2003/668/EC: Commission Decision of 17 December 2002 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.2822–EnBW/ENI/GVS) (Text with EEA relevance) (notified under document number C(2002) 5080)
Date: 2002-12-17
Institutions: European Commission
Subjects: economic concentration, electrical industry, energy distribution, exchange of information, gas, heating, merger control, petroleum exploration, telecommunications, waste recycling

30.9.2003

EN

Official Journal of the European Union

L 248/51

COMMISSION DECISION
of 17 December 2002
declaring a concentration to be compatible with the common market and the EEA Agreement
(Case COMP/M.2822–EnBW/ENI/GVS)

(notified under document number C(2002) 5080)

(Only the English text is authentic)

(Text with EEA relevance)

(2003/668/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

I. THE PARTIES AND THE OPERATION

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,

(4)

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 Articles 8(2) and 22(3) thereof,

Having regard to the Commission's decision of 16 September
2002 to initiate proceedings in this case,

Having regard to the opinion of the Advisory Committee on
Concentrations (3),

Having regard to the final report of the hearing officer in this
case (4),

(5)

Whereas:

(1)

(2)

On 14 August 2002, the Commission received a notifi-
cation of a proposed concentration pursuant to Article 4
of Regulation (EEC) No 4064/89 (‘the Merger Regula-
tion’) by which the undertakings Energie Baden-Würt-
temberg AG (‘EnBW’), Germany, and ENI SpA (‘ENI’),
Italy, acquire joint control of the German undertaking
Gasversorgung Süddeutschland GmbH (‘GVS’) by way of
purchase of shares.

After examination of the notification, the Commission
has concluded that the notified operation falls within the
scope of the Merger Regulation and raises serious doubts
as to its compatibility with the common market. There-
fore, on 16 September 2002, the Commission decided
to initiate proceedings in accordance with Article 6(1)(c)
of the Merger Regulation and Article 57 of the EEA
Agreement.

(6)

(3)

The Advisory Committee discussed the draft of this Deci-
sion on 6 December 2002.

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

21.9.1990, p. 13.

(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 233, 30.9.2003.
(4) OJ C 233, 30.9.2003.

EnBW is active in the fields of electricity as well as gas
generation, transmission, distribution, supply and trading
and district heating supply. Other business activities
comprise telecommunications and waste recycling. Prior
to the liberalisation of the German electricity market,
EnBW's business activities were focused on Southwest
Germany (mainly the State of Baden-Württemberg).
After the liberalisation, however, EnBW extended some
of its electricity activities nationwide (for example, ‘Yello’
electricity to mainly household customers). As far as gas
is concerned, EnBW distributes gas through subsidiaries
at local
level to final customers as well as secondary
distributors.

EnBW is jointly controlled by Electricité de France
(‘EDF’) and Zweckverband Oberschwäbische Elektrizitäts-
werke (‘OEW’) (5). EDF is a wholly State-owned company,
which is active in all fields of supply and transport of
electricity in France. EDF is the operator of the national
grid, but is not active in the sectors of gas generation or
supply. EDF indirectly holds 34,5 % of the shares of
EnBW. OEW is an association of nine public districts in
Southwest Germany. Its main purpose is to hold shares
in companies active in the energy sectors. Through its
wholly owned subsidiary OEW Beteiligungsgesellschaft
mbH, OEW holds 34,5 % of the shares in EnBW.

ENI is active in the exploration and production of oil
and natural gas worldwide. ENI is a gas producer in Italy,
the North Sea, Egypt, Nigeria, Kazakhstan and Libya.
Furthermore, ENI purchases gas volumes from Sona-
trach, Gasunie, Gazprom/Gazexport, Nigeria LNG and
some Norwegian gas producers. ENI is also active in the
supply, transmission, storage, distribution and trade of
natural gas. ENI holds shares in companies with trans-
portation capacities which are active in the operation of
the transnational pipelines for transmission of natural
gas in Germany, Austria, Switzerland, Tunisia, and sea
pipelines in the Mediterranean from Tunisia to Italy, in
the Black Sea from Russia to Turkey and in the North
Sea from the United Kingdom to Belgium.

(5) Commission Decision 2002/164/EC in Case COMP/M.1853 — EDF/

EnBW (OJ L 59, 28.2.2002, p. 1).

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is currently controlled by the Italian Ministry of
ENI
Finance through a controlling 30,33 % participation in
ENI's share capital. The remaining shares of ENI are
floated on the stock exchange.

(12)

GVS's business activities are regional gas distribution and
transportation using and operating a gas
transport
in Baden-Württemberg.
system (network of pipelines)
GVS mainly supplies gas to local distribution companies.
In addition to this, GVS supplies two industrial plants,
Rodia Rhone-Poulenc AG, Freiburg, and Badische Stahl-
werke AG, Kehl. The latter activity constitutes approxi-
mately 1 % of GVS's turnover.

III. COMMUNITY DIMENSION

EDF (including EnBW), ENI and GVS have a combined
aggregate worldwide turnover of more than EUR 5 000
in 2001,
million (EUR 40 700 million for EDF
EUR 48 900 million for ENI in 2001 and EUR 1 734
million for GVS in 2001). The aggregate Community-
wide turnover of EDF, ENI and GVS exceeds EUR 250
million (EUR 36 600 million for EDF
in 2001,
EUR 36 200 million for ENI in 2001 and 1 704 million
for GVS in 2001). EDF (including EnBW) generated
more than two-thirds of its community-wide turnover in
France, GVS in Germany, and ENI in Italy. The notified
operation therefore has a Community dimension within
the meaning of Article 1(2) of the Merger Regulation.

