,1

2,3

27,6

12,1

17,8

57,5

2,2

14,3

59,7

5,7

3,4

2,3

1,1

1,7

5,1

4,2

0,0

9,3

0,2

4,4

9,5

1,8

0,1

2,8

3,2

0,4

6,4

1,6

1,1

9,1

1,1

2,7

10,2

0,5

1,2

(in TWh)

Total

26,3

8,4

4,4

39,1

17,9

18,9

75,9

3,5

21,4

79,4

8,0

4,7

(101) Although the parties have asserted that VEBA/VIAG and
RWE have no overcapacity in the base load range, they
have not backed up this assertion with any evidence.

3.2.3.3. T h e d u o p o l y w i l l c o n t r o l b y f a r t h e

g r e a t e s t p a r t o f t h e t r a n s m i s s i o n
n e t w o r k i n G e r m a n y

(102) The members of the duopoly have it in their power to
leave the abovementioned overcapacities unused or even
to reduce them in parallel in order to stabilise the price
level.

(105) Without including VEW and leaving aside VEAG, which
they control, VEBA/VIAG and RWE by themselves will
control 52 % of the German transmission network. The
duopoly’s competitors are dependent on it for use of
this network in order to compete with it. In addition,
the transmission network as a whole covers the greater
part of Germany.

(103) At

the oral hearing the parties

these
overcapacities would stimulate competition. During by
far the larger part of an assessment period, there was
more to be gained, they stated, from utilising them than
from increasing prices.

stated that

(104) No written evidence was produced, however, to support
these statements. The Commission is accordingly not in
a position to verify the figures. In their arguments the
parties also assume that the duopoly’s capacity remains
unchanged. They thereby ignore the possibility for the
duopoly to extend its parallel behaviour to the closure
of capacity.

Table: Transmission network in Germany (source: VDEW, 1997)

Undertaking

Length of transmission networks
(in km), extra high/high voltage
380/220 kV

VEBA

VIAG

BEWAG (39)

VEBA + VIAG

RWE

VEAG

6 569

5 500

136

12 069

9 000

11 500

16 %

14 %

< 1 %

30 %

22 %

29 %

(37) Including hard coal.
(38) BEWAG is listed as an independent electricity supply company. It
is controlled jointly by VIAG and Southern Energy. For purposes
of examining the duopoly, BEWAG’s figures were included among
those of VEBA/VIAG.

(39) BEWAG is listed as an independent electricity supply company. It
is controlled jointly by VIAG and Southern Energy. For purposes
of examining the duopoly, BEWAG’s figures were included among
those of VEBA/VIAG.

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L 188/21

Undertaking

Total for duopoly VEBA/VIAG
and RWE

Length of transmission networks
(in km), extra high/high voltage
380/220 kV

32 569

81 %

VEW

RWE + VEW

Total for duopoly VEBA/VIAG
and RWE/VEW

EnBW

HEW

Others

2 000

11 000

34 569

2 100

360

3 121

5 %

27 %

86 %

5 %

1 %

8 %

Germany as a whole

40 150

100 %

(106)

In addition, the network, by reason of its scope, and the
ownership of the network links within Germany and
interconnectors enable the members of the duopoly to
steal a significant march in information matters over
their competitors.

the

and

network,

loads used by suppliers. Although,

(107) Through their ownership and operation of the network
the
links/interconnectors
interconnected companies obtain information on load
flows and quantities supplied by competitors and an
outline of
in
terms, network operation is separated
organisational
there is
from the electricity trade and distribution,
evidence to suggest
in individual cases sensitive
that
network operation data concerning competitors of the
interconnected companies come to the knowledge of
interconnected companies’ sales divisions. Such claims
were also made by competitors of the parties at the
hearing.

(108) A further advantage over competitors that ownership of
the network confers on members of the duopoly is the
settlement procedures for balancing energy that are
under Associations
operations
transit
fixed
Agreement II (see point 3.2.3.6).

for

as

and

high

electricity

producers

activities
suppliers.
However, this measure has not been accompanied by
any economic separation and network operation and
electricity production and supply remain in the same
vertically
integrated group so that discrimination
remains possible against competitors who rely on
through-transmission via the network. By virtue of the
it is possible to harm the
negotiated network access,
competitive opportunities of competitors,
especially
traders, in favour of the interconnected companies’ own
production companies by way of combined costing
and
through
through-transmission
In such
correspondingly low electricity supply prices.
circumstances
apply
to
is
transparent tariffs which can be checked to see how
they stand in relation to costs and to the rules of
Associations Agreement
II on through-transmission.
This holds true especially where, as would be the case
once the planned merger was completed, by far the
greatest part of a national network is dominated by only
two groups which, as indicated, can be expected to
engage in parallel behaviour. It must also be borne in
mind here that both blocks operate on downstream
markets where they can fend off competitors through a
for
transparency
lack of price
competition purposes at the interconnected level.

and use

incentive

charges

income

there

little

3.2.3.4. T h e r e a r e s i g n i f i c a n t b a r r i e r s t o

e n t r y t o t h e m a r k e t , a s r e g a r d s b o t h
t h e c r e a t i o n o f n e w c a p a c i t y a n d
i m p o r t s . I m p o r t s , w h i c h a r e
p o s s i b l e o n l y t o a l i m i t e d e x t e n t
a n d a r e m o s t l y e f f e c t e d v i a
i n t e r c o n n e c t o r s c o n t r o l l e d b y
m e m b e r s o f t h e d u o p o l y , c a n n o t
r e s t r i c t t h e d u o p o l y ’ s o p e r a t i o n a l
s c o p e

(110) Potential suppliers are unable to present an effective
challenge to the parties’ strong position on the market.
This is because of the high barriers to entry to the
German market.

it

is

owned

Instead,

(109) The general point should be made that in Germany the
transmission network is not operated by an independent
undertaking.
various
interconnected companies and operated by them. The
interconnected companies have set up subsidiaries to
operate the network. In doing so they had regard for
the minimum requirements contained in the Electricity
Market Directive
out management
unbundling and unbundling of accounts to separate
the transmission network from their
operation of

carried

and

by

(111) Entry to the market in the supply of electricity at the
interconnected level
in Germany entails considerable
investments. These to a large degree form sunk costs,
i.e. they are applicable to one product market only and
have no application to activities on other markets.
These costs include the production-level investments in
the
power
stations. Even after
the
German electricity market, market
production level entails
incurring considerable costs
over a long period because of the necessary investment
in power
right of
through-transmission, however, the development of an
longer
independent

the liberalisation of
at

stations. Given the

transmission

statutory

network

entry

no

is

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necessary since production companies are able to use
the transmission networks of other market operators on
non-discriminatory terms. Since VEBA/VIAG and RWE
hold the major part of German generation capacity, any
market entry entails the risk that the members of the
duopoly will apply their overcapacity so as to force the
newcomer off the market by lower prices. This also
makes it more difficult de facto for electricity traders to
enter the market.

so that

liberalisation, market entry
(112) Consequently, even after
entails high costs
the previously existing
substantial barriers to entry to the German market in
the supply of electricity at
the interconnected level
remain. This is shown clearly by the fact that market
entry at production level has in general proceeded by an
enterprise taking a holding in an existing production
company. Thus the Swedish enterprise Vattenfall took a
holding in the interconnected company HEW. The
Finnish enterprise Fortum took over
the Wesertal
electricity plant. However, entry to the market through
the
company’s own generating
capacity remains the exception. The Commission knows
of few cases where suppliers have tried to secure access
to the market by building their own generating capacity.
Thus Fortum has established a power station in the new
L(cid:228)nder
to strengthen its electricity-generation base in
Germany; likewise, the American company NRG Energy
has taken a holding in a power station.

construction of

a

are

electricity

importing

(113) Moreover, it should be borne in mind that opportunities
the
for
extremely
available
capacity of
capacity is
limited. An increase
unlikely in the years ahead, at
in the present
political climate, owing to the related costs and the
requisite authorisation procedure. As the parties stated
at the hearing, it takes up to two years just to build the

interconnectors
in interconnector

limited because
is

least

overhead lines, to which must be added the time it takes
for the official authorisation procedure and the requisite
analysis of the load on the downstream networks.

the interconnected level

(114) To conclude, barriers to access to the market in the
supply of electricity at
in
Germany are very high. The amount of the necessary
investment and the lack of access from abroad because
of the limited capacity of the interconnectors restrict
competition for the VEBA/VIAG and RWE groups. In
view of the two blocks’ significant resources and their
resulting retaliatory powers, and the wide gap between
them and the other operators on the market, there is no
reason to expect robust competition from current or
potential suppliers, whose room for manoeuvre could
be effectively controlled by the two groups.

3.2.3.5. W i t h t h e i r n u m e r o u s h o l d i n g s , t h e

m e m b e r s o f t h e d u o p o l y e n j o y a
s t r o n g p o s i t i o n o n d o w n s t r e a m
m a r k e t s e n a b l i n g t h e m t o s e c u r e
t h e i r m a r k e t b a s e a t t h e e x p e n s e o f
t h e i r c o m p e t i t o r s

(115) The market position of VEBA/VIAG and RWE is further
strengthened by numerous holdings in undertakings at
the downstream market stage. These holdings give the
the duopoly decisive influence on the
members of
purchasing policy of the undertakings so that the two
groups can secure their market base and at the same
competitors’ marketing
their
time
opportunities. The
an
following
the
the holdings of
overview of
duopoly.

survey provides
the members of

seriously impair

Table: Sample of holdings of the interconnected companies VEBA, VIAG, RWE and VEW in regional supply companies

(RVU) and municipal electricity undertakings (SW)

Company

RVU/SW

Level of holding

Interconnected
company

Avacon

RVU

55,0 %

VEBA

Badische Gas- u. Elektrizit(cid:228)tsversorgung

47,6 %

VEBA

e.dis

EAM

RVU

RVU

69,0 %

VEBA

46,0 %

VEBA

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L 188/23

Company

RVU/SW

Level of holding

Interconnected
company

Energieversorgung Potsdam

EWE

Fr(cid:228)nkisches (cid:220)berlandwerk

Freiburger Energie- u. Wasserversorgung

PESAG

Prevag Provinzials(cid:228)chsische Energie-Versorgung

SCHLESWAG

Stadtwerke Magdeburg

Stadtwerke Frankenthal

Stadtwerke Garbsen

Stadtwerke Geesthacht

Stadtwerke Halberstadt

Stadtwerke Schwedt

Stadtwerke Wei(cid:223)enfels

Stadtwerke Zweibr(cid:252)cken

St(cid:228)dtische Werke Brandenburg

Stromversorgung Osthannover

Th(cid:252)ga

Rhenag

Contigas

IAW Isar-Amperwerke

OBAG

REWAG Regensburger Energie- u. Wasserversorgung

TEAG

(cid:220)berlandwerk Unterfranken

ELE

Envia

EWR

KAWAG

35,0 %

VEBA

27,0 %

VEBA

67,1 %

VEBA

35,9 %

VEBA

54,7 %

VEBA

25,0 %

VEBA

65,0 %

VEBA

29,0 %

VEBA

10,0 %

VEBA

24,9 %

VEBA

24,9 %

VEBA

20,0 %

VEBA

37,0 %

VEBA

24,5 %

VEBA

25,1 %

VEBA

24,5 %

VEBA

26,0 %

VEBA

56,5 %

VEBA

42 %/54 %

VEBA/RWE

95,0 %

VIAG

84,6 %

VIAG

96,0 %

VIAG

35,5 %

VIAG

75,0 %

VIAG

54,3 %/40,1 %

VIAG/VEBA

79,0 %

RWE

63,0 %

RWE

50,0 %

RWE

30,0 %

RWE

RVU

RVU

RVU

RVU

SW

SW

SW

SW

SW

SW

SW

SW

SW

RVU

RVU

RVU

RVU

RVU

RVU

SW

RVU

RVU

RVU

RVU

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Company

RVU/SW

Level of holding

Interconnected
company

KEVAG

LEW

MKW

NVV

OIE

Pfalzwerke

VSE

ELEKTROMARK

AVU

MEAG

(116)

as

these

cases,

are majority holdings

In many
in
distribution companies and the various members of the
duopoly,
to
controlling undertakings,
determine their purchasing decisions directly. Even
where the members have minority holdings they can
influence on the
nevertheless
purchasing policy of the companies whose shares they
hold.

substantial

exercise

able

are

RVU

RVU

RVU

RVU

RVU

RVU

RVU

RVU

RVU

RVU

57,0 %

40,0 %

27,0 %

50,0 %

100,0 %

25,0 %

41,0 %

RWE

RWE

RWE

RWE

RWE

RWE

RWE

10 %/10 %

RWE/VEW

50,0 %

61,0 %

VEW

VEW

interconnected companies to acquire customers in this
that are held by
category. The minority holdings
VEBA/VIAG and RWE in particular
in distribution
companies thus strengthen the duopoly’s position and
create additional difficulties for other operators trying to
establish themselves on the German market.

(119)

the

interest

holders. However,
is

(117) The majority shareholders in those associated companies
are one or more municipalities, which are usually
represented on the company boards through municipal
from the
office
undertakings’
solely in energy-supply
standpoint
companies with minority holdings. Because of
the
skills of PreussenElektra, Bayernwerk and
particular
RWE in the energy and management fields, the holdings
of members of the duopoly in redistributors and their
representation on their boards have in fact significantly
greater weight than the extent of each holding and their
company’s governing
quantitative presence on the
bodies would indicate.

in

supply

severely

restricted

enterprises. Even if

In those circumstances, the parties have comprehensive
means of bringing influence to bear on the decisions
concerning electricity purchases made by many regional
and local
in future
competitors developed significant electricity-generating
capacity in Germany, they would have to operate that
competition with
capacity
members of the duopoly. Given the existing close links
local
between
the
suppliers
to the
duopoly’s competitors
market at production level that would enable them to
offer
geographically
comprehensive competition. This affects the market in
electricity supplies at the interconnected level since it
does not make economic sense to generate considerable
quantities of electricity in competition with the duopoly
unless there is an adequate opportunity of marketing it.

abovementioned
the

lack adequate access

interconnected

companies,

significant

the
and

regional

above

and,

and

all,

the

into

through

enterprise

(118) Energy and management know-how is in large part
introduced
the
interconnected company. The interconnected company
and the other company are normally linked by a supply
contract that covers the total outside supplies required
by the regional supply company or municipal electrical
investigations have
undertaking. The Commission’s
in which an
shown that distribution companies
interconnected company has a holding have hitherto
scarcely exploited the opportunities afforded them by
liberalisation and have remained with their previous
suppliers.
for other
operators, such as importers, electricity traders or other

correspondingly difficult

is

It

3.2.3.6. T h e t e r m s o f A s s o c i a t i o n s
A g r e e m e n t I I , p a r t i c u l a r l y
c o n c e r n i n g t h e T - c o m p o n e n t a n d
b a l a n c i n g e n e r g y , g i v e t h e d u o p o l y
f u r t h e r a d v a n t a g e s o v e r
c o m p e t i t o r s

(120) The provisions of Associations Agreement

II, which
appear to indicate a significant improvement over those
of Associations Agreement
I, contain certain clauses
that, particularly for competitors of the interconnected

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Official Journal of the European Communities

L 188/25

create

companies,
to
through-transmission and thus mainly serve to further
consolidate and strengthen the position of the market
leaders, the interconnected companies.

