2004/271/EC: Commission Decision of 11 June 2003 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.2947 — Verbund/EnergieAllianz) (notified under document number C(2003) 1814) (Text with EEA relevance)
Date: 2003-06-11
Institutions: European Commission
Subjects: economic concentration, electrical energy, electricity supply, energy production, exchange of information, merger control

30.3.2004

EN

Official Journal of the European Union

L 92/91

COMMISSION DECISION

of 11 June 2003

declaring a concentration to be compatible with the common market and the EEA Agreement

(Case COMP/M.2947 — Verbund/EnergieAllianz)

(notified under document number C(2003) 1814)

(Only the German text is authentic)

Text with EEA relevance

(2004/271/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

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

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

by Regulation

amended

last

as

Having regard to the Commission decision of 4 February 2003
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),

Whereas:

(1)

On 20 December 2002 the Commission received
notification of a proposed concentration pursant
to
Article 4 of Council Regulation (EEC) No 4064/89 (the
undertakings
Merger
Österreichische Elektrizitätswirtschafts-Aktiengesellschaft
(Verbund), EVN AG (EVN), Wien Energie GmbH (Wien
Energie), Energie AG Oberösterreich (Energie OÖ),
Elektrizitätswirtschafts-Aktiengesell-
Burgenländische

The Austrian

Regulation).

(1) OJ L 395, 30.12.1989, p. 1; corrigendum in OJ L 257, 21.9.1990,

p. 13.

(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 79, 30.3.2004.
(4) OJ C 79, 30.3.2004.

(2)

(3)

(4)

(5)

für

AG

and

Linz

(Bewag)

schaft
Energie,
Telekommunikation, Verkehr und Kommunale Dienste
(Linz AG) planned to acquire within the meaning of
Article 3(1)(b) of the Merger Regulation joint control of
E & S GmbH (E & S) and Verbund Austrian Power
Trading AG (APT). EVN, Wien Energie, Energie OÖ,
Bewag and Linz AG were to manage their interests
EnergieAllianz Austria
under
jointly
(EnergieAllianz).

name

the

The Commission examined the notification, and found
that the notified concentration fell within the scope of
the Merger Regulation and raised serious doubts as to
its compatibility with the common market and with the
the Agreement on the European
functioning of
Economic Area (the EEA Agreement).

On 4 February 2003, therefore, the Commission decided
to initiate proceedings
to
Article 6(1)(c) of the Merger Regulation and Article 57
of the EEA Agreement.

case pursuant

in the

a

the

case

thorough investigation of

After
the
Commission has come to the conclusion that in itself
the notified concentration would indeed strengthen a
dominant position as a result of which effective
significantly impeded in a
competition would be
substantial part of
the
common market. But
the
competition concerns to which the transaction gave rise
have been overcome by the commitments entered into
by the notifying parties.

I. THE BUSINESS OF THE PARTIES

Verbund generates and transmits electricity and supplies
it to industrial customers and to electricity distributors;
it also trades in electricity. Verbund is the biggest
and operates
electricity generator
the
in Austria,
high-voltage grid throughout
the country with the
exception of Vorarlberg and the Tyrol. Verbund deals
through a 55 % subsidiary,
with large

customers

L 92/92

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Official Journal of the European Union

30.3.2004

in

the

holding

Verbund — Austrian Power Vertriebs GmbH (APC); the
bulk of the other shares in APC, which do not carry
controlling rights, are held by Energie Steiermark
Holding AG (Estag), a company which is itself controlled
jointly by the Land of Styria and the French electricity
supplier Électricité de France (EdF). Verbund and Estag
also jointly own Steweag-Steg GmbH (Steweag-Steg),
in Styria, Verbund
which is a regional distributor
holding 34 % of
Estag 66 %;
and
capital
Steweag-Steg differs from APC in that here Verbund and
Estag exercise joint control (5). Verbund has a minority
Kelag — Kärntner
35,12 %
Elektrizitäts-Aktiengesellschaft
is
controlled by an intermediate holding company owned
jointly by the Land of Carinthia and the German
company RWE AG (RWE). Verbund also has interests in
companies that supply electricity to households on the
these interests
liberalised Austrian electricity market;
currently
Unsere
stakes
Wasserkraft GmbH & Co. KG (Unsere Wasserkraft),
which is a joint venture with Estag (6), and MyElectric
Stromvertriebs GmbH (MyElectric), which is controlled
und
by
für
Telekommunikation (Salzburg AG). Verbund itself
is
controlled by the Republic of Austria, which holds 51 %
of the shares.