(7)

(8)

(9)

Presently, 26,25 % of the shares in GVS are held by
MVV RHE AG (‘MVV’), 25 % by the State of Baden-
Württemberg, 15,35 % by individual
local authorities
and 33,4 % by Neckarwerke Stuttgart AG (‘NWS’), which
is controlled by EnBW. MVV, State of Baden-Württem-
berg, NWS and some of the individual local authorities,
which taken together represent 95,62 % of the shares in
GVS, have decided to sell their shares. Two local authori-
ties will
together
shareholders
accounting for 4,38 % of the shares in GVS. EnBW and
(the latter through its wholly owned subsidiary
ENI
Società Nazionale Metanodotti
intend to
acquire 95,62 % of the shares in GVS. After completion
of the transaction, the notifying Parties intend to use
GVS as their main gas distribution channel within and
beyond the borders of the State of Baden-Württemberg.

of GVS,

(‘SNAM’))

remain

II. CONCENTRATION

(10) As a result of the notified operation EnBW and ENI will
jointly control GVS. Via NewCo, a jointly controlled 50/
50 joint venture, EnBW and ENI (through its wholly
owned subsidiary SNAM) intend to acquire all the shares
in GVS and, thereby, gain control of GVS. Since NewCo
will be a mere holding company for the Parties' shares
in GVS,
indirectly lead to joint
control of GVS by the Parties. All major strategic deci-
sions of NewCo and GVS will require the consent of
EnBW and SNAM. Both parent companies will have
equal rights as to the appointment of the joint venture's
managing bodies. Therefore, EnBW and SNAM will
jointly control GVS through NewCo.

the transaction will

(11)

The proposed operation, therefore, constitutes a concen-
the
tration within the meaning of Article 3(1)(b) of
Merger Regulation.

IV. THE RELEVANT MARKETS

A. Relevant product market

(13)

In Germany, as a result of historical developments, there
are two levels of gas wholesale companies: wholesale
companies which purchase gas from Community and
non-Community gas producers and transport this gas
over long distances through high-pressure pipelines, and
regional supply companies, which use short-distance
In
medium and low pressure transmission pipelines.
Exxon/Mobil (1) as well as in Veba/Viag (2) the Commis-
sion concluded for Germany that
long-distance and
short-distance wholesale
companies operate on a
different wholesale market.

Regional wholesale of gas is the relevant product market

(14) GVS's business activities are regional gas distribution and
transport
transportation using and operating a gas
system (network of pipelines)
in Baden-Württemberg.
GVS mainly supplies gas to local distribution companies.
regional wholesale of gas is the relevant
Therefore,
product market in which GVS operates.

(15) As set out further in recital 20, the investigation carried
out by the Commission revealed that large commercial
customers and municipality-owned utilities (‘Stadtwerke’)
tend to conclude supply contracts with gas wholesalers
active in their respective regions. This means that the
regional wholesale (in former decisions (3) referred to as
short-distance wholesale transmission) (4) of gas still has
to be seen as a distinct product market. The assessment
below will focus on the market thus defined.

(1) Commission Decision of 29.9.1999, Case IV/M.1383 — Exxon/

Mobil, recitals 48 et seq., 111.

(2) Commission Decision 2001/519/EC in Case COMP/M.1673 —

Veba/Viag, OJ L 188, 10.7.2001, p. 1, recital 186.

(3) See footnotes 1 and 2.
(4) For reasons of terminological clarity, this expression is not used in
the present Decision, given that the activity at stake is a sales and
not a transport activity.

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Official Journal of the European Union

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B. Relevant geographic market

(16)

In Exxon/Mobil (1) as well as
the
Commission has left open whether the gas wholesale
markets in Germany were still regional, that is to say,
still
limited to the former demarcation regions, or
already national in scope.

in Veba/Viag (2),

1. The notifying Parties submit that the gas wholesale market

is national in scope

(17)

The notifying Parties take the view that the wholesale
transmission markets are national, because distribution
has traditionally been organised largely on a national
basis through national or regional operators. This is
supported by the possibility of third-party access fixed
on a national basis, which enables other regional gas
suppliers to supply gas customers even in regions where
the respective supplier does not physically have a
network.

customers and municipality-owned utilities (‘Stadtwerke’)
concluded to a large extent supply contracts with gas
wholesalers active in their respective regions, that is, at
the level of the ‘Bundesland’, for example the States of
Baden-Württemberg, Bavaria, Hesse, Rhineland Palatinate
and North Rhine Westphalia. This corresponds to the
previous demarcations for gas markets, which were
subsequently banned due to the liberalisation process in
the gas sector.

(21)

In addition, very few customers consider the use of spot
markets to be a viable alternative supply source. In their
view, substantial volumes are unsuitable for purchases at
spot markets due to the typical short-term delivery
contracts and small volumes available. Moreover, many
Stadtwerke appear to be inexperienced in managing
renewal of spot purchase and delivery on a continuous
basis in order to have a permanently secured supply of
gas. Spot-market deliveries are therefore not currently a
common means to bring in gas from outside the region.

on

based

(18) With respect to the Commission's assessment in Exxon/
Mobil and Veba/Viag the notifying Parties take the view
that the regional scope established in those decisions
was due to the regulatory framework in place at that
time,
I’
(‘VVI’) (3), which did not sufficiently enable newcomers
in gas wholesale supply to compete effectively against
the respective incumbents in the different regions. Mean-
while, however, on 3 May 2002, ‘Verbändevereinbarung
Erdgas II’ (‘VVII’) was signed by the relevant industrial
organisations. It entered into force on 1 October 2002
and is valid until 30 September 2003.