barriers

serious

(121) Foreign

to

pay

and

south

trading

continue

suppliers must

zones. According

the rate of 0,25 pfennig/kWh)

the
T-component at the rate of 0,125 pfennig/kWh when
they import electrical energy into the Federal Republic
of Germany. The T-component also applies within
Germany (at
for all
electricity traders and electricity generators that are
unable to achieve a balance in supplies between the
north
to
information obtained from electricity traders, in certain
circumstances payment of the T-component can reduce
traders’ margins to zero. Only those companies that can
the quantities of electricity supplied by them
offset
against
the quantities of electricity which cross the
trading zone boundary in the other direction need not
pay the T-component. In this respect the members of
the duopoly enjoy significant advantages. VEBA and
VIAG will have available an extensive supply area
covering both trading zones. Although RWE operates in
only one trading zone at present (the same applies to
VEW),
its status as a major interconnected company
gives it an advantage in offsetting electricity with other
interconnected companies operating in the other trading
zone. After the proposed merger, the supply area of the
merged entity will also cover both trading zones. By
contrast,
and
interconnected
electricity traders find it relatively more difficult to offset
energy supplies.

companies

smaller

(122) Under Associations Agreement

II,

the

offsetting
arrangements
for balancing energy confer a further
advantage on the members of the duopoly. Since final
consumers’ energy consumption fluctuates, in the course
of long-term supplies the level of energy purchased is
frequently above or below the contractual amounts. The
technical rules mean that the balance, i.e. the deficit or
excess, must be balanced by the network operator for
his balancing area. This means that balancing energy is
bought in or sold. Associations Agreement II applies in
principle to systemic services that are necessary for the
transmission and distribution of electrical energy and
determine the quality of electricity supplies, for example
demands on balancing energy, to within tolerances of
+/(cid:150) 5 %. Additional payments are required if a standard
tolerance of +/(cid:150) 5 % of the reference value is exceeded.
On payment of a higher through-transmission charge an
applicant can choose a wider bracket of +/(cid:150) 10 % or

by

energy

network

network

transmission

operators within

considerably higher

20 %. Balancing energy can generally be provided only
their
by
balancing areas or by suppliers operating a power
station in the balancing area to which electricity is
the price
supplied. According to market operators,
for
transmission
charged
operators
under Associations
balancing
supplying
Agreement
than under
is
II
Associations Agreement
I. The market operators
consulted by the Commission claim that the price for
under Associations
energy
supplying
Agreement II significantly exceeds the cost of providing
the energy. The fact that balancing energy is constantly
kept ready for cases where it
is necessary plays a
relatively important role in the calculation. For example,
if the 5 % tolerance band is exceeded just once, the
amount charged is based on an assumption that it was
exceeded for one month. This is liable to prove a
burden, especially for suppliers with comparatively low
quantities of sales of electricity. In those circumstances,
with this method of calculation electricity traders risk
losing their profit margins.

balancing

(123) By contrast,

the prices

for balancing energy entail
scarcely any burden for members of the duopoly. This is
mainly because, with their prominent position on the
market and large sales volume they can much more
easily offset
consumption fluctuations within their
balancing areas and thus incur significantly lower costs
interconnected companies,
for balancing energy. Also,
which, as network transmission operators, are in fact
the main suppliers of balancing energy, usually supply
each other with balancing energy against payment in
kind, according to market operators. The parties state
that the interconnected companies provide each other
with energy on a reciprocal basis to a limited extent, at
all events where there is an unintentional exchange of
energy or a power station failure, so that no costs arise
are not
energy. Competitors
for
interconnected are often dependent on interconnected
companies for supplies of balancing energy. They are
naturally dependent on members of
the duopoly in
particular since they cover a large part of the area of the
Federal Republic of Germany.

balancing

that

(124)

In addition, Associations Agreement II does not contain
any provisions on management of bottlenecks where
the network is subject to restrictions in Germany. The
sometimes give
transferor companies
result

that

is

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priority to requests for transfers from their own group,
invoking network-safety issues and technical difficulties,
and merely offer competitors the use of any remaining
free capacity.

meet demand fully. Both groups of companies would
therefore be able to determine how much electricity
independent electricity traders on the German market
receive and to exercise permanent control on prices.

(125) Any competitors of members of the duopoly that do
not have their own transfer network available are
therefore adversely affected by the arrangements on use
of the network. The prominent position on the market
held by VEBA/VIAG and RWE is therefore consolidated
by the arrangements on use of the networks belonging
to them.

(129) The same consideration applies to the trade through the
German electricity exchanges, which are intending to
begin operations in the autumn of this year.
In the
LPX’s view, it is a condition for a properly functioning
task of price
exchange performing
formation that 15 % to 25 % of national physical
consumption can be traded on the exchange. In view of
the high concentration of generation capacity held by
VEBA/VIAG and RWE, the two groups can determine
the exchanges and thus determine
the success of
whether their competitors succeed and make profits.

essential

the

3.2.3.7. C o n t r o l o f b y f a r t h e m a j o r p a r t o f

g e n e r a t i o n c a p a c i t y , t h e
t r a n s m i s s i o n n e t w o r k s a n d
n e t w o r k - l i n k c a p a c i t y w i t h
n e i g h b o u r i n g S t a t e s g i v e t h e
d u o p o l y d e c i s i v e i n f l u e n c e o v e r t h e
e l e c t r i c i t y t r a d e t h a t i s d e v e l o p i n g
i n t h e w a k e o f l i b e r a l i s a t i o n

(130)

(126) According to the Commission’s current information, the
electricity traders already operating on the market are
likewise unable to restrict the operational freedom the
market structure allows the parties.

4. Conclusion

come

In summary,
to the
the Commission has
conclusion that the merger of VEBA and VIAG would
considerably deteriorate the structures on the German
market for the provision of electricity from the grid.
Competition would be critically weakened as a result of
the emergence of a duopoly, (VEBA/VIAG and RWE or
RWE/VEW). Because of their dominant market position
and access
stations,
transmission grids and grid transfer points, the duopoly
could
from
competition and, in addition, prevent the emergence of
a properly functioning market for trade in electricity.
The merger would therefore lead to the creation of a
joint dominant position.

the German market

such as power

to resources

largely

shield

and

The

existing

situation has
producers

suppliers. This
of
both
traders.

(127) Since the liberalisation of the German electricity market
in 1998, all consumers have been entitled to choose
influenced the
their
independent
operations
electricity
interconnected
companies have in large part extended their operations
beyond the traditional interconnected areas. Independent
wholesale electricity traders, such as Enron, Fortum and
Vasa Energy, have newly entered the market. Those
traders have so far concentrated on short-term spot
supplies and have concluded long-term contracts only in
exceptional cases. Their own capacity for electricity
generation is negligible, so that they correspondingly
depend on access to free capacity.

(128) The operators on this market consider that an essential
condition for a market in electricity trade which will
have a decisive impact on the duopoly’s ability to
determine prices is that adequate liquidity should be
present on the market. The overcapacity available to
independent electricity traders
is mainly owned by
VEBA/VIAG and RWE, as has been pointed out above.
They therefore have a large measure of
freedom to
determine prices since other producers are unable to

B. CHEMICALS

(131) VEBA operates in chemicals through its subsidiaries
Degussa-H(cid:252)ls AG and VEBA Oel AG (petrochemicals).
The chemical interests of the VIAG group are handled
by its
subsidiaries SKW Trostberg AG and their
subsidiary Goldschmidt AG. The Commission has come
to the conclusion that the merger will strengthen further
a dominant position on the markets
sodium
dicyanamide and cyanuric chloride.

for

B.1. SODIUM DICYANAMIDE

1. Relevant product market

(132) Sodium dicyanamide is a product of hydrocyanic acid
from the
/chlorine cyanide chemistry which arises
(highly-poisonous) chlorine cyanide and
synthesis of
an unusually
cyanamide. As
dangerous
sodium
dicyanamide is closely linked geographically to that of
chlorine cyanide.

production

substance,

chlorine

cyanide

the

of

is

10.7.2001

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Official Journal of the European Communities

L 188/27

a

is

as

chlorine-free biocide

for the production of

(133) Sodium dicyanamide is used chiefly as an intermediate
the active substances
product
polyhexamethylene biguanide (PHMBG), chlorhexidine
and proguanil. PHMBG is used for preservation and
sterilisation in the technical field. By volume the most
for
important use
swimming pools. PHMBG is also used in the food
industry, for example in meat-processing and brewing,
to clean vats and pipes, as it is non-toxic and does not
corrode sealing. In the oil
industry it is employed in
pressure tests on pipelines, as it kills off unwanted
organisms, but not sulphur-decomposing bacteria, such
as those added to petroleum with high-sulphur content.
Chlorhexidine is a disinfectant used on humans and on
animals forming part of
for
example in human medicine (surgery) and veterinary
medicine (disinfecting udders),
in the manufacture of
cosmetics and in contact-lens cleaning fluid. Proguanil is
used as a remedy against malaria. Sodium dicyanamide
is also used in the agri-chemicals industry as a herbicide.

the human food chain,

firm Lonza AG (Lonza) produced sodium dicyanamide
up to 1998, but then closed down production and since
then has been selling on goods it obtains from [(cid:133)] (*).
The parties expect Lonza to resume production in the
second half of the year.

(137) The capacity of

to

[(cid:133)]

tonnes

(1996)

the plant at which SKW produces
sodium dicyanamide has been increased from [(cid:133)]
tonnes
(1999). Degussa
manufactures it at a multi-product plant for which it
quotes an annual capacity for
sodium dicyanamide
production of around [(cid:133)] tonnes. Degussa uses sodium
dicyanamide to produce chlorhexidine in the form of
chlorhexidine base and chlorhexidine digluconate. [(cid:133)]
obtains from Degussa a product of sodium dicyanamide,
hexa-methylene biscyanoguanidine (HMBCG), which it
processes further to produce chlorhexidine base and
sodium
chlorhexidine
dicyanamide.

purchases

salts.

[(cid:133)]

also

by

that

parties,

unchallenged

(134) The customers asked for their views stated in unison,
and
sodium
the
dicyanamide is for them a key intermediate product,
which cannot be replaced by any other intermediate
product. Even if another intermediate product were
available in the foreseeable future, its use would imply
considerable adaptations to the production process and
the re-registration of products manufactured hitherto
from sodium dicyanamide and all other subsequent uses
(cid:151) a lengthy and expensive process. The Commission
therefore assumes that sodium dicyanamide should be
regarded as the relevant product market.

2. Relevant geographic market

(135) The parties base their arguments on a worldwide market
for sodium dicyanamide. The firms asked to submit
their views make the same assumption. The assessment
can therefore be based on a worldwide market.

3. Competition assessment

3.1. Present market situation

(136) At present, only two firms in the world produce sodium
dicyanamide in large quantities (cid:151) Degussa and SKW.
The parties also cite Avecia Ltd, Manchester (United
its production process does not
Kingdom). However,
yield isolated sodium dicyanamide, but an intermediate
product
(HMBDA), which is used in turn to obtain
chlorhexidine and PHMBG. This intermediate product is
manufactured only by Avecia and is not available on the
market, as Avecia does not trade in HMBDA. The Swiss

(138) The parties estimate that world production of sodium
cyanamide comes to somewhere between around 900
and 1 300 tonnes per annum (tpa), including between
[(cid:133)] and [(cid:133)] tpa attributed to Avecia. They disregard
that Avecia produces no isolated sodium
the fact
dicyanamide. The estimated figures for Asian producers
cited by the parties have not been confirmed by
Commission investigations.

to the entire production of

(139) Subtracting the parties’ production estimates for Avecia
from their estimates for total world production leaves a
remainder of no more than [(cid:133)]
tonnes, which is
the
roughly equivalent
parties in 1998 (around [(cid:133)] tonnes). On the basis of
the parties’ estimates,
this leaves no more than [(cid:133)]
tonnes for production by other firms. If one starts from
a world production figure of around [(cid:133)] tonnes, SKW
has a share of around [50 % to 60 %] and the parties
together have a share of [< 100] %.
If one subtracts
from this figure the amounts produced by the parties
for their own use,
this leaves a market volume of
around [(cid:133)] tonnes, of which [(cid:133)] tonnes, or [60 % to
70 %], is accounted for by SKW.

(140) Degussa states that it does not actively market sodium
dicyanamide, but manufactures it
for use within its
business group for the production of chlorhexidine.
it has provided occasional,
However,
in the past,
supplementary supplies to [(cid:133)],
in some cases even
delivering the goods direct to [(cid:133)]’s customers.

(141) At present, buyers of sodium dicyanamide have two
suppliers to choose from (cid:151) Lonza and SKW. Even a

(*) Parts of

this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets.

L 188/28

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Official Journal of the European Communities

10.7.2001

cautious analysis shows that SKW supplies over two
thirds of the market. In these circumstances SKW can
be said to have a dominant position on the market.

Lonza’s probable trade volume of around [(cid:133)] tpa (40))
would be strengthened accordingly.

(142) Nevertheless,

the presence of Lonza does at present
provide customers with some scope for responding to
excessive price demands on the part of SKW by
reducing the amounts they order. In this respect, the
extent of Lonza’s operations on the market depends on
the amount of sodium dicyanamide which Degussa is
prepared to supply. For its part, Degussa contributes to
the supply of the market by its deliveries to Lonza.
Before the merger Degussa could also be seen as a
potential competitor in the market in question.

(143) With the exception of AstraZeneca, all the firms which
require large quantities of sodium dicyanamide are small
and medium-sized businesses. AstraZeneca uses sodium
dicyanamide to produce proguanil, which is marketed
only
brand,
under
comparatively small quantities of sodium dicyanamide
for this purpose.

Paludrin

requires

and

the

3.2. Effects of the merger

as

the

Lonza’s

competitor.

(chlorhexidine), where

Similarly,
entity will have no interest

(144) First of all, the merger will eliminate Degussa, which is
now also in contact with Lonza’s customers, as a
new
potential
market-dominant
in
supplying Lonza, its only competitor. From this angle
the very least, a further
the merger will mean, at
weakening
competitor.
position
of
Furthermore, Degussa already operates in a downstream
market
potential
competitor for PHMBG, as the HMBCG produced by
Degussa
produce
chlorhexidine or PHMBG. Degussa/SKW would be able
be more
overall,
to
advantageous to market sodium dicyanamide or use it
itself.
the
supply of sodium dicyanamide to Degussa’s competitors
on the downstream market for chlorhexidine or make
supplies more expensive, thus reducing their long-term
competitiveness.

it could largely cut off

In the latter case,

decide whether,

it would

processed

further

can

be

to

is

it

a

3.2.1. Submission by the parties regarding the possible

re-entry of Lonza to the market

If

(145) The parties mention the possibility that Lonza might
enter the market with its own production. However, this
does not change the assessment of the merger from a
competition angle.
the merger did not take place,
Lonza would cease to be a customer of Degussa, in so
far as it would manufacture amounts itself. This would
create an incentive for Degussa to sell the amounts it
in competition with the amounts
produces elsewhere,
manufactured by SKW. Such competition would be
eliminated by the merger and SKW’s dominant position
(which could in no way be called into question by

(40) This figure can be estimated on the basis of the amounts supplied
by Degussa to Lonza during the period in which the latter no
longer produced sodium dicyanamide. Taking into account
Lonza’s own consumption, its volume of trade would be less than
[(cid:133)] tpa.