‘Verbändevereinbarung

Erdgas

(19)

The Parties point out that the VVII will apply a uniform
pricing system for regional and trans-regional wheeling.
The price will be calculated according to the number
and characteristics of transmission tracks used. There-
fore, the Parties are of the view that gas markets must be
considered as national in scope as a result of the pro-
competitive effects of the VVII.

(22)

2. The investigation showed that

regional
wholesale of gas is still regional in scope and is likely to
remain so in the future

the market

for

2.2. F u r th e r

to Di r e c ti v e 98/ 30/ EC of

t h e
E u r op e a n Pa r li a me nt a nd of t h e C ou nc i l of
22 Ju ne 1998 c onc er ni ng common r ules
i n na t u r a l g a s ( 4),
f or th e i nte r na l ma r ke t
G e r ma ny st a r te d l i b e r a li si n g th e g a s se c t or
V e r b ä nde v e r e i n-
t h r ou g h
bar u ng E r dg as
then a mended by
V e r b ä nde v e r e i nb a r u ng E r dg a s II ( V V II)

a g r e e me nts:
(VVI)
I

VVI and VVII are agreements by four German business
associations (5) concluded with the view to put into prac-
tice the principles of Directive 98/30/EC (6). It is true
that the current supply situation is still based on the
framework defined by VVI since VVII only came into
force on 1 October 2002. However, the framework fore-
seen by VVII
from that
defined by VVI. In particular, VVII does not modify the
concept of distance-related tariffs which has already been
established by VVI. The essential differences between
VVI and VVII lie mainly in the following two points: a
new model of network access (‘Punkt-Zahlen-Modell’) as
well as its application to the regional wholesale level.

is not significantly different

2.1. A t

p r e se nt, most

sti ll
su p p li e d b y g a s w h ole sa l e r s a c t i ve w i t h i n
t h e
t h e
‘B un de slände r ’

de ma r c a t i o n s ,

c u stome r s

p r e v i o u s

a r e

(20)

The investigation carried out by the Commission did not
confirm the Parties' submission that gas markets must be
large industrial
considered national.

revealed that

It

(1) Recital 152.
(2) Recital 186.
(3) VVI was signed on 4 July 2000.

(23) As regards network access, VVI established a price model
based on postage stamp tariffs (7) for access to regional
networks. The prices of the postage stamps were defined
by each network operator concerned on specified areas.

(4) OJ L 204, 21.7.1998, p. 1.
(5) Bundesverband der Deutschen Industrie e.V; Verband der Indus-
triellen Energie- und Kraftwirtschaft
e.V; Bundesverband der
deutschen Gas- und Wasserwirtschaft e.V; Verband kommunaler
Unternehmen e.V.

(6) Those principles include in particular

network access and unbundling.

free choice of supplier,

(7) Postage stamp tariffs are tariffs unrelated to distance or the charac-

teristics of a single transaction.

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(24)

(25)

introduced a new model

for regional network
VVII
access and transportation network access. This model is
called ‘Punktzahlen-Modell’ whereby the price of trans-
mission is computed based on the distance of pipelines
and the diameters or pressure of the pipelines. This
model is also used for long distance transmission. On
the basis of VVII a uniform calculation model is foreseen
for both long-distance and regional wholesale. The tariff
model for the local supply networks (Stadtwerke) is still
the same as VVI:
local-distribution postage stamps
(‘Endverteilerbriefmarke’).

they chose the ‘Punktzahlen-Modell’,

The operators had to make public by 1 October 2002
whether they would apply the ‘Punktzahlen-Modell’ or
the local-distribution postage stamp for their networks.
If
they had to
publish their specific prices in relation to the distance
and diameters/pressure for the pipelines by 30 June
2002. Then they also had to publish the ‘Punktzahlen’
themselves by 1 October 2002. These ‘Punktzahlen’ have
to be calculated on the basis of the specific prices, thus
making it possible to compute the total price to be paid
based on distance, diameter, etc.

2.3. K e y i ssu e s c onsi de r e d a s ne ce ssa r y t o ma ke
t h e g a s ma r ke t
fully ope n to ne w come r s
ha ve n ot y e t be e n addr e sse d b y VVI and
V VII

(26) On the basis of VVII, it appears that the total price can
still not be computed transparently by potential compe-
titors because the operator of the physical network to be
used is the only one to know and/or decide the path the
gas will follow in its network and hence the parameters
(distance, diameters of different sections) on which the
price will be based. Suppliers interested in through-trans-
mission have no means to control that the distance of
transportation related to the path they paid is the one
effectively followed.

(27)

This cost model remains distance related and requires
specific third-party-access agreements (TPA-agreements)
with each network operator involved in a specific trans-
action. This means in most cases that the greater the
distance you want your gas to travel, the more networks
you have to go through, the more access agreements
you have to negotiate with related network operators
and the greater the additional costs and burdens that will
be incurred. As a consequence, TPA continues to be
costly and complicated and prevents alternative suppliers
from transporting gas on long distance if not in their
own network.

(28)

It is worth noting that the German federal ministry of
economics and technical development ordered an inde-
pendent study (1) which made a competitive assessment
of the framework provided by VVI for network access
and came to the following conclusions:

‘The current rules defined for network access and
tariff by the business associations are not yet appro-
priate for developing a liquid gas market and mass
transactions, essential
issues are not yet addressed
(…)

— case-by-case negotiations versus binding standard

conditions

— network access and tariffs

(…)

Network access and tariffs are related to transactions,
which means that each tariff is defined directly or
indirectly on the basis of the specific underlying
commercial
system impedes
competition through high transaction cost and the
risk of discrimination of third Parties for network
access. In fact, tariffs should be independent of the
specific transaction involved (stamp tariff).’

transaction. This

(29)

These arguments are still valid since VVII did not address
these issues. In fact, VVII is only an intermediate step
within the liberalisation process of gas markets and
issues such as binding standard
many of the critical
conditions have been left open and have to be addressed
within a further agreement,
to be issued by 30
September 2003. In this respect, VVII contains a list of
improvements to be tackled in a new VVIII by the
concerned business associations. They have to:

‘develop an improved concept which achieves the
following goals:

More competition and transparency than so far,
more straightforward services and use, opportunities
for gas trading floors, non-discriminatory conditions,
suitability for mass market and tariff independent of
specific
(non-distance
based tariff/stamp), suitability for forming energy
balancing group, causality principle in cost alloca-
tion.

transaction characteristics

(1) EWI, BET: ‘Analyse und Wettberwerbliche Beurteilung der Verbän-
devereinbarung Gas zum Netzzugang’, Gutachten im Auftrag des
Bundesministeriums für Wirtschaft und Technologie. Endbericht
9.11.2000. Paragraph: ‘8. Zusammenfassung’.

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Official Journal of the European Union

L 248/55

The improved concept shall be put into force in time
for the beginning of the economic gas year 2003/
2004.

The business associations concerned have agreed
upon that a continuous sharing of experience in this
field may help develop and lead to a more simple,
transparent and competitive network access.’ (1)

V. COMPATIBILITY WITH THE COMMON MARKET

A. Dominant position of GVS

1. GVS has high market shares in the regional wholesale gas
market and is the main gas supplier in Baden-Württem-
berg

2.4. A s

th e Commi ssi on ca n not a ssu me w i th
t h e
t h e g a s m a r ke ts w i l l
i t must r e ly on
th e
of
i n

t h e r e qu i r e d de g r e e of c e r ta i nty th at
c h a r a c t e r i s t i c s of
c h ang e i n th e sh or t te r m,
t h e
c onc er ne d mar ke ts whi c h a r e r e g i onal
sc ope

c h ar a cte r i sti cs

c ur r e nt

(30) As regards the future VVIII, VVII specifies that VVIII
should be ready for gas year 2003/2004. However there
are no indications at present as to how the business
associations concerned will address the issues outlined in
recital 24. Therefore,
for the purpose of the present
assessment the Commission cannot take into account
the impact of the future VVIII on the development of
the gas markets in Germany.

(31)

In the light of the above, it can be concluded that the
relevant gas wholesale market is currently regional
in
scope and that the conditions for competitors outside
Baden-Württemberg to enter this area will improve only
gradually over the coming years. GVS's business activ-
ities are regional gas distribution and transportation
using and operating a gas transport system (network of
pipelines)
the
Baden-Württemberg.
geographic market to be considered in the present case
is the State of Baden-Württemberg.

Therefore,

in

2.5. B a de n -Wü r tt e mb e r g consti t u te s a su b st a n-

t i a l p a r t of t h e c ommon ma r ke t

(36)

(32)

The quantities of gas supplied in the State of Baden-
Württemberg roughly correspond to those supplied, for
example, in Austria or in Denmark. Therefore, Baden-
Württemberg constitutes a substantial part of
the
common market.

(1) VVII, paragraph 6.2.4: ‘Bis zum 30.9.2003 werden die Unterzeich-
nerverbände ein verbessertes Konzept entwickeln, welches die
folgenden Ziele erreicht: mehr Wettbewerb und Transparenz als
bisher, einfachere Bedienung und Nutzung, Börsenfähigkeit, Diskri-
für Massengeschäft/Transaktionsu-
minierungsfreiheit,
nabhängigkeit, Bilanzkreisfähigkeit, Kostenzuordnung nach Verursa-
cherprinzip. Das verbesserte Konzept wird rechtzeitig vor Beginn
des Gaswirtschaftsjahres 2003/2004 in Kraft gesetzt. Die Unter-
zeichnerverbände sind sich darin einig, dass ein stetiger Erfahrungs-
und Meinungsaustausch zu diesem Thema den einfachen, transpar-
enten und wettbewerbsfähigen netzzugang begleiten und fördern
soll.’

Eignung

(33) GVS owns and operates a transport system of approxi-
mately 1 881 km in Baden-Württemberg, including two
compressor stations and two smaller storage facilities.
The main gas flow direction is North to South with
Lampertheim, Amerdingen, Zoltingen, Michelbach and
Willstätt being the most important entry points into the
GVS pipeline system. These entry points are served
through the international
transport systems MEGAL
(owned by Ruhrgas and Gaz de France), TENP (owned
by Ruhrgas and ENI/SNAM) and MIDAL (owned by
Wingas). GVS is supplied with gas by Wingas accounting
for [less than 20 %] (*) of GVS's supplies. The remainder
is supplied by Ruhrgas.

(34)

The regional wholesale gas market in Baden-Württem-
berg comprises a consumption of [70-90] * billion kWh
in 2001. On this market level only GVS, Ruhrgas, and
Wingas are active. GVS had a market share of [more
than 75 %] * on the market for regional wholesale, the
remaining [less than 25 %] * were supplied by Ruhrgas
and Wingas.

(35) GVS

has

concluded

supply
contracts with its customers, as can be seen in table 1
below.
supply contracts end
between now and 2008, the remainder run until 2015.

long-term wholesale

[40 %-50 %] * of

the

Table 1

GVS's supply contracts in Baden-Württemberg

Name of the Stadt-
werk

Contractual expira-
tion date

Annual supply
volume (2001, GWh)

[Total supply 60 000—80 000 GWh] *

The current supply contracts between GVS and its custo-
mers are based on a standard contract model named LV
III. This model (version of 1 March 2000) foresees a
contractual duration until 30 September 2015. Supply
contracts based on LV III model contain no possibility
for an early termination and only limited flexibility in
terms of adaptation of volume and price.