3.2.2. Entry of further competitors is unlikely

(146) There is also no prospect of the parties being faced with
the threat of new market entrants in the event of a
substantial rise in prices. At present only Avecia could
be considered as a potential candidate. But even if
Avecia wanted to put sodium dicyanamide supplies on
the free market,
it would first have to undergo an
extensive reorganisation of its production in order to
obtain isolated sodium dicyanamide. It is worth bearing
in mind here that Avecia obtains the cyanamide it needs
for its HMBDA production from [(cid:133)]. As cyanamide is
not a stable product, Avecia cannot transport it over
long distances and would therefore find it difficult to
switch to another supplier.

4. Conclusion

(147) For the reasons stated above, the Commission considers
that
permanent
strengthening of a dominant position on the market for
sodium dicyanamide.

the merger would

lead

to

a

B.2. CYANURIC CHLORIDE

1. Relevant product market

1.1. Cyanuric chloride and its four main uses

(148) Cyanuric chloride (CC)

is an intermediate chemical
product in hydrocyanic acid chemistry. It has a simple
structure and has not enjoyed patent protection for
the most
some
acid,
important
for manufacturing CC is
chlorine gas.

time. Besides hydrocyanic

raw material

from price,

(149) CC is a commodity product which is sold as a powder
and in molten form. There is no major degree of
product differentiation. Apart
the most
important aspects from a competition point of view are
in the case of powder,
product quality (purity and,
flowability) and packaging. The relevance of packaging
concerns not only the size of
the packages. CC is
classified as a (cid:145)less dangerous(cid:146) substance, so that certain
official
its
transport.

laid down concerning

conditions

are

10.7.2001

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Official Journal of the European Communities

L 188/29

(150) CC is distributed predominantly by the manufacturers
themselves and by importers. According to the parties,
trade plays no role in distribution.

(151) CC is used mainly in the production of weedkillers,
optical brighteners, reactive dyes and UV-absorbers.

(152)

[> 50 %] of CC production is used in the manufacture
of weed control agents for maize cultivation (maize
herbicides).

(153)

[Considerable quantities] are processed into optical
brighteners, which are used to whiten paper and textiles
and in detergents. Optical brighteners alter the reactive
properties of these materials with regard to certain light
components and give the products to which they are
applied a particularly white appearance.

(154) CC is also used in the manufacture of reactive dyes. The
addition of CC improves the durability of textile colours
by intensifying the link between the dye and the fibre.
The parties estimate that [a certain proportion] of CC
production is used for this purpose.

(155) Finally, significant amounts of CC ([< 10 %] of world
employed in the production of
the manufacture of plastics. CC

production)
UV-stabilisers
protects plastic surfaces from fading and decay.

are

for

(156) The competitors and customers asked to give their
views have cited CC as the relevant product market,
although two customers make a distinction between
powdered CC and molten CC. Degussa is the sole
manufacturer of molten CC, producing around [(cid:133)] tpa
in Europe and around [(cid:133)] tpa in the USA. The question
whether the two product variants represent a single or
two separate product markets can remain open, as the
competition assessment does not hinge on this point.

1.2. The parties regard CC as interchangeable in all

its applications

(157) The parties argue that CC is in keen competition with
to
sold in the above consumer

intermediate

products

used

that

other
manufacture products
markets.

are

(158) The parties also consider that CC is an intermediate
product which cannot be used by the final consumer
and that its competitive environment should be assessed
between
not

competition

only with

regard

to

argue

manufacturers, but above all from the point of view of
the four consumer markets for the abovementioned
applications. They
that, on these markets,
products manufactured from CC compete with CC-free
products. Accordingly, they ask the Commission not to
examine the conditions of competition with regard to
the manufacture and sale of CC, but to consider the
abovementioned consumer markets as
the relevant
markets. They justify this request by stating that, as an
intermediate product, CC faces keen competition on the
consumer markets from other intermediate products
which are also used in end-products offered on those
markets. They argue that the manufacture and sale of
CC is not relevant for the examination of this aspect of
the planned merger from a competition angle, as it does
not constitute the (cid:145)affected market(cid:146) within the meaning
of
the parties confuse the
form CO.
delimitation of
the relevant product market, which
(cid:145)comprises all those products (cid:133) which are regarded as
interchangeable or substitutable by the consumer, by
reason of the products’ characteristics, their prices and
their intended use(cid:146) (41) with a statement of the factors
determining the conditions of competition on those
markets.

In so doing,

1.3. There is, however, a lack of substitutes for CC

as an ingredient and for processed products

(159) The parties’

claims

the many possible
regarding
substitutes in all four of the main applications of CC
have not been borne out by the Commission’s
investigations.
Indeed customers have stated that, at
present, they have no possibility of replacing CC with
other chemicals in the products they manufacture.

(160) As regards pesticides, the ban on atrazine can in no way
be seen as equivalent to a ban on all maize herbicides
containing CC; indeed the parties do not make such a
claim. Even after atrazine containing CC has been
banned in Germany, 13 other herbicides which are used
in maize cultivation and whose active ingredient
is
synthesised using CC are still permitted in Germany,
according to the Federal Office
for Forestry and
Agriculture in Berlin and Braunschweig. But even a ban
on all maize herbicides containing CC would mean only
that the market for CC would decrease. It cannot be
assumed that CC could be replaced by another active
ingredient within a short time and without higher costs
for the firm concerned. This observation is lent further
weight by the fact that any reformulated product first
requires permission.

(41) Commission notice on the definition of relevant markets for the

purposes of Community competition law (97/C 371/03).

L 188/30

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Official Journal of the European Communities

10.7.2001

(161) Optical brighteners are used in the production of paper,
In the paper industry
textiles, plastics and detergents.
CC-based brighteners cannot be replaced by CC-free
brighteners, while in the textile industry this depends on
the fibre used. Only CC-based brighteners are used on
cotton, by far the most widely used textile fibre, while
only CC-free brighteners are used on synthetic fibres. In
the case of detergents, CC-based brighteners are not
interchangeable at high washing temperatures. Thus, the
final application of CC in this field generally rules out
any replacement.

(162) As regards the replacement of CC in future, it is true for
all areas of application that buyers of CC will first have
to develop new products and adapt their production
process accordingly, not
to mention the generally
time-consuming licensing procedures which may have
to be gone through before a new product can be put on
the market.

1.4. CC is therefore the relevant product market

These firms market CC worldwide, except Novartis,
which produces it solely for its own use [(cid:133)].

(165) The firms that were asked for their views and the
parties assume a worldwide market, pointing to growing
imports to the EEA from China. Transport costs come
to [< 7] % of the full price, depending on the country of
destination, so that CC can be exported anywhere. Nor
are there any major restrictions on imports, in particular
on supplies from China. On the other hand, the firms
asked to submit their views point out that the transport
(and processing) of CC entails
risks.
Hydrochloric acid is formed on contact between CC and
air/atmospheric humidity, while hydrocyanic acid is
formed in the event of heat being applied (fire). Users of
CC therefore take particular care as soon as CC is
delivered, ensuring that it is delivered in road tankers
and stored in silos or tanks. However, for the purposes
of the assessment, the question can remain open as to
whether,
in view of these risks, the relevant product
market covers only western Europe (the EEA and
Switzerland) or is worldwide.

considerable

(163) CC is therefore to be regarded as the relevant product

market.

3. Competition assessment

2. Relevant geographic market

3.1. In view of its market share, Degussa enjoys a

dominant position on the European market;
the merger would lead to an increase in its
market shares

(164) The parties produce CC at various locations in Europe
and in the USA (VEBA). CC is also manufactured in
Europe by the Swiss firm Lonza AG, which belongs to
the Algroup-Lonza group, and in the USA by Novartis.

(166) The parties estimate that the various manufacturers of
CC have had the following capacities over the last three
years.

Table: Total capacity in tonnes

SKW

Degussa

Lonza

Novartis

Japan

China

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

[(cid:133)] 000

(cid:151)

[(cid:133)] 000

1996

1997

1998

(167) With the help of the parties’ estimates for capacity utilisation, the following picture emerges for CC

production in the last three years.

Table: Production in tonnes

SKW

Degussa

Lonza

Novartis

Japan

China

Total

Total, excluding Novartis

1996

1997

1998

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

(cid:151)

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[70 000(cid:151)80 000]

[90 000(cid:151)100 000]

[80 000(cid:151)90 000]

10.7.2001

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Official Journal of the European Communities

L 188/31

(168) Lonza’s estimates of the volume of the world market are
the
significantly lower
the parties,
difference arising solely from the estimate of
the
Chinese share of production, which Lonza puts at 10 %
and parties at around 30 %. On the basis of Lonza’s
estimate, the parties have an even bigger share of the

than those of

market. Moreover, China’s production is
between a number of firms.

divided

(169) On the basis of the parties’ estimates, the market shares

(in %) for the worldwide market are as follows:

1996

1997

1998

SKW

[< 20]

[< 20]

[< 20]

Degussa

[50(cid:151)60]

[50(cid:151)60]

[50(cid:151)60]

SKW + Degussa

[70(cid:151)80]

[60(cid:151)70]

[60(cid:151)70]

Lonza

[< 10]

[< 10]

[< 10]

(170) Using as a basis the data submitted by the parties, the
EEA market shares for 1998 are: Degussa [60(cid:151)70] %,
SKW [20(cid:151)30] % and Lonza [< 10] %. The picture
would be similar for the EEA plus Switzerland. Imports
from China still play no role here.

3.2. Novartis’s position as market leader for the

most important application of CC by volume
does not seriously reduce Degussa/SKW’s room
for manoeuvre on pricing

(171) The parties claim that

at

on

put

their

position

dominant

important

the most

customers

immediately

is Novartis’s

factor
preventing them from pursuing an uncontrolled pricing
the
policy
downstream market for herbicides. Novartis’s activities,
mainly on the US and South American markets, are said
to be a crucial factor for the price of CC in the field of
triazine herbicides (i.e. maize herbicides based on CC).
Any increase by Degussa/SKW in the cost of using CC
would
a
considerable competitive disadvantage vis-(cid:224)-vis Novartis,
which has an estimated [(cid:133)] % spare capacity. This
argument cannot be accepted. It may well be that, as
the parties claim, Novartis’s strong position on the
downstream market
imposes
certain limits on Degussa’s room for manoeuvre in
setting prices,
in so far as CC is sold to herbicide
manufacturers. This limit would coincide with a price
increase for the intermediate product CC which would
be so high that Degussa’s customers could no longer
manufacture and sell their herbicides at a competitive
price. However, such a limit on Degussa’s room for
manoeuvre on pricing, which would in any case be
confined to a specific group of customers, does not
stand in the way of
it has a
market-dominant position for CC. First of all, it must be
stated that,
in general, market domination is not
equivalent to complete freedom to set prices. Even a

for maize herbicides

the assumption that

monopoly must and will be guided to some extent by
the elasticity of demand from its customers. If prices go
beyond a certain level, the drawbacks of falling demand
may outweigh the benefits of the price increase. In the
case at hand, consideration must first be given to the
fact that CC accounts for only around one third of total
maize-herbicide production costs. Therefore, an increase
in the price of CC would not necessarily lead to a
similar increase for the finished product, nor have the
parties made any such claim to date. Furthermore, it has
not been demonstrated that price is the only parameter
of action open to maize-herbicide producers. Quality
and customer advice also play an important part here.
Nor should one rule out
the possible advantage of
having on offer a variety of products the effects of
which complement one another. It must therefore be
assumed that, in this area of application, which is the
most important by volume, buyers of CC do still have
room for manoeuvre to protect their own customers
from increases in the price of CC.

3.3. Novartis, the world’s biggest CC producer, uses
CC only in its own manufacturing processes
and is not a potential competitor on the world
market

(172) Although Novartis is the world’s biggest producer of
CC, it processes its entire production itself and sells no
In the Commission’s view, such
CC to third parties.
sales are unlikely in the future,
in view of Novartis’s
own special production set-up in the USA and the fact
that [(cid:133)].

3.4. Chinese production of CC is not in a position
to reduce Degussa/SKW’s room for manoeuvre
in setting prices

(173) The parties point

to the growing importance of CC
production in China. Besides supplying the domestic

L 188/32

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Official Journal of the European Communities

10.7.2001

market, various Chinese firms sell CC worldwide,
in
particular on the USA and EEA markets. Supplies to the
EEA are said to be sold at [(cid:133)] more cheaply. However,
to date only very small amounts of Chinese-produced
CC have reached Europe, so that its significance appears
to be less than described by the parties (Lonza estimates
the European market share at 1 %). The answers given
by customers point in the same direction. Only one
initially with a very small amount,
firm had tested,
whether
transport, availability and
quality associated with Chinese CC production could be
overcome. All the other firms, except one, which had
no detailed information, ruled out such supplies on the
grounds of
availability and
transport problems.

insufficient quality or

the problems of

3.5. The merger rules out a continuation of
customers’ second-supply policy

(174) The parties’ state that their sales are concentrated on a
few large customers, whose professional purchasing
departments would immediately seek out competitive
bids in the event of any price increase by suppliers. But
this statement disregards the fact that there would be no
competitors able to provide such supplies.

(175) This applies in particular to the statement that a large
proportion of customers apply a second-supply policy.
A merger would reduce the number of CC suppliers
from three to two. Lonza’s production capacities are so
low that it can be considered only as a supplementary
supplier in addition to Degussa and SKW, not as a
replacement supplier. Moreover,
if customers applied
such a strategy, this would not force Lonza to charge a
lower price than Degussa/SKW in order to make better
use of its capacity.

relevance whether the market in question is western
Europe or the world.

4. Conclusion

(177) For the reasons stated above, the Commission considers
that the proposed merger will lead to a strengthening of
a dominant position.

(178) The notified merger would lead to the creation or
strengthening of dominant positions, as a result of
which effective competition would be impeded in a
substantial part of the Community. Accordingly,
it is
incompatible with the common market and with the
operation of the EEA.

C. GAS

(179) The parties are also active in gas distribution and the
through affiliates
supply of gas to final consumers
which are either regional gas supply companies (VEBA:
Avacon) or suppliers to final consumers (VEBA: Avacon,
Schleswag, Gelsenwasser, Th(cid:252)ga; VIAG: Contigas,
Fr(cid:228)nkische Gas-Lieferungsgesellschaft, Gasversorgung
Oberbayern).

1. Relevant product markets

(180) The parties draw a distinction between the market
sectors for long-distance gas operations (import, storage
and transport and sale of natural gas to bulk buyers)
and the supply of gas to final consumers (as regional
supplier and local distributor), and submit these as the
relevant product markets.

3.6. Degussa’s dominant position will be

strengthened by the merger

(181)

(176) For

then,

these reasons,

it can be concluded that
Degussa already enjoys a dominant position in the
market
for CC. The merger would strengthen this
position permanently. In view of Lonza’s insignificant
market position and low capacity, the new entity would
achieve a virtual monopoly of
for CC,
irrespective of whether CC as a whole is regarded as the
relevant product market or whether a distinction is
made between powdered CC and molten CC, as the
latter is manufactured only by Degussa. Nor is it of any

the market

in particular

In a recent decision (42), the Commission investigated
the gas sector,
the conditions on the
markets for long-distance gas. It found that a distinction
should be drawn in the long-distance gas sector between
two relevant product markets (cid:151) supra-regional gas
transmission and regional gas transmission. The market
for supra-regional gas transmission includes the import
from foreign gas producers and its
of natural gas
subsequent
to
regional
gas
the supra-regional gas companies mainly
companies,
supply
electricity
distribution companies.
generators
Supra-regional
separate
this activity, which is
market. The peculiarity of

through overland pipelines
the

special-rate
and

transmission forms

industrial
gas

companies.

customers,

transport

regional

local

Like

gas

gas

a

(42) Case COMP/M.1383 (cid:151) Exxon/Mobil.