2. Conclusion

(37) On the basis of GVS's market share of [more than
75 %] *, it can be assumed that GVS enjoys a dominant
position.

(*) Parts of this text have been edited to ensure that confidential infor-
mation is not disclosed; those parts are enclosed in square brackets
and marked with an asterisk.

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B. Future potential for changes in the gas supply

market

1. Although GVS will remain dominant in the near future
there are indications that GVS may face a certain degree of
competition in the coming years

(38)

There are indications that some of the factors which
currently hamper any significant competition in the
regional wholesale market may be changed to such an
extent in the foreseeable future that at least a limited
degree of competition would be conceivable. This is in
particular true of the completion of the Wingas long-
distance gas pipeline Südal and the expected decision of
the German Federal High Court on the long-term exclu-
sive gas supply agreements.

2. Completion of

the Wingas

long-distance gas pipeline,

Südal

(39) As one of the wholesale gas importers, Wingas owns
and operates a system of pipelines which allows it to
transport gas long distance. Its existing pipelines have
also enabled Wingas directly to supply Stadtwerke and
industrial customers located in areas along the path of
its pipelines. In this case, Wingas does not need to go
through the network of a competitor such as GVS but
builds dedicated connections from its main transporta-
tion pipeline to its customers.

(40) At present, a section of Wingas's pipeline system covers
a small area in the north-west of Baden-Württemberg.
Wingas currently supplies three Stadtwerke located in
that area: Stadtwerke Weinheim, Stadtwerke Heidelberg
and Stadtwerke Schwäbisch Hall which recently switched
from GVS to Wingas.

(41) However, Wingas is currently building a new pipeline,
called Südal, which is likely to be completed by the end
of 2004. This pipeline would enable Wingas to transport
gas from Russia and supply cities and industrial custo-
mers in areas such as München and Augsburg in Bavaria
as well as Stuttgart in Baden-Württemberg. Given the
density of industrial and municipality customers in the
areas across which the pipeline will run, Wingas may
appear as a viable competitor to GVS in a substantial
part of Baden-Württemberg from 2005 onwards.

the relevant exclusive long-term contractual clauses
infringed German as well as Community competition
law (paragraphs 1, 19 and 20 of the German law against
restriction of competition (3) and Articles 81 and 82 of
the EC Treaty) and therefore were deemed invalid.

(43) As regards the consequences of the invalidity of the rele-
vant exclusive long-term contractual clauses, the German
Court of Appeal of Düsseldorf rejected the possibility to
resort to the safeguard clause contained in the contract,
in order to adapt the contractual gas volume or the
duration of the contract. The German Court of Appeal
of Stuttgart did not follow the German Court of Appeal
of Düsseldorf in this respect, since it did not rule out the
possibility that the safeguard clause form the basis of an
appropriate and necessary adaptation. Therefore,
it
rejected the claim that the entire contract should be
invalidated. As a consequence, customers would be free
to source at least a certain percentage of their current
supplies from a different supplier.

(44)

The judgement of the German Court of Appeal of Stutt-
gart has been appealed and the German Federal High
Court has accepted the appeal for legal review. An oral
hearing is foreseen to take place in April 2003.

(45) Depending on the approach to be taken by the German
Federal High Court, it is possible that customers would
be in a position to source at least a certain percentage of
their supplies from a different supplier. This in turn
would make it more attractive for new competitors, such
as Wingas, but also gas dealers and wholesale suppliers
in neighbouring areas, to become active in Baden-Würt-
temberg. It is true that in the current state of the market
incentives for new competitors to become active in
Baden-Württemberg are poorly developed. This is mainly
the result of a combination of two different factors.
Firstly, transmission, though being legally and technically
feasible, is still difficult because of the current conditions
for
transmission as outlined in recitals 22 to 29.
Secondly, and more importantly, customers are bound
to their current supplier on the basis of
long-term
contracts.

3. Judgements
agreements

on the

long-term exclusive

gas

supply

(46)

(42)

The long-term exclusive supply clauses contained in the
long-term gas supply contracts have been subject
to
court proceedings in the German Court of Appeal of
Düsseldorf (1) and in the German Court of Appeal of
Stuttgart (2). Both courts came to the conclusion that

(1) OLG Düsseldorf,

Judgement
U(Kart)31/00, ‘Thyssengas./. Stadtwerke Aachen AG’.

of

7.11.2001, Aktenzeichnen:

(2) OLG Stuttgart, Judgement of 21.3.2002, Aktenzeichnen: 2 u 136/
01, ‘Gasversorgung Süddeutschland GmbH./. Stadtwerke Schwäbisch
Hall GmbH’.

In a situation, however, where at least a certain percen-
tage of the demand will be open to competition, compe-
titors have a chance to step in and gain customers. This
is evident for a company such as Wingas which builds
dedicated connections from its main transportation pipe-
line in order to supply customers and, therefore, does
not need to go through GVS's network. However, even
competitors such as gas dealers and wholesale suppliers
in neighbouring areas which have to go through GVS's
network could profit from this development, at least to a
certain extent, particularly if conditions for transmission
improve in the longer term.

(3) Gesetz gegen Wettbewerbsbeschränkungen (GWB).

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Official Journal of the European Union

L 248/57

4. Conclusion

(47)

In the light of the above, it is concluded that there are
indications that GVS may face a certain degree of
competition in the medium term. This will be in parti-
cular the case due to the completion of the Südal pipe-
line by the end of 2004 and the opening up of the long-
term supply contracts on the basis of the expected judge-
ment by the Federal High Court which,
in turn, will
enable customers to source at least a certain percentage
of their supplies from a different supplier (1).

EnBW's participation in Stadt-
werke in Baden-Württemberg
(indirectly and directly), with
gas supply

Share in capital
in %

Gas supply in
2001 (GWh)

EVS-Gasversorgung
GmbH, Stuttgart

Süd

51,00

[…]*

Equity consolidated participation:

[…] *

C. Strengthening of GVS's dominant position

Non-consolidated participation:

(48)

The proposed concentration will strengthen GVS's domi-
nant position in Baden-Württemberg through down-
stream vertical integration foreclosing a substantial part
of GVS's current customers.

[…] *

[Total supply: more than 30 000 GWh] *

1. EnBW controls a substantial part of

the downstream

market of gas distribution

(49)

In Baden Württemberg, EnBW is active on the market
for local gas distribution, which is the downstream
market
in relation to the regional wholesale of gas,
through participation in Stadtwerke. The volumes sold
by GVS to undertakings which are controlled by EnBW,
that is, the volumes sold to Stadtwerke in which EnBW
holds a majority shareholding, correspond to [more than
20 %] * of the regional wholesale market as shown in
table 2 below. If all shareholdings of EnBW are consid-
ered,
the volumes sold by GVS to those Stadtwerke
correspond to [more than 30 %] * of the regional whole-
sale market.

Table 2

(50) However, EnBW's downstream market position is even
stronger since its subsidiaries also supply gas on the
basis of long-term contracts to independent Stadtwerke,
that is to say, Stadtwerke where EnBW has no participa-
tion. Table 3 shows the Stadtwerke which are supplied
with gas by EnBW's subsidiaries Neckarwerke Stuttgart
AG (NWS), EnBW Gas GmbH (EnBW Gas), EVS-Gasver-
sorgung Nord Energie GmbH (EGVN), EVS-Gasversor-
gung Süd GmbH (EGVS) and EnBW Ostwürttemberg
DonauRies AG (ODR) as regional distributors.

Table 3

Customers supplied by EnBW's subsidiaries

EnBW's participation in Stadtwerke in Baden-Württemberg

Name of the
Stadtwerk

Supplier

Contractual
expiration date

Annual supply
volume (2001,
GWh)

EnBW's participation in Stadt-
werke in Baden-Württemberg
(indirectly and directly), with
gas supply

Share in capital
in %

Gas supply in
2001 (GWh)

[Total supply less than 7 000 GWh] (*)

(*) customers where EnBW is a shareholder

100 % consolidated participation:

EVS-Gasversorgung
GmbH, Stuttgart

Nord

100,00

[…]*

EnBW Gas GmbH, Karlsruhe

100,00

EnBW
DonauRies AG, Ellwangen

Ostwürttemberg

99,48

[…]*

[…]*

Neckarwerke Stuttgart AG,
Stuttgart

86,27

[…]*

Badenwerk
Karlsruhe

Gas

GmbH,

72,00

[…]*

(1) This is without prejudice to the consequences of possible changes in
the framework of the implementation of Community legislation.

2. Without the present operation EnBW would have a strong
incentive to profit from developments in the coming years,
such as the completion of the Wingas long-distance gas
pipeline, Südal

(51) As outlined in recitals 39 to 41, Wingas is currently
building the new Südal pipeline, which is likely to be
completed by the end of 2004. The new pipeline will
run across an area of Baden-Württemberg where the
density of industrial and municipality customers is very
high, namely the Stuttgart area. The investigation carried
out by the Commission has revealed that dedicated
connections from main transportation pipelines are a
viable supply alternative up to a distance of 20 to 25
kilometres on both sides of the pipeline. Accordingly, a
corridor of 40 to 50 kilometres around the new Südal
pipeline would be the potential supply area for gas
supply via dedicated pipelines.

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Official Journal of the European Union

30.9.2003

(52)

(53)

(54)

(56)

In this respect, it should be noted that the EnBW's subsi-
diaries NWS, EGVN and EGVS as well as the following
Stadtwerke in which ENBW has
shareholdings are
located in this area: Energieversorgung Gaildorf OHG,
Stadtwerke Esslingen am Neckar GmbH, Gasversorgung
Dornstadt GmbH, Energieversorgung Rottenburg am
Neckar GmbH, Gasversorgung Pforzheim Land GmbH,
Stadtwerke Sindelfingen GmbH, Stadtwerke Schwäbisch
Gmünd GmbH, FairEnergie GmbH, Reutlingen, Stadt-
werke Nürtingen GmbH, Stadtwerke Fellbach GmbH.

EnBW's subsidiary NWS is one of the bigger customers
of GVS accounting for [20 %-30 %] * of
its current
supplies. NWS's supply contract will end in 2008.
Without the proposed transaction, EnBW would have a
strong incentive to explore competitive alternatives for
NWS future gas supplies, namely supply through Südal
via dedicated pipeline available in the market from 2005
onward.