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L 188/33

of

their

above),

stations,

the original

boundaries were defined by the demarcated areas
reserved for each supply company. With the entry into
force of the new version of the Energy Industry Law
(see
agreements on market
boundaries have now expired. However, unlike in the
liberalisation has not yet led to any
electricity sector,
noteworthy structural changes on the German gas
markets. Under the EC Directive on the internal gas
market, the Member States must open up their markets
by 10 August 2000 (44). By that date, operators of gas
annual
irrespective
power
consumption, and final consumers who consume more
than 25 million m3 per year ((cid:145)eligible customers(cid:146)) must
be free to choose their suppliers. In all, at least 20 % of
the market must be opened up; this figure rises to 28 %
by 2005 and 33 % by 2010. The annual minimum
consumption threshold falls to 15 million m3 in 2005
and 5 million m3 in 2010. An associations agreement is
now being negotiated for the gas sector along the lines
regulating
of
electricity sector. The
through-transmission in the
negotiations
the
are
Industrieverband der Kraftwirtschaft, the Bundesverband der
deutschen Industrie and the Bundesverband der Gas- und
Wasserwirtschaft. Unlike in the electricity sector, where
there was already access
for
competition in through-transmission,
these important
prerequisites for competition have not yet been met in
the gas
supply areas.
agreement on a draft
According to the parties,
associations agreements should be reached in the first
half of 2000, although the associations have so far been
able to agree only on a rudimentary text, (cid:145)Eckpunkte der
Verb(cid:228)ndevereinbarung zum Netzzugang bei Erdgas (Key
points of an associations agreement on network access
for natural gas)(cid:146), dated 17 March 2000, which leaves
open many
practical
implementation of transmission.

sector outside the traditional

to lines and scope

concerning

agreement

conducted

voluntary

between

issues

being

the

the

the import of
countries.

undertaken by supra-regional gas companies, is that it
from
entails
producer
have
correspondingly long supply contracts with producers
and the installations required for import, long-distance
transport and services to customers (e.g. storage).

large quantities of gas

companies

These

(182) The Commission also considered as

the
relevant downstream market, gas supplies to the final
consumer (43). Here local gas distribution companies
supply business customers and households through a
system of narrow low-pressure pipelines.

separate

(183) Since investigations in this case have given no cause to
question this approach to dividing up the markets, it is
this division which is used below in the competition
assessment.

supplies

(184) The parties state that the activities of the two groups
to final
overlap only in the field of gas
consumers, so that
this should be regarded as the
relevant product market. However, in the course of the
procedure, the Commission received a submission that
the proposed merger would result in the strengthening
of Ruhrgas AG’s dominant position in the market for
supra-regional gas transmission. The grounds given for
this statement were that the merger would block off
important sales channels to Ruhrgas’s competitors in the
long-distance gas sector, as both VIAG and VEBA have
in Ruhrgas and are active on the
a direct
subsidiaries.
downstream market
Following the merger, Ruhrgas could permanently enjoy
in which VIAG group
better access
the
companies
competition
the
implications of the merger for Ruhrgas’s position on the
market for supra-regional gas transmission.

interest. Accordingly,
investigates

to customers
an
assessment

through

interest

their

held

also

2. Relevant geographic markets

(185)

In the past the Commission considered that gas markets
in Germany, regional markets whose
were, at

least

(186) All these facts suggest that the geographic market is
confined to the previously demarcated regional supply
areas in which each supply company also owns the
supply pipelines. In the Exxon/Mobil assessment (45), the
question of whether the market for supra-regional gas
still a regional one or already a
transmission was
national one was left open (cid:151) mainly because of the
expiry of the demarcation agreements.
In the present
case too, the exact extent of the gas markets can be left
open to debate, as the competition assessment remains
the same no matter which conceivable boundaries are
applied.

(43) Case COMP/M.1383 (cid:151) Exxon/Mobil.

(44) OJ L 204, 21.7.1998, p. 1.
(45) Case COMP/M.1383 (cid:151) Exxon/Mobil.

L 188/34

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3. Competition assessment

(1) Supply of gas to final consumers

its

affiliate Avacon. Among

(187) VEBA is active in Lower Saxony and adjacent areas
through
other
subsidiaries, Schleswag operates in Schleswig-Holstein,
Gelsenwasser operates
and
Mecklenburg-Western Pomerania and the affiliate Th(cid:252)ga
is active in Bavaria, through two of its own companies,
and has a holding in Gasbetriebe Emmendingen in
Baden-W(cid:252)rttemberg.

in Ost-Westfalen-Lippe

its

(188) VIAG controls the Bavarian gas distribution companies
Fr(cid:228)nkische Gas-Lieferungsgesellschaft and Gasversorgung
Ostbayern. It is also represented in south Germany, via
the affiliate Contigas,
fully owned
companies or majority holdings.

in the form of

(189) Taking the national market as a basis, VEBA had a
market share of [< 5] % in 1998 (sales of [35 to 40]
TWh according to the parties), assuming a market
volume of around 925 TWh (46). On the same basis,
VIAG’s market share in the Federal Republic as a whole
would have been only [< 5] % (sales of [10 to 15]
TWh). Given this aggregate market share of [5 to 10] %
and the large number of companies competing to
supply final consumers, the creation or strengthening of
a dominant position in this market sector is not to be
expected, taking the national market as a basis.

(190)

If the assessment is based on regional markets confined
to the supply areas of the gas supply companies, it is
true that the subsidiaries of VEBA and VIAG still enjoy
dominant positions in their supply areas.

(191) However,

the supply areas of

the Commission considers that neither of
these market positions would be strengthened by the
merger, as
the VEBA group
companies are for the most part located far away from
those of the VIAG group companies. It is only in the
Harz region that
this is not so. Here, VEBA-owned
Avacon and Th(cid:252)ga have minority holdings in individual
municipal undertakings whose supply areas border on
that of Gasversorgung Th(cid:252)ringen,
in which the VEBA
affiliate Contigas has a minority holding. But there are
no grounds for supposing that these minority holdings
amount to a controlling interest.

(46) Source: BEB business report 1998; BGW statistics.

(192) The merger between VEBA and VIAG will not therefore
strengthening of dominant
lead to the creation or
positions on the markets for the supply of gas to final
consumers.

(2) Supra-regional gas transmission

(193) Given its present company structure, VEBA cannot
exercise a dominant
influence on Ruhrgas, which is
formally controlled by the (cid:145)Bergemann Pool(cid:146). This term
is used to describe Bergemann GmbH (cid:151) or
its
shareholders, including an RAG subsidiary which holds
around 51 % of
its capital (cid:151) and Gelsenberg AG.
Gelsenberg AG has pooled its shares in Ruhrgas with
the shareholders of Bergemann GmbH. Because of this
pooling arrangement, Gelsenberg controls around 41 %
of
at Bergemann’s AGM. The
of
Bergemann’s own shareholders are reduced accordingly
in so far as voting in Ruhrgas is concerned; RAG’s share
of votes falls to 30 %. However, Bergemann GmbH plus
Gelsenberg (the Bergemann Pool) decides on the
exercise of voting rights at the Ruhrgas AGM.

votes

votes

(194) The majority requirements in the Bergemann Pool are
laid down in Article 7 of Bergemann GmbH’s
shareholders’ agreement, which provides that decisions
relating to voting at the AGM of an affiliated company
require a qualified majority when a qualified majority is
necessary in that affiliated company. As a rule,
the
Ruhrgas AGM takes decisions by a simple majority, save
where the law or the articles of association provide
otherwise (Article 19 of the articles of association). This
means
that, on account of Bergemann GmbH’s
shareholder structure, changing majorities are possible.
There are therefore no grounds for considering that
VEBA enjoys sole or joint control of Ruhrgas, whether
directly or indirectly.

(195)

consumers,

In order to assess the importance from a competition
angle of VIAG’s participation in companies supplying
final
the Commission also investigated
VEBA’s position. Even before the merger, VEBA had
holdings both in Ruhrgas and in suppliers to final
consumers.

(196) The Commission’s investigations show that, at least in
1998, the gas supply companies operating in Germany
in the final consumers market obtained their gas from
the company in whose traditional supply area they were
it
located. The Commission therefore considers that

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Official Journal of the European Communities

L 188/35

makes no difference whether the public utility supplying
final consumers is a company in which VEBA has a
holding. Where such companies are located for example
in the former demarcation area reserved for Thyssengas,
they have also (cid:151) as far as one can see (cid:151) obtained the
gas they need from Thyssengas, under supply contacts
extending over more than 10 years. Thus, because of
the demarcation agreements, alternative gas suppliers
found it difficult in the past to gain access to companies
serving final consumers which did not operate in their
supply area. In the time since the agreements expired
the position has remained basically unchanged. Where
alternative gas suppliers have succeeded in winning
customers, these are supplied via spur lines linked to the
suppliers’ own pipelines. Evidence of competition in the
form of transit arrangements is so far lacking. Where
VEBA had an equity participation in a municipal
undertaking supplying final consumers, Ruhrgas did not
derive any discernible advantage from it vis-(cid:224)-vis its
competitors (other than the traditional suppliers in the
supply area). When asked by the Commission, some of
the companies in which VEBA has a holding and which
operate in the former demarcation area of Ruhrgas said
they obtained gas for sales to final consumers from
such as WINGAS GmbH,
Ruhrgas’s
regardless of VEBA’s holding. Even regional
supply
companies in which Ruhrgas has a direct holding have
in the past obtained supplies from WINGAS.

competitors,

In these circumstances there is insufficient evidence to
suggest that gas suppliers in which VEBA has a holding
are closed off from Ruhrgas’ competitors because of the
links between VEBA and Ruhrgas. This assessment is
based on an assumption that the geographic market in
which Ruhrgas operates
former
demarcation area. If it is assumed that the market is
actually larger
similar
(e.g. on a national
considerations apply and concerns about competition
are equally unjustified.

covers only

scale),

its

Community of 18 April 1951 and is thus subject to
(see Case COMP/ECSC.1321 (cid:151)
special proceedings
VEBA/VIAG). The present proceedings are concerned
with the distribution of other product groups (tubes,
bright steel, wire products, reinforcing steel, roofing and
wall products, aluminium and non-ferrous metals).

1. Relevant product market

(200) Steel distribution forms a separate product market from
the manufacturing of steel products and the direct
selling of them by the manufacturers (47).

(201) Furthermore,

into

the market

agency
and

distribution,
non-stockholding

is a particular distribution channel

for the distribution of steel
products can be broken down by type of distribution,
stockholding,
i.e.
distribution.
Streckengesch(cid:228)ft
Streckengesch(cid:228)ft
in
Germany, whereby the final purchaser concludes a
contract with the trader but
the goods ordered are
delivered directly by the producer to the final purchaser.
The precise market definition can be left open since no
competition concerns arise with respect to any of the
possible market definitions.

(202)

In accordance with previous Commission decisions, the
most widely sold steel products must be divided into
separate product markets (48). In this case the product
groups are tubes, reinforcing steel, bright steel, wire
products, roofing and wall products, non-ferrous metals
and aluminium.

4. Conclusion

(203)

is not expected that dominant positions on the
supplies
consumers or
transmission will be created or

It
market
for
supra-regional gas
strengthened.

to final

gas

a

previous

decision (49),

the market

tube. However,

In
tube
Commission
distribution was further subdivided according to the
type of
investigation
the vast
conducted by the Commission showed that
majority of customers and competitors did not consider
such a subdivision to be appropriate. It can be left open
as to whether the individual types of tube, in this case,
commercial, boiler, structural and precision tubes, form
separate product markets since no objections to the
planned merger arise on competition grounds on any of
the possible markets.

(197)

(198)

D. STEEL DISTRIBUTION

(199) The business activities of

include steel
the parties
distribution,
in which VEBA is active via the Interfer
group, part of the Stinnes group ((cid:145)Stinnes(cid:146)), and VIAG
via its
subsidiary Kl(cid:246)ckner & Co. AG ((cid:145)Kl(cid:246)ckner(cid:146)).
Distribution of rolled steel products (flat and long steel
products), stainless steel, hot-rolled wide strip, wire rod
and semi-finished products falls within the scope of the
and Steel
Treaty

the European Coal

establishing

of

Case

1994,

(47) Decision

21 December

IV/M.484 (cid:151)
Krupp/Thyssen/Riva/Falck/Tadfin/AST; decision of 20 August
1996, Case IV/M.760 (cid:151) Kl(cid:246)ckner/ARUS; decision of 4 February
1999, Case IV/M.1329 (cid:151) Usinor/Cockerill Sambre; decision of 7
April 1999, Case IV/M.1369 (cid:151) Thyssen Handel/Mannesmann
Handel.
(48) Decision

IV/ECSC.1268 (cid:151)
Usinor/Cockerill Sambre; decision of 7 April 1999, Case
IV/ECSC.1292 (cid:151) Thyssen Handel/Mannesmann Handel.

1999, Case

February

of

4

(49) Decision of 7 April 1999, Case

IV/M.1369 (cid:151) Thyssen

Handel/Mannesmann Handel.

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2. Relevant geographic market

(204)

In accordance with previous decisions (50), it is assumed
that the relevant geographic markets for the distribution
of steel products are at
least national markets. The
investigation of this case gave no reason to suppose any
differently. It is, however, unnecessary to clarify whether
the markets extend beyond national markets, since the
merger gives rise to no competition concerns with
respect to any of the possible definitions.

3. Competition assessment

(205) The

in

are

active

parties

stockholding

and
Streckengesch(cid:228)ft distribution only, and not
in agency
distribution or non-stockholding distribution. There is
no overlapping of
regards wire
products since Stinnes has no turnover for this product
group.

their activities as

(206) The parties operate principally in Germany and only to
a negligible extent in other Member States. This applies
in particular to Stinnes, since the firm’s market share
outside Germany is at most
the entire
market for the supply of steel in each Member State and
it does not deal
in aluminium or non-ferrous metal
outside Germany. The activities of the parties overlap in
Belgium, France, the United Kingdom, the Netherlands,
Austria and Spain only, where their combined share of
the entire market for the supply of steel is in each case
less than 7 %.

[< 10] % of

(1) Tubes

(207) The parties have a combined market share on the total
German market
for tube stockholding distribution of
[< 20] % (Stinnes: [< 10] %; Kl(cid:246)ckner: [< 20] %). If the
tube distribution market is broken down by tube type,
the combined market share of the parties is [< 20] % for
commercial
Kl(cid:246)ckner:
(Stinnes:
[< 10] %), [< 20] % for boiler tubes (Stinnes: [< 20] %;
Kl(cid:246)ckner:
tubes
(Stinnes: [< 10] %; Kl(cid:246)ckner: [< 20] %) and [< 30] % for
precision tubes (Stinnes: [< 20] %; Kl(cid:246)ckner: [< 10] %).

[< 30] % for

[< 10] %),

structural

[< 10] %;

tubes

(208) As

regards Streckengesch(cid:228)ft distribution of

in
Germany, the parties have a combined market share of
[< 10] % of the market as a whole (Stinnes: [< 10] %;

tubes

(50) Decision of 4 February 1999, Case IV/M.1329 (cid:151) Usinor/Cockerill
Sambre; Case IV/M.1369 (cid:151) Thyssen Handel/Mannesmann Handel.

If

is

entire

[< 10] %).

tube market

[< 10] % for

Kl(cid:246)ckner:
is
the
subdivided into tube types, the parties’ combined market
share
(Stinnes:
[< 10] %; Kl(cid:246)ckner: [< 10] %), [< 10] % for boiler tubes
(Stinnes:
[< 10] % for
structural tubes (Stinnes: [< 10] %; Kl(cid:246)ckner: [< 10] %)
and [< 20] % for precision tubes (Stinnes:
[< 10] %;
Kl(cid:246)ckner: [< 20] %).

[< 10] %; Kl(cid:246)ckner:

commercial

[< 10] %),

tubes

(209) On the tube distribution market

the parties

face
numerous powerful competitors, some of which are
vertically integrated,
such as Carl Spaeter GmbH,
Hoberg & Driesch GmbH & Co., L(cid:246)we & Jaegers GmbH,
R(cid:246)hren- und Stahllager GmbH & Co. KG, Salzgitter
Stahlhandel GmbH and Thyssen Schulte GmbH. Given
this market structure,
is unlikely that a dominant
position would be created for the parties.

it

(2) Reinforcing steel

(210) On the German market for stockholding distribution of
reinforcing steel, the parties have a combined market
share of [< 10] % (Stinnes: [< 10] %; Kl(cid:246)ckner: [< 10] %),
and for Streckengesch(cid:228)ft, of [< 30] % (Stinnes: [< 30] %;
[< 10] %). The merger would thus neither
Kl(cid:246)ckner:
create nor strengthen a dominant position as regards
reinforcing steel.

(3) Bright steel

(211) The parties’ combined share of

is

share

the (cid:151) presumed (cid:151)
overall German market for the distribution of bright
steel
at
[< 20] %, with Stinnes’s market
[< 10] %. The parties estimate the volume of the market
for stockholding distribution of bright steel to be about
180 000 tonnes. Against this background, the parties’
aggregate market share comes to [< 30] % (Stinnes:
[< 10] %; Kl(cid:246)ckner: [< 20] %). As regards Streckengesch(cid:228)ft
distribution of bright steel, where the volume of the
market has been put at 145 000 tonnes, Kl(cid:246)ckner has a
market share of about [< 20] %, while Stinnes has a
share of
share of (cid:151)
depending on how the market is defined (cid:151) at most
20 % is, given the large number of partly vertically
integrated competitors, not
a
dominant position for the parties.

[(cid:133)]. The aggregate market

suited to creating

(4) Roofing and wall products, aluminium and non-ferrous

metals

roofing and wall products

(212) Stinnes has only a marginal presence in the distribution
and aluminium in
of
tonnes.
Germany, with sales of well below [(cid:133)]
Kl(cid:246)ckner,
in the
scarcely present
is
distribution of non-ferrous metals (approximately [(cid:133)]

its part,

for

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therefore has

in 1998). Stinnes

tonnes
a barely
measurable share of the market for the distribution of
roofing and wall products, as has Kl(cid:246)ckner
in the
market for the distribution of non-ferrous metals. At all
the aggregate market shares of Kl(cid:246)ckner and
events,
irrespective of how the
Stinnes do not exceed 15 %,
markets are defined. The merger would therefore neither
create nor strengthen a dominant position in the above
areas also.

4. Conclusion

(213)

the extremely small market shares and
In view of
market share combinations in some cases and the keen
competition faced by the parties, especially in Germany,
the planned merger would give rise to no competition
concerns in the area of steel distribution.

V. SUMMARY

(214)

In the light of the above, the proposed merger would in
its notified form lead to the creation or strengthening of
dominant positions on the markets for electricity and
chemicals, and would, accordingly, be incompatible with
the common market and with the operation of the EEA.

VI. COMMITMENTS OFFERED BY THE NOTIFYING
PARTIES

A. ELECTRICITY

1. Commitments

(215) To allay the Commission’s concerns

regarding the
proposed merger, VEBA and VIAG have made the
following commitments.

(consisting

The parties undertake to divest their shareholdings in
VEAG. VEAG is owned 26,25 % by VEBA and 22,5 %
by VIAG. RWE also has a 26,25 % shareholding and
Energiebeteiligungs-Holding
of BEWAG,
HEW, VEW and EnBW) has a 25 % shareholding. The
parties also undertake to divest their shareholdings in
the east German lignite producer LAUBAG and to
transfer the rights which the latter owns in the mining
of
the
shareholdings in VEAG. VEBA holds 30 % of the shares
BBS
in
Braunkohle-Beteiligungsgesellschaft mbH holds
the
remaining 55 %. BBS is in turn owned 18,2 % by
Energiebeteiligungs-Holding, 71,8 % by Rheinbraun AG
(which belongs to RWE) and 10 % by RWE Energie AG.

east German lignite

acquirer of

LAUBAG,

to the

VIAG

15 %.

and

include

load distribution [(cid:133)]. This

purchase electricity at the market price from VEAG to
the extent that it is not already purchased through the
parties’ east German regional suppliers TEAG, e.dis and
(formerly EVM). Up until 31 December
Avacon-Ost
2003 the purchasing
the
guarantee will
obligation to purchase 100 % of the reference quantity
of the abovementioned regional suppliers [(cid:133)] and also
correspond to the
is
equivalent to a guaranteed take of approximately [(cid:133)]
TWh. As
from 1 January 2004 the purchasing
obligation will relate to a quantity 10 % smaller than the
quantity taken [(cid:133)]. In the event of an increase in sales
by the regional suppliers compared with sales in [(cid:133)],
the parties will offer to procure [a larger part] of this
additional quantity from VEAG. In the event of a loss of
sales by the regional suppliers, the purchasing obligation
will not be reduced. A price of [corresponding roughly
(energy and network
to the current market price]
component) will
the
market price up until 31 December 2001. From 1
January 2002, the [market price] will form the basis of
the price of the energy component [(cid:133)].

in principle be guaranteed as

(217) The parties undertake to divest their shareholdings in
BEWAG. VIAG holds 26 % of the capital and 28,7 % of
the voting rights, while VEBA holds 23 % of the capital
the latter being,
the voting rights,
and 23,8 % of
however, limited to 20 % of the voting rights by virtue
of a commitment given by VEBA to the Federal Cartel
Office on 17 September 1997. A further 26 % of the
capital and 28,7 % of
the voting rights are held by
Southern Energy Holding.

(218) VIAG undertakes to divest the shares it holds directly
and indirectly in VEW and RWE should the merger
between RWE and VEW be completed before the
divestment of its shareholding in VEW. VIAG currently
has a direct shareholding of 11,13 % and in addition it
has a 30 % shareholding through its subsidiary Contigas
in a ballast company, Energie-Verwaltungsgesellschaft
(EVG), which holds a further 24,7 % of the shares.

(219) VEBA undertakes to divest

its direct shareholding in
HEW. VEBA indirectly holds 15,4 % of the capital and
14,2 % of the voting rights in HEW. It also has a 15,4 %
holding in HEW through the Swedish company
Sydkraft, in which it has a 17,6 % interest.

(220) VEBA undertakes to terminate its existing alliance with
RWE within Rheinische Energie AG (Rhenag). Rhenag is
owned 54,1 % by RWE and 41,3 % by VEBA.

(216) The parties undertake furthermore to guarantee VEAG’s
electricity sales as follows. From the time the merger is
cleared up until 31 December 2007, the parties will

(221) The parties undertake, moreover, to amend, within one
month of their merger being cleared, their charges for

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Official Journal of the European Communities

10.7.2001

network use in Germany in such a way that the price
component for the national T-component comes to 0
Pf/kWh. If RWE/VEW have already issued a waiver by
the time the VEBA/VIAG merger is cleared, the parties
undertake to follow suit forthwith.

their merger being cleared,

(222) The parties further undertake to indicate, within two
months of
the electricity
prices for special contract customers (re-distributors and
industrial customers) who are supplied in their own
network area at 110 kV and above, broken down by
network-use charge, energy price, metering/reading, etc.
(Law on renewable energy sources, law on cogeneration,
licensing agreements, turnover tax). In respect of special
contract customers who are supplied in their own
network area at the medium voltage level (20 kV), the
parties enter into this commitment as of 1 January
2001.

(223) The parties undertake to amend, within one month of
their merger being cleared,
the
supplying of balancing energy in such a way that either
the price per kilowatt is levied on a daily basis or only
kilowatt-hour rates are charged.

their charges

for

(224) The parties further undertake to make available to the
interconnector on the German-Danish border additional
capacity amounting to 400 MW. VEBA holds on the
overland route from Denmark to Germany, inter alia, a
proportionate transport right amounting to 400 MW
out of a basic transmission capacity of 1 200 MW. In
order that it might be able to offer outsiders additional
transmission capacity amounting to 400 MW, VEBA
undertakes to conclude an agreement with Eltra and
Statkraft by which:

(cid:151) Eltra buys back the 400 MW transport right,

(cid:151) the part of the 400 MW agreement signed with
is converted into a financial agreement

Statkraft
without affecting its value,

so that third parties can use this capacity as from 1
January 2001.

regards

(225) The commitments also contain the following provisions
(see section VIII.4. of the commitments on electricity).
As
their
commitment
shareholdings in VEAG and LAUBAG, the Commission
and VEBA/VIAG are agreed that this commitment will
be deemed to be fulfilled only if RWE/VEW have met an
obligation imposed on them by the Federal Cartel Office

divest

the

to

in proceeding B 8 (cid:151) 309/99 according to which they
must divest the shares and voting rights they hold in
VEAG and in LAUBAG and the lignite mining rights
they hold in the new L(cid:228)nder, and if the Federal Cartel
Office has imposed obligations to safeguard VEAG’s
sales and preserve that company’s liquidity and these
obligations have been met. As regards the commitments
in respect of the Associations Agreement (see section
VI.1 to 3 on electricity),
the Commission and
VEBA/VIAG are agreed that these commitments will be
deemed to be fulfilled only if the Federal Cartel Office
has imposed corresponding obligations in proceeding B
8 (cid:151) 309/99 and these obligations have been met.

2. Assessment of the commitments

(226) The proposed package of commitments, linked as it is
to the abovementioned commitments given by RWE to
the Federal Cartel Office, ensures that no dominant
consisting of VEBA/VIAG and RWE or
duopoly
RWE/VEW is created on the German market for the
supply of electricity at
the interconnected level. The
commitments also ensure that the major corporate links
between the members of the duopoly are severed. This
the factors that might encourage
eliminates one of
parallel behaviour. Further commitments concerning the
inter alia, competing
divestment of shareholdings to,
interconnected companies
increase the number and
significance of competitors operating independently of
commitments
RWE/VEW.
VEBA/VIAG and
concerning market conditions and access to the German
market
improve the initial position for existing and
potential competitors of both groups.

The

(227) The German market for the supply of electricity at the
interconnected level was already highly concentrated
before the merger. The further increase in the level of
concentration resulting from the merger would mean
the two groups of enterprises would no longer
that
another. Underlying
compete
market conditions such as the homogeneity of
the
product, the transparency of the market and the limited
growth in demand likewise favour the parallel behaviour
that is to be expected with a fair degree of certainty
from the new market structure, of which the corporate
links between the two blocks form part.

effectively with one

(228) The divestment of the shareholdings in VEAG means,
therefore, that the most important link between RWE
and VEBA/VIAG will be dissolved. As indicated above
the situation with regard to VEAG has
(recital 64),

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contributed to the two blocks having a common interest
in peaceful parallel behaviour. It has meant in particular
that the west German interconnected companies, and
RWE, VEBA and VIAG especially, have
stopped
competing in VEAG’s traditional supply area (i.e. the
new L(cid:228)nder, where VEAG’s transmission network is
situated). Looked at from this angle, by divesting their
shareholdings in VEAG the two blocks lose an essential
tool with which to keep the eastern part of Germany
free of competition, a tool which could at the same
time contribute to maintaining the balance in the West
and ultimately therefore throughout the entire German
market.

(233) VEAG will at
the same time, as a result of
the
the shares held by VEBA/VIAG and
divestment of
RWE/VEW, become an independent supplier on the
its extensive
market which,
inter alia, by reason of
traditional
the
potential for limiting the parties’ and RWE’s freedom of
manoeuvre by giving them stiff competition. The other
commitments take account of the fact that VEAG is not
yet vertically integrated either on the supply side or on
the demand side. They ensure that, despite this, VEAG
can operate from the outset as a serious competitor.

supply area in the new L(cid:228)nder has

(229) The divestment by VEBA/VIAG and RWE of

their
shareholdings in VEAG means at the same time that
VEAG becomes an independent competitor. VEAG’s
competitive potential
is no longer to be included in
those of the two blocks. The divestment signifies in fact
the level of concentration in the
that, post-merger,
market will
same. Although
following the VEBA/VIAG merger VEBA’s market share
will
increase by 12,2 % (excluding the BEWAG and
VEAG positions), VEAG occupies a similar market
position to VIAG with a share of 12,1 % and will, once
the commitments have been fulfilled, operate on the
market as an independent supplier.

remain basically the

(234) There is a need first of all for guaranteed access to the
primary product, lignite, which is obtained mainly from
LAUBAG. The linking of the disposal of the shares in
VEAG and LAUBAG,
including the mining rights
needed for the mining of lignite, to one and the same
acquirer
the generation of
safeguards
electricity by VEAG.

accordingly

(235) On the demand side,

the quantitative purchasing
guarantee safeguards a large but declining part of
VEAG’s current sales to regional suppliers up until 31
December 2007. Up until 31 December 2004 the
purchasing guarantee covers approximately [(cid:133)] % of
current electricity sales.

(230) LAUBAG is

the largest

lignite producer

in eastern
Germany and as supplier to VEAG forms an economic
unit with the latter. In order that VEAG might attain its
full significance as an operator independent of the two
blocks, it is essential that control of LAUBAG should be
in the hands of this new independent entity.

in the

(231) Through its shareholding in Rhenag, VEBA has an
interest
subsidiary
success of
commensurate with its holding. VEBA is represented on
Rhenag’s supervisory board and therefore has privileged
access to information about the corporate strategy of a
subsidiary of the other member of the duopoly.

this RWE

(236) The Federal Cartel Office will

in proceeding B 8 (cid:151)
309/99 impose corresponding supplementary conditions
with a view to safeguarding sales (otherwise the present
commitments are to be deemed not met). A sufficient
proportion of current sales is therefore guaranteed for a
number of years to come. And that is not to mention
the present contractual supply relationships with other
to the
regional
suppliers which do not belong
VEBA/VIAG or RWE/VEW groups. Sales
to these
regional suppliers, which include ESAG and WEMAG,
and to the interconnected power company BEWAG,
which itself has hardly any base-load generating
capacity, extend VEAG’s sales basis still further. VEAG is
free, moreover,
business
enter
relationships with local suppliers or industrial special
customers.

direct

into

to

(232) The divestment of

the abovementioned shareholdings
eliminates the essential corporate links between the two
groups of companies. There are other mutual interests
in the form of the holding in STEAG and in municipal
electricity undertakings
in which both Envia in its
capacity as a RWE subsidiary and the VEBA group
company Th(cid:252)ga have a minority interest. But these links
are of somewhat lesser importance from the point of
view of the risk of parallel behaviour on the part of the
two blocks at the interconnected level. STEAG is in fact
an electricity producer for RWE and,
is
majority-owned by RAG.

furthermore,

(237) The safeguarding of sales for a period of seven years
with a progressive reduction starting in 2004 is in the
the operators
Commission’s opinion, and in that of
whose views were sought, sufficient in order to help
VEAG through the difficult initial period. Over the next
seven years VEAG’s position will still be weak owing to
the scale of its commitments, these being predominantly
in power-station capacity.
in the area of

investment

L 188/40

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Official Journal of the European Communities

10.7.2001

VEAG’s power stations are, however, among the most
modern in Europe and will provide VEAG with a
low-cost production base once the debt burden has
been reduced and as depreciation increases.

sales

to divest

by VEAG and

(238) These commitments appear reasonable and adequate as
a means of safeguarding the conversion of lignite into
by VEAG. The
electricity
commitment
the shares in VEAG and the
supplementary commitments mean, taken as a whole,
that that link between the two blocks which gives rise
to the greatest risk of parallel behaviour is cut. At the
same time, there comes into being a significant new
competitor which can place limits on the two blocks’
pricing behaviour. Hence, although the merger between
from the
VEBA and VIAG removes one operator
market,
further
a
position
independent
comparable to that of VIAG minus its holdings in
BEWAG and VEAG is placed at the market’s disposal.
Since VEAG has an up-to-date stock of power stations
facilities via the interconnectors between
and import
new
and
Germany
opportunities for electricity traders.

operator with

commitments

a market

Poland,

creates

thanks

also

this

the

to

(239) The commitment

to divest

the shares in VEW will
prevent VEBA/VIAG from gaining an insight into the
corporate strategy of this large interconnected company
or into that of the other duopoly member RWE.