3. As a shareholder of GVS EnBW would be more interested
in GVS's economic performance and, therefore, rather use
its influence to secure GVS's current supplies

It is true that even before the proposed operation, EnBW
has a certain interest in GVS's economic performance
since EnBW's subsidiary NWS is one of the 10 share-
holders in GVS, with a stake of 33,40 %. As a result of
the proposed operation, however, EnBW would jointly
control GVS which, in turn, would double its interest in
GVS economic performance. As EnBW would have a
stronger interest in GVS's economic success as a share-
holder of GVS, EnBW's subsidiaries would negotiate with
GVS as EnBW's preferred supplier once an existing
supply contract came to an end. In this respect, it can be
concluded that GVS would be able to secure supply
contracts if its offer was at least equally acceptable as
those of its competitors. Other shareholders in these
subsidiaries would have no reason to oppose EnBW's
preferred supplier where the company had no direct or
indirect disadvantages resulting from a supply by GVS.
In addition, EnBW could use its decisive influence as a
shareholder in GVS to adapt GVS's offers in a way that
least affected GVS's and EnBW's profitability.

on

Stadtwerke's

It is true that, in those companies, EnBW does not have
the same influence to direct the future gas sourcing as in
its subsidiaries. In this respect, even in Stadtwerke where
EnBW has only a minority participation, EnBW holds
seats on the companies' boards, either on the board of
directors or in the supervisory board. Thus, EnBW has
representatives
boards,
[15-25] *
amounting,
in total, to [50-70] * representatives. This
presence at least enables EnBW to obtain information on
competing supply offers made by gas suppliers other
than GVS. Consequently, GVS would be in a better posi-
tion to match the conditions of competing offers. There-
fore, even for the companies in which it holds minority
shareholdings, EnBW's presence secures GVS preferred
access to those clients, allowing it
to secure supply
contracts if the other shareholders of the client do not
perceive any economic disadvantages compared to
supply by a competitor of GVS.

(57) As a result of the proposed operation, GVS would thus
be in a position to secure sales to EnBW's subsidiaries of
[20 %-30 %] * of its current customer base which corre-
sponds to [20 %-30 %] * of the gas volumes it presently
sells in the relevant market. If all shareholdings of EnBW
are considered, those percentages are arguably higher.
Conversely, the relevant part of consumption would be
(in the case of EnBW's
withdrawn from the market
subsidiaries), to the detriment of other suppliers, or at
least would risk being subject to some degree of fore-
closure.

4. Conclusion

(58) As outlined under recitals 38 to 47 competition will be
economically and legally feasible to a limited extent in
the coming years. This limited competition will be elimi-
nated to a significant extent through the vertical down-
stream integration resulting from the proposed opera-
tion. It cannot be assumed that EnBW's subsidiaries and
the companies in which it holds shares will make use of
the
arising through the
completion of the new Wingas pipeline and the antici-
pated opening up of supply contracts for at
least a
certain percentage of supplies. This, in turn, will lead to
a significant strengthening of GVS's dominant position
in the near future.

competitive opportunities

(55) Moreover, EnBW has a high number of minority share-
holdings in Stadtwerke as shown in table 3 above. Even
for those companies where EnBW has a non-controlling
participation the concentration could have a comparable
result in terms of securing future supply for GVS, as
outlined in recital 54, at least to a certain extent.

(59)

Therefore, it is concluded that, in the current state of the
regional wholesale gas market, the proposed concentra-
tion would strengthen GVS's dominant position in
Baden-Württemberg due to EnBW's activities on the
downstream market.

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L 248/59

VI. UNDERTAKINGS

(66)

(60)

(61)

The decision to initiate proceedings adopted by the
Commission pursuant to Article 6(1)(c) of the Merger
Regulation already raised the competition concerns
outlined in this Decision.
the notifying
Parties proposed commitments aiming to remedy these
concerns at an early stage of the in-depth investigation.

In response,

1. Undertakings offered by the notifying Parties

In order to address the issue on the foreclosure effect of
the proposed operation, the notifying Parties undertake
to grant a special right whereby each local distribution
company, customer of GVS in Baden-Württemberg, irre-
spective of whether EnBW holds a participation in it or
not, can terminate early its supply contract
it
concluded with GVS. The special right of early termina-
tion can be exercised at two different points in time.
Long-term contracts ending in 2008 can be terminated
in October (1) 2004 or October 2006;
those
either
ending in 2015 can be terminated either in October
2005 or October 2007. Customers will have to notify
their early termination six months in advance.

that

(67)

(62)

These special
termination provisions also extend to
contracts concluded between local distribution compa-
nies and Neckarwerke Stuttgart AG or EnBW Gas
GmbH (2), in both of which EnBW is a controlling share-
holder.

(68)

(63) Moreover, the undertakings proposed contain provisions
on reporting as well as the obligation on the notifying
Parties
local distribution companies
concerned of these special termination rights.

to inform all

2. Assessment of the undertakings

(64)

the notifying Parties
The proposed undertakings of
address the foreclosure effect by providing the possibility
of bringing substantial volumes of gas demand on to the
market much earlier than currently possible under the
long-term supply agreements. Even under the assump-
tion that all local distribution companies in which EnBW
holds participation would remain with GVS as their
supplier of gas, a potential volume of at least about
60 % of GVS's present sales could gradually come on the
market in Baden-Württemberg over the next years.

(65) Moreover, by expanding the early termination rights to
the customers of NWS and EnBW Gas outlined in table
3 and in recital 50, those customers will have the possi-
bility of early termination of their supply contracts with
NWS and EnBW Gas. If one disregards customers which
are either EnBW subsidiaries or where EnBW has a parti-
cipation, an additional 5 % of gas volume could come
gradually on the market in Baden-Württemberg over the
next years.

(1) October is typically the month of the year determining the begin-

ning of the one-year period for gas supply agreements.

(2) These supply contracts end all in 2008, i.e. the relevant customers
can exercise their right to early termination either in October 2004
or in October 2006.

The current supply contracts can be terminated for the
first time in 2004, for those contracts ending in 2008,
and in 2005, for those ending in 2015. In this respect, it
can be expected that conditions in the regional whole-
sale gas market may have changed by that time because
of the completion of the Südal pipeline and efficient
TPA rules allowing for some degree of competition to
take place.