(240) The divestment of the shares in BEWAG, which VIAG
together with Southern Energy,
currently controls
likewise makes
the company into an independent
supplier on the market for the supply of electricity at
the
the
divestment of BEWAG, like the divestment of the shares
in VEAG, reduces VIAG’s competitive potential, which
passes during the course of the merger to VEBA.

interconnected level. At

same

time,

the

last

this

the position of

(241) The divestment of the direct shareholding in HEW also
strengthens
interconnected
company in which the duopolists have a shareholding
as an independent supplier. The fact that VEBA has,
through its minority interest in the Swedish company
Sydkraft, a minority interest in HEW does not alter this
competition assessment. The indirect minority interest
does not give any entitlement to representation on the
boards of HEW, which is controlled jointly by the
Swedish company Vattenfall and the city of Hamburg.
The minority shareholder’s position does not therefore
afford any privileged access to information or any
leverage over HEW.

(242) The divestment commitments accordingly improve the
structure of the market for the supply of electricity at

a

they

create

the interconnected level. They sever the most important
corporate links between the members of the duopoly,
and hence those links which are most relevant from the
point of view of their competitive position. At the same
time
competitor with considerable
potential, namely VEAG, and other competitors are
removed from VEBA/VIAG’s
influence.
Through the divestment of shareholdings which enable
a dominant influence to be exercised over companies at
the same market stage, the degree of concentration of
the market, which would increase following the merger,
actually decreases.

sphere of

by

the

The

two

their being present

(243) The overall conditions of competition for the supply of
electricity at the interconnected level are improved still
blocks
commitments.
further
VEBA/VIAG and RWE/VEW currently enjoy certain
in both
advantages by dint of
trading zones set up by Associations Agreement
II.
VEBA/VIAG and RWE/VEW can thus offset electricity
supplies and hence avoid the obligation to pay the
T-component. Other interconnected companies whose
supply areas are in only one trading zone and electricity
traders do not have such scope for offsetting supplies
within the group but instead have to seek out individual
other
opportunities
electricity suppliers. As a result of VEBA/VIAG and
RWE/VEW renouncing payment of the T-component,
competitors of
the two blocks will no longer suffer
from this disadvantage. They will henceforth be able to
supply
of Germany,
corresponding to the interconnected supply areas of
VEBA/VIAG and RWE/VEW, without having to pay the
T-component.
It is likely, moreover, that waiving the
T-component in so large a part of Germany will lead to
its becoming a dead letter in the other network areas.

throughout most

supplies with

electricity

offsetting

for

(244) The obligation to break
network-use

to

energy

down electricity prices
according
price,
charge,
metering/reading, etc. will greatly increase transparency
in the case of through-transmission. The showing of
cost items separately inhibits any cross-subsidising of
energy prices by companies which also own networks.
The separate showing of network and energy prices in
particular makes it easier to compare the pricing of the
parties and of RWE/VEW with that of other operators
who do not own networks. This makes for freer access
by the latter suppliers in particular to all market stages
and at the same time counteracts any consolidation of
the parties’ market position at the interconnected level.

10.7.2001

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Official Journal of the European Communities

L 188/41

(245) With regard to customers

supplied outside

their
network area, VEBA/VIAG will ensure that the relevant
network operator furnishes the corresponding data to
them in broken-down form so that they can be suitably
broken down for these customers also.

(246) As transmission network operators,

energy

supplying

the parties enjoy
further advantages by reason of the fact that they supply
balancing energy. Balancing energy can generally be
provided only by transmission network operators within
their balancing areas or by suppliers operating a power
station in the balancing area to which electricity is
supplied. The price charged by transmission network
under
for
operators
balancing
Associations Agreement
is, according to market
II
operators, considerably higher than under Associations
Agreement I and exceeds by a significant margin the
cost of providing the energy. For example, if the 5 %
the amount
tolerance band is exceeded just once,
charged is based on the assumption that it was exceeded
for one month. As a result of the offer to calculate, for
the supply of balancing energy, either the price per
kilowatt on a daily basis or the kilowatt-hour rate, the
price calculation reflects more closely the costs arising
from recourse
energy. VEBA/VIAG
balancing
therefore no longer have, in the event of consumption
fluctuations, any appreciable advantage over competitors
who do not number among the transmission network
operators.

to

(250) The parties undertake to offer for sale a company to
which SKW Trostberg’s production plants for making
hydrocyanic acid and CC will be transferred.
If no
purchaser comes forward within a period of [(cid:133)] from
the date of clearance of the merger (phase I), the parties
will offer for sale, as an alternative, a company to which
only the CC production plants will be transferred,
hydrocyanic
with
production
VEBA/VIAG (phase II). If after a total of [(cid:133)] from the
date of clearance of the merger no purchaser has been
found for either alternative, the parties will offer for sale
as a further alternative the CC business minus the
production facilities
III). The business will
comprise the entire commercial know-how for CC,
including all customer lists and orders on hand. The
increase in capacity in phases II and III will, however,
require the Commission’s consent.

remaining

(phase

acid

a

for

sale

company to which the
the

(251) The parties have also undertaken, during an initial phase
lasting [(cid:133)] from the date of clearance of the merger, to
sodium
offer
dicyanamide
entire
the
commercial
manufacture and sale of sodium dicyanamide will be
transferred. If no purchaser is found within this period,
the sodium dicyanamide business will as an alternative
be offered for sale together with all customer lists and
orders on hand.

production
and

know-how for

technical

plant

and

(247) The interconnector on the German-Danish border has a
capacity of 1 200 MW, of which 700 MW are reserved
by contract
for VEBA. The remaining 500 MW are
currently sold by auction to anyone who wishes to buy
them. Because of the much lower price of electricity in
Scandinavia, the German-Danish interconnector is one
of
to experience capacity
bottlenecks. The releasing of 400 MW facilitates access
the
for
favourable price level
the
German
pressure
competitive
interconnected companies.

from Scandinavia and, because of
increases
in Scandinavia,

the few interconnectors

imports

large

the

on

(248) The commitments

thus

improve conditions on the
market for the supply of electricity at the interconnected
level in such a way that all market operators are placed
on a comparable footing.

B. CHEMICALS

1. Commitments

(249) To allay the Commission’s concerns about the proposed
merger as regards the markets for cyanuric chloride (CC)
and sodium dicyanamide,
the parties have made the
following commitments.

(252) Where a purchaser is dependent on supplies of either
hydrocyanic acid, chlorine cyanide, CC or
sodium
dicyanamide, deliveries to it will be guaranteed for a
period of [(cid:133)] years. Reductions will be made especially
in the event of a statutory ban on hydrocyanic acid
in the quantities of
production or of drastic cuts
upstream products, CC or sodium dicyanamide procured
by the purchasers.

2. Assessment of the commitments

(253) The proposed commitments eliminate in one way or
another
the overlapping which the merger would
otherwise have caused on the markets for CC and
sodium dicyanamide. They are
likely to
prevent
the strengthening of dominant positions on
these markets.

therefore

(254) Ultimately the commitments offered in respect of CC
ensure that potential customers have alternative sources
of supply which can make at least as big a contribution
when it comes to supplying the market as SKW does
now.
acid
production unit together with the plant for processing
the acid into CC would be the best way of ensuring that
Degussa continues to have a viable competitor because

hydrocyanic

Transferring

entire

the

L 188/42

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Official Journal of the European Communities

10.7.2001

that competitor

it guarantees
the greatest possible
degree of independence. It is therefore to be preferred to
the other solutions proposed in the commitments.

second subparagraph,
sector),
concerning
compatible with the common market and the EEA Agreement.

electricity

the

(255) The divestment of the sodium dicyanamide production
plant or of the sodium dicyanamide business rules out
any cooperation between SKW Trostberg and its
potential
any
strengthening
position. The
staggering of the commitments over time enables an
appropriate solution to be found should the sale of the
assets which are first
in line for divestment prove
impossible,

competitor Degussa
SKW’s

dominant

hence

and

of

Article 2

This Decision is addressed to:

VEBA Aktiengesellschaft
Benningsenplatz 1
D-40474 D(cid:252)sseldorf,

VIAG Aktiengesellschaft
Briennerstra(cid:223)e 40
D-80333 M(cid:252)nchen.

HAS ADOPTED THIS DECISION:

Article 1

Done at Brussels, 13 June 2000.

The notified merger between VEBA AG and VIAG AG is, on
condition that the commitments given by the notifying parties
as set out in the Annex to this Decision are fulfilled (with the
the commitment referred to in section VI.2,
exception of

For the Commission

Mario MONTI

Member of the Commission

10.7.2001

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Official Journal of the European Communities

L 188/43

ANNEX

EC MERGER CONTROL PROCEEDING VEBA/VIAG

COMP/M.1673

COMMITMENTS IN RESPECT OF ELECTRICITY

I. VEAG/LAUBAG

VEAG is owned 26,25 % by VEBA (PE) and 22,5 % by VIAG (BAG). RWE also has a 26,25 % shareholding and
Energiebeteiligungs-Holding (consisting of BEWAG, HEW, VEW and EnBW) has a 25 % shareholding.

LAUBAG, a lignite producer, is one of VEAG’s suppliers. VEBA (PE) holds 30 % of the shares in LAUBAG, and VIAG
(BAG) 15 %. BBS Braunkohle-Beteiligungsgesellschaft (BBS) mbH holds the remaining 55 %. BBS is owned 18,2 % by
Energiebeteiligungs-Holding (consisting of BEWAG, HEW, VEW and EVS), 71,8 % by Rheinbraun AG (which is wholly
owned by RWE) and 10 % by RWE Energie AG. The mining interests which are leased to LAUBAG are co-owned by
LAUBAG’s west German shareholders in proportion to their holdings in LAUBAG. [(cid:133)]

1.

If the planned merger between VEBA and VIAG is granted clearance under the merger control legislation and goes
ahead, the parties undertake to divest all the shares they hold in VEAG and LAUBAG either themselves or through
affiliates to one and the same acquirer (see point (a) below) within the time limit specified at point (b). At the same
time as they divest their shares in LAUBAG, the parties will divest the lignite mining rights which either they or
their affiliates hold either to LAUBAG direct or to the acquirer of the LAUBAG shares.

If LAUBAG and VEAG merge before the shares in LAUBAG are divested, VEBA/VIAG undertake to dispose of the
resulting interests within the period specified at point (b) to the acquirer of the VEAG shares.

(a) The acquirer must be a viable existing or prospective competitor of VEBA, VIAG and RWE. It must be
independent of and unconnected with the three groups. Its financing must be assured in the long term and it
must have a track record which points to its being able to build up and develop the subject of divestment,
VEAG and LAUBAG, if necessary in already merged form, into an active force rivalling VEBA and VIAG at all
market stages. Any acquirer will have to have the Commission’s express prior approval. If the acquirer is a
consortium of several undertakings, each member of
the consortium will have to be approved by the
Commission in advance.
In accordance with the provisions of VEAG’s privatisation agreement, and in
particular Article 5(1) thereof, up until 30 June 2013 any complete or partial resale of the parties’ shares in
VEAG by way of a singular or universal transfer to third parties will require the prior approval of the
Treuhandanstalt or its successor, the Bundesanstalt f(cid:252)r vereinigungsbedingte Sonderaufgaben.

(b) Should the shares in VEAG and LAUBAG not be sold within [(cid:133)] of the merger being cleared, VEBA/VIAG
will irrevocably transfer the power of disposal over the subject of divestment to a trustee (known as the
divestment trustee) who will within a further [(cid:133)] effect the sale for the account of VEBA/VIAG according to
sound commercial principles [(cid:133)]. The divestment
to the same obligations as
VEBA/VIAG, especially when it comes to choosing the acquirer of the shares in VEAG and LAUBAG. He
should be the same person as is appointed by RWE/VEW in accordance with the obligations imposed in the
merger control proceedings before the Federal Cartel Office. He must be appointed within [(cid:133)] of
the
VEBA/VIAG merger being cleared. The choice of divestment trustee and of his mandate will have to be
approved in advance by the Commission. The divestment trustee will monitor compliance by VEBA/VIAG with
their divestment obligations in relation to VEAG/LAUBAG as entered into vis-(cid:224)-vis the Commission. He will
report to the Commission [at regular intervals] about the progress being made with the sale, participate in the
sales negociations and take a position on individual matters at the Commission’s request. He will make
suggestions to the parties to the sale as to how to speed up the process and will agree the list of potential
acquirers in good time with the Commission.

trustee will be subject

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The Commission may at any time during phase I ([(cid:133)] from the date of clearance of the VEBA/VIAG merger)
irrevocably transfer to the divestment trustee the power of disposal over the VEAG and LAUBAG shares which are
to be divested if the divestment of these shares within a period of [(cid:133)] is unlikely for reasons cited by the parties.
The parties will be heard before any such decision is taken.

The parties may apply to the Commission for an extension of the divestment periods, subject to their furnishing
proof [of exceptional circumstances beyond their control]. The Commission will then exercise its discretion in
deciding whether or not to allow such an extension, the total divestment period being limited to [(cid:133)]. Applications
for an extension must be submitted not later than one month before expiry of the relevant period.

2. Within one month of

their merger being cleared, VEBA/VIAG will renounce all rights arising under the

Bayernwerk/PE/RWE consortium agreement of 22 August 1990.

3. VEBA/VIAG undertake to appoint, within [(cid:133)] of their merger being cleared, in agreement with the Commission
another trustee (known as the security trustee). Exercise of VEBA/VIAG’s voting rights in VEAG and in LAUBAG
will be transferred to this security trustee, whose terms of reference must also be agreed with the Commission. In
exercising the voting rights transferred to him the security trustee will in principle be bound by his instructions.
Where measures are involved, however, which would result in a substantial financial burden being placed on
VEBA/VIAG, such as, for example, in the event of a capital increase, the trustee may exercise the voting rights only
in agreement with VEBA/VIAG. Within [(cid:133)] of clearance being granted, the members of the supervisory boards of
VEAG and LAUBAG appointed by VEBA and VIAG will resign apart from one representative on each board. [(cid:133)]
Once the shares in VEAG and LAUBAG have been divested, the remaining supervisory board members will also
resign. The new members of
the supervisory boards of VEAG and LAUBAG will be appointed forthwith,
VEBA/VIAG’s rights of proposal and voting rights being exercised by the security trustee. The newly chosen
supervisory board members may not also be members of the managing boards or employees of VEBA/VIAG or
RWE or of any company affiliated therewith. Members of the managing boards of VEAG and LAUBAG may
likewise not also be members of the managing boards or employees of VEBA/VIAG or of RWE or of any company
affiliated therewith. An exception will be made in the case of
the real property company BPR Energie
Gesch(cid:228)ftsbesorgung GmbH, Berlin.

4. Under a May 1999 loan agreement VEAG’s shareholders placed financial resources at VEAG’s disposal in order to
guarantee its liquidity. VEAG’s continued existence is therefore assured for the time being. VEBA/VIAG will give up
their special termination rights under the abovementioned agreement. [(cid:133)].

5. VEBA/VIAG declare that they are prepared to guarantee VEAG’s electricity sales as follows.

(a) To the extent that the corresponding purchases are not already effected through their east German regional
suppliers TEAG, e.dis and Avacon-Ost (formerly EVM), VEBA/VIAG will up until 31 December 2007 obtain
either themselves or through third parties electricity from VEAG at the market price (see point (c) below). The
guaranteed annual amount and its breakdown over the year will be determined by the purchases of the
regional supply companies [(cid:133)]. Up until 31 December 2003 the parties undertake to purchase 100 % of the
reference quantity of the abovementioned regional suppliers [(cid:133)]. In subsequent years, starting on 1 January
2004, the purchasing obligation will be reduced, irrespective of the rule at point (b), by 10 % a year compared
with the initial quantity [(cid:133)].

Quantities of electricity which VEAG supplies to the companies by way of balancing under the law on
renewable energy sources will not count towards the sales volumes promised here.

(b)

In the event an increase in sales by the abovementioned regional supply companies compared with sales in
1999, VEBA/VIAG will offer to procure [a larger part] of this additional quantity from VEAG. This additional
take will also be subject to the abovementioned adjustment. This rule will apply only to increases in those
areas in which the abovementioned east German regional supply companies currently operate their electricity
networks.

In the event of a loss of sales by the abovementioned regional supply companies, the above obligation will not
be reduced.

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Official Journal of the European Communities

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(c) Any shortfalls in the purchasing obligations will be added to the purchasing quota for the following quarter.

(d) The market price is defined as follows.

(i)

For the year 2000 and up until 30 June 2001, an electricity price (energy cost and network cost
component) of [corresponding roughly to the current market price] will be guaranteed. This electricity
price will also apply for six months after the shares in VEAG have been transferred to a third party, that is
to say for at least six months from the conclusion of the corresponding contract of acquisition, but at all
events not beyond 31 December 2001. The network cost component may, however, not be counted twice
by VEAG. The price of [corresponding roughly to the current market price] is accordingly to be adjusted
by the network cost component where corresponding costs of VEAG’s are already otherwise accounted for
under Associations Agreement II for electricity sales in the areas covered by the east German regional
supply companies.

From the time of VEAG’s transfer
[corresponding roughly to the current market price], the following will also apply.

to its new owner to the expiry of

the purchase price rule

In so far as a fall in sales by the abovementioned regional supply companies in those areas in which they
currently operate their electricity networks to below the level of sales in 1999 is due to direct or indirect
supplies by VEAG or by companies affiliated with VEAG, the price of [corresponding roughly to the
current market price] will be adjusted for a corresponding quantity of electricity in accordance with the
rule subsequently applicable (see point (ii)).

ii) After the initial phase (see point (i)) the following shall apply.

The electricity purchase price will be split into an energy component and a network cost component.

The charge for the network cost component will be determined by VEAG’s published network use tariffs
and will be collected in accordance with the principles of Associations Agreement II or any subsequent
agreements and the applicable statutory provisions.

The charge for the energy component will be determined as follows.

For the period after the expiry of the price rule [corresponding roughly to the current market price] (see
point (i)) the price of the energy component will be adjusted in line with the market price. [The market
price will then apply]. This [market price] must be notified to VEAG during the following quarter. The
reimbursement or additional payment resulting from the price adjustment will then be accounted for
retrospectively. VEBA/VIAG will be required to have the notified price certified by an auditor.

VEBA/VIAG may depart from the above price adjustment rules if they reach a different agreement with
the acquirer of the shares in VEAG or LAUBAG.

iii) The balancing and remuneration rights and obligations under the law on renewable energy sources and
the law on cogeneration will remain unaffected throughout the purchasing period. In calculating the
average price weighted according to the quantity concerned, offsetting supplies under the law on
renewable energy sources do not have to be taken into account.

II. BEWAG

VIAG (BAG) holds 26 % of the capital and 28,7 % of the voting rights in BEWAG, and VEBA (PE) holds 23 % of the
capital and 23,8 % (20 %) of the voting rights. Southern Energy Holding (SEI) holds 26 % of the capital and 28,7 % of
the voting rights. The 20 % limitation of voting rights is based on the commitment given by PE in its letter of 17
September 1997 to the Federal Cartel Office. Ownership of the remaining capital (25 %) and voting rights (18,8 %) is
widely dispersed.

1.

If the planned VEBA/VIAG merger is granted clearance under the merger control
legislation and goes ahead,
VEBA/VIAG undertake, within the period referred to at point (b), to divest to a third party their shareholdings in
BEWAG (see point (a) below).

(a) The acquirer must be an existing company independent of and unconnected with VEBA, VIAG and RWE and
possessing the financial resources and proven expertise enabling it to maintain and develop BEWAG as an

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active force in competition with VEBA and VIAG. Any acquirer will have to have the Commission’s express
prior approval. If the acquirer is a consortium of several undertakings, each member of the consortium will
have to be approved by the Commission in advance.

(b)

If the divestment does not take place within [(cid:133)] of their merger being cleared, VEBA/VIAG will irrevocably
transfer the power of disposal over the subject of divestment to a trustee (known as the divestment trustee).
The choice of divestment trustee and of his mandate will have to be approved in advance by the Commission.
The divestment trustee will effect the sale for the account of VEBA/VIAG within [(cid:133)] according to sound
commercial principles [(cid:133)].

2. VEBA/VIAG undertake to appoint, within [(cid:133)] of their merger being cleared, in agreement with the Commission a
trustee (known as the security trustee). Exercise of VEBA/VIAG’s voting rights in BEWAG will be transferred to this
security trustee, whose terms of reference must be agreed in advance by the Commission. Under the consortium
agreement, this appointment is subject to SEI’s consent. VEBA/VIAG will, moreover, empower the security trustee,
subject to SEI’s consent, to exercise their rights under the consortium agreement. In exercising the voting rights
transferred to him the security trustee will in principle be bound by his instructions. Where measures are involved,
however, which would result in a substantial financial burden being placed on VEBA/VIAG [(cid:133)], the trustee may
exercise the voting rights only in agreement with VEBA/VIAG. Such agreement must be given if it is essential to
fulfilment of the commitment at section VIII.1 Within [(cid:133)], the members of BEWAG’s supervisory board appointed
by VEBA and VIAG will resign apart from one representative. [(cid:133)]. Once the shares in BEWAG have been divested,
the remaining supervisory board member will also resign. The new supervisory board members will be appointed
forthwith, VEBA/VIAG’s rights of proposal and voting rights being exercised by the security trustee. The newly
chosen supervisory board members may not also be members of
the managing boards or employees of
VEBA/VIAG or RWE or of any company affiliated therewith. Members of BEWAG’s managing board may likewise
not also be members of the managing boards or employees of VEBA/VIAG or of any company affiliated therewith.

3. The parties may apply to the Commission for an amendment of the commitment concerning divestment of the
shares in BEWAG if they can prove that a divestment [is not possible despite their best efforts]. But even in this
case the appointment of the new members of the supervisory board must proceed as indicated above and no
member of BEWAG’s managing board may also be a member of
the managing board or an employee of
VEBA/VIAG or of any company affiliated therewith.

III. VEW

VIAG currently holds (through BAG/IAW) 11,13 % of the shares in VEW and, through its subsidiary Contigas, 30 % of
the shares in a ballast company, Energie-Verwaltungsgesellschaft (EVG), which in turn holds a further 24,7 % of the
shares in VEW. Within EVG, reciprocal pre-emption rights have been agreed in favour of the shareholders or of VEW.

1.

If the planned merger between VEBA and VIAG is granted clearance under the merger control legislation and goes
ahead, the parties undertake to sell to a third party (see point (a) below) the abovementioned direct and indirect
shareholdings in VEW within the time limit specified at point (b). If VEW merges with RWE before the expiry of
the time limit specified at point (b), the parties undertake to dispose of the resulting shares within that period to an
acquirer (see point (a) below).

(a) The acquirer must be an existing company independent of and unconnected with VEBA and VIAG. Any such
acquirer will have to have the Commission’s express prior approval. If VEW does not merge with RWE, the
Commission will be particularly vigilant in ensuring that the company remains an active competitor.

(b)

If a sale does not take place within [(cid:133)] of their merger being cleared, VEBA/VIAG will irrevocably transfer the
power of disposal over the subject of divestment to a trustee (known as the divestment trustee). The choice of
trustee and of his mandate will have to be approved in advance by the Commission. The
divestment
divestment
the sale for the account of VEBA/VIAG within [(cid:133)] according to sound
trustee will effect
commercial principles [(cid:133)].

2.

If the divestment does not take place within [(cid:133)] of their merger being cleared, VEBA/VIAG undertake to transfer
the exercise of the voting rights conferred by the direct and indirect shareholdings in VEW to a trustee (known as
the security trustee). The choice of security trustee and of his mandate will have to be approved by the

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Commission. In exercising the voting rights transferred to him the security trustee will in principle be bound by his
instructions. Where measures are involved, however, which would result in a substantial financial burden being
placed on VEBA/VIAG [(cid:133)], the trustee may exercise the voting rights only in agreement with VEBA/VIAG. Such
agreement must be given if it is essential to fulfilment of the commitment at section VIII.1. Within [(cid:133)], the
members of VEW’s supervisory board appointed by VIAG will resign. New supervisory board members will be
appointed forthwith, VEBA/VIAG’s rights of proposal and voting rights being exercised by the security trustee. The
newly chosen supervisory board members may not also be members of the managing boards or employees of
VEBA/VIAG or of any company affiliated therewith. Members of VEW’s managing board may likewise not also be
members of the managing boards or employees of VEBA/VIAG or of any company affiliated therewith. This
provision concerning the composition of VEW’s supervisory and management boards will also apply to RWE if the
merger of RWE and VEW is completed before the shares in VEW are divested.

IV. HEW

VEBA (or PreussenElektra/PE) holds 15,4 % of the shares and 14,2 % of the voting rights in HEW.

1.

If the planned merger between VEBA and VIAG is granted clearance under the merger control legislation and goes
ahead, VEBA/VIAG undertake to sell to a third party (see point (a) below) the abovementioned shareholding in
HEW within the time limit specified below.

(a) The acquirer must be an existing company independent of and unconnected with VEBA, VIAG and RWE. Any

such acquirer will have to have the Commission’s express prior approval.

(b)

If a sale does not take place within [(cid:133)] of their merger being cleared, VEBA/VIAG will irrevocably transfer the
power of disposal over the subject of divestment to a trustee (known as the divestment trustee). The choice of
trustee and of his mandate will have to be approved in advance by the Commission. The
divestment
divestment
the sale for the account of VEBA/VIAG within [(cid:133)] according to sound
trustee will effect
commercial principles [(cid:133)].

2.

If the divestment does not take place within [(cid:133)] of their merger being cleared, VEBA/VIAG undertake to transfer
the exercise of the voting rights conferred by the direct shareholding in HEW to a trustee (known as the security
trustee). The choice of security trustee and of his mandate will have to be approved by the Commission.
VEBA/VIAG will, moreover, empower the security trustee, subject to the consent of HGV and Sydkraft, to exercise
their rights under the consortium agreement. In exercising the voting rights transferred to him the security trustee
will in principle be bound by his instructions. Where measures are involved, however, which would result in a
substantial financial burden being placed on VEBA/VIAG [(cid:133)], the trustee may exercise the voting rights only in
agreement with VEBA/VIAG. Such agreement must be given if it is essential to fulfilment of the commitment at
section VIII.1. Within [(cid:133)], the member of HEW’s supervisory board appointed by VEBA will resign. A new
supervisory board member will be appointed forthwith, VEBA/VIAG’s rights of proposal and voting rights being
exercised by the security trustee. The newly chosen supervisory board member may not also be a member of the
managing boards or an employee of VEBA/VIAG or RWE or of any company affiliated therewith. Members of
HEW’s managing board may likewise not also be members of the managing boards or employees of VEBA/VIAG
or of any company affiliated therewith.

V. Rhenag

RWE Energie AG holds 54,1 % of the shares in Rhenag Rheinische Energie AG and VEBA AG (through Th(cid:252)ga AG)
holds 41,3 %. RWE Energie AG and Th(cid:252)ga AG have concluded a consortium agreement in respect of their interests in
Rhenag.

1.

If the planned merger between VEBA and VIAG is granted clearance under the merger control legislation and goes
ahead, VEBA/VIAG undertake to ensure that the existing corporate relationship between RWE Energie AG and
Th(cid:252)ga AG, on the one hand, and Rhenag, on the other, is dissolved within [(cid:133)] of the merger being cleared. One
way of doing this would be for the shares held by RWE to be acquired by VEBA/VIAG or Th(cid:252)ga. In the event of a
division of ownership, a time limit of [(cid:133)] will apply. If it is done by selling the shares to a third party, the
acquirer must be independent of and unconnected with VEBA and VIAG. Any such acquirer will have to have the
Commission’s express prior approval.

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2.

If the corporate relationship is not dissolved within [(cid:133)] of the merger being cleared, the Commission may require
VEBA/VIAG to transfer the exercise of the voting rights conferred by the shareholding in Rhenag to a trustee
(known as the security trustee). The choice of security trustee and of his mandate will have to be approved by the
Commission. Subject to the consent of RWE, VEBA/VIAG will also entrust to such trustee as may be appointed the
task of exercising their rights under the consortium agreement. In exercising the voting rights transferred to him
the security trustee will in principle be bound by his instructions. Where measures are involved, however, which
would result in a substantial financial burden being placed on VEBA/VIAG [(cid:133)], the trustee may exercise the voting
rights only in agreement with VEBA/VIAG. Within [(cid:133)] of the appointment of the security trustee, the members of
Rhenag’s supervisory board appointed by VEBA will resign. New supervisory board members will be appointed
forthwith, VEBA/VIAG’s rights of proposal and voting rights being exercised by the security trustee. The newly
chosen supervisory board members may not also be members of
the managing boards or employees of
VEBA/VIAG or RWE or of any company affiliated therewith. Members of Rhenag’s managing board may likewise
not also be members of the managing boards or employees of VEBA/VIAG or of any company affiliated therewith.

VI. Associations Agreement II

1. VEBA/VIAG undertake to amend, within one month of their merger being cleared, their charges for network use in
Germany in such a way that the price component for the national T-component, which is provided for by
Associations Agreement II for crossing the interzonal boundary, comes to 0 Pf/kWh. They will publish this in an
appropriate form within the abovementioned period. If, by the time the VEBA/VIAG merger is cleared, RWE/VEW
have already notified their renunciation, VEBA/VIAG will immediately follow suit.