In the current situation customers accounting for [40 %-
50 %] * of GVS's sales of gas are contractually bound
until 2008 and customers accounting for [50 %-60 %] *
of the sales are even bound until 2015. As a result of
the
in the undertakings
proposed by the Parties, at least 60 % of the gas volumes
sold by GVS will be opened up to competition in the
near future.

termination rights

early

of

the

competitive

disadvantages

The undertakings proposed by the Parties will improve
the conditions for competition in the regional wholesale
market in the coming years to an extent that clearly
outweighs
the
proposed operation. As a result of the proposed opera-
tion, companies accounting for a considerable part (see
recital 57) of the regional wholesale market would be
prevented from making use of the upcoming competi-
tive opportunities. Through the commitment proposed
by the Parties, however, at least about 60 % of GVS total
supply (60 % direct customer and 5 % indirect customer
supplied by NWS and EnBW Gas) will legally be able to
change supplier for 100 % of the respective supplies.
This extensive market opening taking place in the
coming years will mean that GVS's market position
becomes subject to competition and that the market
may benefit from the legal liberalisation, as it is gradu-
ally expected to evolve.

(69) Without these commitments, Stadtwerke, which repre-
sent [50 %-60 %] * of GVS's entire supplies, are currently
bound contractually to GVS until 2015. Under those
circumstances it can be expected that GVS would retain
its dominant position in Baden-Württemberg for the
next 13 years. This would be the case even if certain
volumes of long-term exclusive contracts were released,
within the coming years, due to the application of
national and/or Community competition law. On the
basis of the commitments, however, competitors, such
as Wingas in particular, will have the chance to win
customers to a significant extent in the coming years.
They will have the chance gradually to expand their
position in Baden-Württemberg, and to proceed on a
considerably better basis in the relevant market once all
the contracts currently in force have expired.

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the undertakings. This will result in a structural change
in the market. Sections III, IV and V of the undertakings
which refer to procedures shall be obligations upon the
Parties aimed at implementing the structural change in
the market.

VIII. CONCLUSION

(76)

It can be concluded from the foregoing that the under-
takings proposed by the notifying Parties will remove
implemented,
the competition concerns and thus,
render
the proposed operation compatible with the
common market. The operation should therefore be
declared compatible with the common market pursuant
to Article 8(2) of the Merger Regulation and with the
EEA Agreement pursuant to Article 57 thereof,

if

HAS ADOPTED THIS DECISION:

Article 1

The notified operation whereby Energie Baden-Württemberg
AG and ENI SpA would acquire joint control of the under-
taking Gasversorgung Süddeutschland GmbH within the
meaning of Article 3(1)(b) of Regulation (EEC) No 4064/89 is
declared compatible with the common market and with the
EEA Agreement.

Article 2

Article 1 is subject to full compliance with the conditions set
out in Sections I and II of the Annex.

Article 3

Article 1 is subject to full compliance with the obligations set
out in Sections III to V of the Annex.

Article 4

This Decision is addressed to:

The notifying Parties.

Done at Brussels, 17 December 2002.

For the Commission
Mario MONTI
Member of the Commission

(70) Against

this background and for

these reasons the
commitments will clearly outbalance the effects of the
proposed concentration. They appear to be at least as
effective as the divestiture of ‘Stadtwerke’ by the new
entity, a solution which would also involve, to a consid-
erable extent, activities which are unrelated to the
competition problems identified above (in particular
electricity, water and district heating) and are, probably,
inseparable (1).

(71) An outline of the proposed undertakings was presented
to a wide range of third Parties, including competitors
and all local distribution companies in Baden-Württem-
berg and companies located in neighbouring regions, for
from which potential
example, Bavaria and Hesse,
third-party
competition could be
commentators considered these proposals to be an
appropriate means to free gas volume from long-term
supply agreements and, in consequence, to resolve the
competition concerns raised by the proposed concentra-
tion.

expected. Most

(72)

(73)

(74)

The undertakings proposed by the Parties and accepted
by the Commission in this case in no way prejudice the
legal assessment of
the long-term exclusive supply
clauses or
the supply contracts as a whole, under
German or Community law.

VII. CONDITIONS AND OBLIGATIONS

the Merger Regulation,

Pursuant to the first sentence of the second subpara-
the
graph of Article 8(2) of
Commission may attach to its decision conditions and
obligations intended to ensure that
the undertakings
concerned comply with the commitments they have
entered into vis-à-vis the Commission with a view to
concentration compatible with the
rendering
common market.

the

the

The achievement of each measure that gives rise to a
structural change in the market is a condition, whereas
the implementing steps which are necessary to achieve
that result are generally obligations of the Parties. Where
a condition is not fulfilled, the Commission's decision
declaring
concentration compatible with the
common market no longer stands; where the undertak-
ings concerned commit a breach of an obligation, the
Commission may revoke its clearance decision, acting
pursuant to Article 8(5)(b) of the Merger Regulation, and
the Parties may also be subject to fines and periodic
penalty payments in accordance with Articles 14(2)(a)
and 15(2)(a) of the Merger Regulation (2).

(75)

In view of the above, this Decision must be conditional
upon the granting of the special right of early termina-
tion of supply contracts as set out in Sections I and II of

(1) NWS, for example, accounts for at least 20 % of GVS's total gas
sales. NWS, in turn, however, achieves only 23,7 % of its respective
turnover with gas. The remaining 76,3 % were achieved with its
other activities, of which electricity is
important,
accounting for 59 %.

the most

(2) Cf. the Commission Notice on remedies acceptable under Council
Regulation (EEC) No 4064/89 and under Commission Regulation
(EC) No 447/98(OJ C 68, 2.3.2001, p. 3).

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L 248/61

ANNEX

The full original text of the conditions and obligations referred to in Articles 2 and 3 may be consulted on the following
Commission website:

http://europa.eu.int/comm/competition/index_en.html