2. VEBA/VIAG undertake to indicate, within two months of their merger being cleared, to their special contract
customers supplied in their own network area at 110 kV and above, the electricity prices broken down by
network-use charge, energy price, metering/reading, etc. (Law on renewable energy sources, law on cogeneration,
licensing agreements, turnover tax). For special contract customers supplied in their own network area at the
medium voltage level (20 kV), this will apply as of 1 January 2001. The parties will publish this information in an
appropriate form within the abovementioned two-month period.

With regard to customers supplied outside their network area, VEBA/VIAG will ensure that the relevant network
operator furnishes the corresponding data to it in broken-down form so that they can be suitably broken down for
these customers also.

3. With regard to the charges for supplying balancing energy, the parties undertake to amend, within one month of
their merger being cleared, their prices in such a way that either the price per kilowatt is levied on a daily basis or
only kilowatt-hour rates are charged. They will publish this information in an appropriate form within the
abovementioned period.

VII. Germany/Denmark interconnector

VEBA (PE) currently holds on the overland route from Denmark to Germany, inter alia, a transport right amounting to
400 MW (allowing for losses) out of a total interconnector capacity of 1 200 MW. Outsiders may be offered additional
transmission capacity out of these 400 MW (over and above the capacities already sold by auction) only if the existing
physical exchange of electricity from the electricity business Statkraft/PE is abandoned and replaced by an offsetting
system.

If the planned merger between VEBA and VIAG is granted clearance under the merger control legislation and goes
ahead, VEBA/VIAG undertake to conclude with Eltra and Statkraft an agreement whereby:

(cid:151) Eltra may buy back the 400 MW transport right which currently serves to underpin the Statkraft/PE electricity
less a certain amount for the use made of it in the

supply agreement for the price previously paid by PE,
meantime,

(cid:151) the part of the 400 MW agreement signed with Statkraft is converted into a financial agreement without affecting

its value,

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so that third parties can use this capacity [in the near future]. If for reasons not attributable to VEBA/VIAG the
agreement has not been concluded by [(cid:133)], VEBA/VIAG may apply to the Commission for an extension of the time
limit. The Commission will decide on the application to the extent that corresponding capacity is available [in the near
future].

VIII. Common supplementary provisions

The following supplementary provisions will apply.

1. The parties undertake to safeguard the full economic value of the subject of divestment until the divestment is
completed. In the case of VEAG, LAUBAG and BEWAG in particular, the parties will behave in such a way that
the corporate assets are not reduced in value other than through the normal course of business. This relates in
particular to maintenance of the fixed assets, know-how and technical and commercial competence of staff.

The security trustee will exercise the voting rights transferred to him in accordance with the above principles and
ensure that the parties do not keep any confidential information obtained in the course of the market-related
business activities of the undertakings in which shareholdings are to be divested, unless it is essential for purposes
of fulfilling the present commitments, inter alia, when it comes to determining the undertaking’s value and for the
purchase price negotiations.

2. The Commission and VEBA/VIAG are agreed that the latter will have observed the time limits in relation to the
divestment obligations if within the relevant time limit binding contracts concerning the subject of divestment have
been concluded with the acquirer.

3. Unless provided otherwise in these commitments, they apply in full even where the operation concerned can be

carried out only with the consent of third parties [(cid:133)].

4. As regards the commitment to divest their shareholdings in VEAG and LAUBAG, the Commission and VEBA/VIAG
are agreed that this commitment will be deemed to be fulfilled only if RWE/VEW have met an obligation imposed
on them by the Federal Cartel Office in proceeding B 8 ﬂ 309/99 according to which they must divest the shares
and voting rights they hold in VEAG and in LAUBAG and the lignite mining rights they hold in the new L(cid:228)nder,
and if the Federal Cartel Office has imposed obligations to safeguard VEAG’s sales and preserve that company’s
liquidity and these obligations have been met. As regards the commitments in relation to the Associations
Agreement (see section VI.1 to 3), the Commission and VEBA/VIAG are agreed that these commitments will be
deemed to be fulfilled only if the Federal Cartel Office has imposed corresponding obligations in proceeding B 8 ﬂ
309/99 and these obligations have been met.

5. The trustee’s task will be completed when the divestment of the subject of divestment concerned has been

implemented.

COMMITMENTS IN RESPECT OF CHEMICALS

I. Cyanuric chloride

their planned merger is granted clearance under the merger control

If
legislation and goes ahead, VEBA/VIAG
undertake to divest the existing worldwide cyanuric chloride business of SKW Trostberg AG within [(cid:133)] of the merger
being cleared, as follows:

1. VEBA/VIAG undertake to offer for sale during a first phase [(cid:133)] after clearance of the merger exclusively the
subject of divestment defined below. They will submit to the Commission at least two weeks before the expiry of
[(cid:133)] a report on the steps taken to effect a sale and on the stage reached in or outcome of the sales negotiations.

The subject of divestment is a company to which will first have been transferred the hydrocyanic acid production
plants and the cyanuric chloride production plants of SKW Trostberg, together with the necessary staff and all the
technical know-how needed for the manufacture of hydrocyanic acid as well as all the commercial and technical
know-how needed for the manufacture and sale of cyanuric chloride. The purchaser will procure the technical and
auxiliary services (electricity, steam, water supply, sewage disposal, workshops, waste disposal) made available by a
pool in the M(cid:252)nchsm(cid:252)nster industrial park on the same terms as the other pool members. VEBA/VIAG will require
this purchaser to supply hydrocyanic acid to the purchaser of the sodium dicyanamide plant referred to at section
II.1; if the sodium dicyanamide plant is not sold, this obligation will be agreed in favour of VEBA/VIAG.

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2.

If despite all the efforts made during the first phase, VEBA/VIAG do not succeed in finding a purchaser for the
subject of divestment defined at section 1, they will with the Commission’s agreement offer for sale during a
second phase starting [(cid:133)] after the merger is cleared and ending upon the expiry of a period of [(cid:133)] after the
merger is cleared exclusively both the subject of divestment defined at section 1 and the subject of divestment
defined below.

The other subject of divestment is a company to which will first have been transferred the cyanuric chloride
production plants, the necessary staff and all the commercial and technical know-how needed for the manufacture
and sale of cyanuric chloride. VEBA/VIAG undertake to supply the company for a period of 15 years with
hydrocyanic acid to the extent necessary to make full use of the available CC production capacity at a price
corresponding to the annual weighted average of the prime costs of the existing [(cid:133)] cyanuric chloride production
plants of [(cid:133)], plus [(cid:133)]. The purchaser will be entitled to have the prime costs verified by an independent auditor,
who will communicate to the purchaser and the seller the verified weighted annual average value of the prime
costs while remaining bound by a duty of discretion vis-(cid:224)-vis the purchaser as regards the cost components. If
either the purchaser or the seller challenges this value, it will be established with binding force by an arbitrator
should one of the parties submit, within three months of communication of the value by the auditor, to the
president of the Cologne Chamber of Trade and Industry an application for the appointment of an arbitrator,
notifying the other party of the application two weeks in advance. The arbitrator will decide on the value
conclusively,
If no application is submitted within the
abovementioned period, the value communicated by the arbitrator will be deemed to bind the parties. The supply
obligation will cease to apply if hydrocyanic acid production has to be stopped by virtue of the law. It will also
cease to apply at the earliest after expiry of a period of [(cid:133)] if during [(cid:133)] consecutive years the annual take of
hydrocyanic acid by the purchaser falls below [(cid:133)] tonnes a year and at the same time the rate of working of the
hydrocyanic acid plant falls below [(cid:133)] %. The purchaser will accept the obligation mentioned at section II.1 to
supply the purchaser of the sodium dicyanamide plant with hydrocyanic acid. If the sodium dicyanamide plant is
not sold, this obligation will apply in favour of VEBA/VIAG. The purchaser will procure the technical and auxiliary
services (electricity, steam, water supply, sewage disposal, workshops, waste disposal) made available by a pool in
the M(cid:252)nchsm(cid:252)nster industrial park on the same terms as the other pool members.

there being no right of appeal

from his decision.

VEBA/VIAG will submit to the Commission no later than two weeks before the end of the second phase a report
on the steps taken to effect a sale and on the stage reached in or outcome of the sales negotiations.

3.

If, despite all their efforts, after the merger has been cleared VEBA/VIAG do not succeed in finding a purchaser for
the subject of divestment defined at 1 or 2, the subject of divestment may with the Commission’s agreement also
be the cyanuric chloride business described below. The subject of divestment will consist of all the commercial
know-how for cyanuric chloride, including all customer lists and orders on hand. VEBA/VIAG undertake to supply
the purchaser on a commission order basis for a period of [(cid:133)] years with up to [(cid:133)] tonnes of cyanuric chloride a
year at a price corresponding to the production costs plus [(cid:133)]. The costs of the hydrocyanic acid needed for the
production process will be fixed using the weighted annual average of the prime costs for hydrocyanic acid in the
three existing production plants of [(cid:133)]. The purchaser will be entitled to have the prime costs verified by an
independent auditor, who will communicate to the purchaser and the seller the verified weighted annual average
value of the prime costs while remaining bound by a duty of discretion vis-(cid:224)-vis the purchaser as regards the cost
components. The fifth sentence of point I. 2 will apply by analogy. The supply obligation will cease to apply if
hydrocyanic acid production has to be stopped by virtue of the law. It will also cease to apply at the earliest after
expiry of a period of [(cid:133)] if the purchaser’s CC take falls below [(cid:133)] tonnes a year and at the same time the rate of
working of the hydrocyanic acid plant falls below [(cid:133)] %.

II. Sodium dicyanamide

their planned merger is granted clearance under the merger control

If
legislation and goes ahead, VEBA/VIAG
undertake to divest the existing sodium dicyanamide business of SKW Trostberg AG within [(cid:133)] of the merger being
cleared, as follows.

1. VEBA/VIAG undertake to offer for sale during a first phase [(cid:133)] after clearance of the merger exclusively the
subject of divestment defined below. They will submit to the Commission at least two weeks before the expiry of
[(cid:133)] a report on the steps taken to effect a sale and on the stage reached in or outcome of the sales negotiations.
The subject of divestment will consist of the sodium dicyanamide production plant and all the commercial and
technical know-how needed for the manufacture and sale of sodium dicyanamide.
the hydrocyanic acid
production plant has not been sold in accordance with section I, VEBA/VIAG undertake to supply the purchaser of

If

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the sodium dicyanamide plant for a period of [(cid:133)] years until [(cid:133)] with the hydrocyanic acid requirements (in the
form needed for current sodium dicyanamide production) of the existing sodium dicyanamide production plant, at
a price corresponding to the annual weighted average of the prime costs of the three existing [(cid:133)] production
plants of [(cid:133)] plus [(cid:133)]. The purchaser will be entitled to have the prime costs verified by an independent auditor,
who will communicate to the purchaser and the seller the verified weighted annual average value of the prime
costs while remaining bound by a duty of discretion vis-(cid:224)-vis the purchaser as regards the cost components. The
fifth sentence of point I. 2 will apply by analogy. The supply obligation will cease to apply if hydrocyanic acid
production has to be stopped by virtue of the law. It will also cease to apply at the earliest after expiry of a period
of [(cid:133)] if the purchaser’s annual hydrocyanic acid take falls below [(cid:133)] % of the 1999 quantity and at the same
time the rate of working of the hydrocyanic acid plant falls below [(cid:133)] %. The purchaser will procure the technical
and auxiliary services (electricity, steam, water supply, sewage disposal, workshops, waste disposal) made available
by a pool in the M(cid:252)nchsm(cid:252)nster industrial park on the same terms as the other pool members.

2.

If, despite all their efforts during the first phase VEBA/VIAG do not succeed in finding a purchaser for the subject
of divestment defined at section 1, VEBA/VIAG will with the Commission’s agreement offer for sale immediately
thereafter the subject of divestment defined at section 1 and the subject of divestment defined below.

The other subject of divestment consists of all the commercial know-how for the sodium dicyanamide business,
including all customer lists and orders on hand. SKW Trostberg undertakes to supply the purchaser on a
commission order basis for a period of [(cid:133)] years with up to [(cid:133)] tonnes of sodium dicyanamide a year at a price
corresponding to the production costs plus [(cid:133)]. The costs of the hydrocyanic acid needed for the production
process will be fixed using the weighted annual average of the prime costs for hydrocyanic acid in the [(cid:133)] existing
production plants of [(cid:133)]. The purchaser will be entitled to have the prime costs verified by an independent
auditor, who will communicate to the purchaser and the seller the verified weighted annual average value of the
prime costs while remaining bound by a duty of discretion vis-(cid:224)-vis the purchaser as regards the cost components.
The fifth sentence of point I. 2 will apply by analogy. The supply obligation will cease to apply if hydrocyanic acid
production or sodium dicyanamide production has to be stopped by virtue of the law or if the purchaser’s sodium
dicyanamide take falls below [(cid:133)] tonnes a year.

3. The purchaser may also be a company set up with a view to a management buy-out.

III.

The subjects of divestment referred to at sections I and II may be acquired by one and the same purchaser.

IV.

1. VEBA/VIAG undertake to ensure that the subjects of divestment referred to at sections I and II are managed in the
same way as before the merger. They also undertake to ensure that the corporate assets are not reduced in value
prior to the sale other than through the normal course of business. This relates in particular to maintenance of the
fixed assets, know-how and technical and commercial competence of staff. In agreement with the Commission
VEBA/VIAG will appoint within [(cid:133)] an independent
trustee whose mandate will require the Commission’s
approval and who will monitor the fulfilment of the above obligations on the Commission’s behalf. The trustee will
ensure in particular
that both the CC and the sodium dicyanamide businesses continue to be operated
independently, exactly as before the merger but separately from the CC and sodium dicyanamide activities retained
by VEBA/VIAG, and that they are not subject to any influence on the part of VEBA/VIAG. To this end the trustee
will be invited to all general meetings and meetings of the supervisory and management boards of SKW Trostberg
and its successors dealing with the CC and the sodium dicyanamide activities of SKW Trostberg. The trustee will
report to the Commission at its request or where he considers it necessary about what he has observed and will
suggest additional measures where appropriate.

2.

If not all the commitments concerning CC and sodium dicyanamide have been fulfilled by then, VEBA/VIAG will
appoint within [(cid:133)] of the merger being cleared in agreement with the Commission an independent trustee whose
mandate will require the Commission’s approval. VEBA/VIAG will keep him informed about their attempts to
effect a sale in accordance with sections I and II. The trustee will report to the Commission within [(cid:133)] of the
merger being cleared. He and the trustee appointed in accordance with section IV.1 may be one and the same
person.

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3. VEBA/VIAG will ensure that, if no sale of the subjects of divestment referred to at sections I and II has taken place
within [(cid:133)], the power of disposal over the remaining subjects of divestment will be transferred irrevocably to the
trustee appointed in accordance with section IV.2, who will within [(cid:133)] do his utmost to carry out the divestment
on the owner’s behalf according to sound commercial principles, autonomously and above all without being
committed to any predetermined minimum price.

4. The choice of purchasers, who must be independent of and unconnected with VEBA/VIAG, will require the

Commission’s approval.

5. The Commission and VEBA/VIAG are agreed that VEBA/VIAG will have observed the time limits relating to the
divestment obligations where binding contracts in respect of the subjects of divestment have been concluded
within the time limits laid down with the acquirer concerned.

6. The trustee’s task will be completed when the divestment of the subject of divestment concerned has been

implemented.