Salzburg

Energie,

Verkehr

(Kelag),

include

which

20 %

AG

in

(6)

in Lower Austria (EVN),

The members of EnergieAllianz distribute electricity
regionally,
the Vienna area
(Wien Energie), Upper Austria (Energie OÖ), the Linz
area (Linz AG) and Burgenland (Bewag); this includes
supplying to final consumers. Energie OÖ also has a
26,13 % stake in Salzburg AG, the regional supplier in
the Land of Salzburg. With the exception of Bewag, the
members of EnergieAllianz all generate electricity. The
members also distribute gas and heat regionally, and
provide services relating to transport, the environment,
waste management, waste disposal, telecommunications
the
and cable television. Majority holdings
regional
members of EnergieAllianz
authorities.

are held by

in all

(7)

(8)

II. THE TRANSACTION

the

and

planned

capacity

consolidate

of Verbund

transaction would

the
The
electricity business of Verbund and EnergieAllianz in
two joint ventures, E & S and APT. The electricity
generation
Land
corporations that are members of EnergieAllianz would
continue to be in separate ownership. But generation
would be directed by the trading company APT, which
would be owned 67 % by Verbund and 33 % by
EnergieAllianz. The electricity generated in Verbund's
and EnergieAllianz's power stations would be supplied
exclusively to APT. APT would handle electricity trading.
APT would also supply electricity to E & S, which would
be owned 67 % by EnergieAllianz and 33 % by Verbund.
E & S would deal with all the large customers formerly
with EnergieAllianz or Verbund which have an annual
consumption of more than 4 GWh, and would supply
them with electricity. APT would supply electricity to
the
of
EnergieAllianz, and those corporations would supply
commercial customers with a consumption of 0,1 to
4,0 GWh and household customers up to 0,1 GWh.
APT would also supply electricity to the remaining Land
corporations that are not party to the transaction and
the city corporations outside the areas supplied by
EnergieAllianz.

corporations which

are members

Land

III. CONCENTRATION

million,

APT and E & S are to be subject to the joint control of
Verbund and EnergieAllianz. The agreement of both
sides on the supervisory board, or in the case of E & S
on the shareholders' committee, would be needed for
investments of over EUR […]*(*)
the
determination of general principles of business policy
(including the principles of pricing and product policy),
and the conclusion of purchase and supply contracts for
an amount of more than […]* TWh a year and a
duration of more than […]* years. On the management
board the agreement of both sides would be needed for
important items such as production and sales planning
on a multiannual, annual, monthly, weekly and daily
basis, and for ‘day ahead' operations. Strategic decisions
would require
the agreement of both sides at a
consortium meeting (Syndikatsversammlung).

(5) Commission decision of 14 December 2001 in Case COMP/M.2485

— Verbund/Estag, paragraph 7.

(6) This company previously traded under the name RWA Wasserkraft,
and was
it was
subsequently renamed Unsere Wasserkraft;
originally owned 50:50 by Verbund and Raiffeisen Ware Austria AG
(RWA): Commission decision
2001 in
Case COMP/M.2541 — RWA/Verbund/JV. At the end of 2002 all of
RWA's shares and part of Verbund's shares were sold to Estag.

of 17 September

(9)

APT and E & S are to be linked together by this
consortium meeting, which would be common to the
them and on which they would be equally
two of
represented. APT would handle procurement for E & S.

(*) Parts of

this text have been edited to ensure that confidential
information is not disclosed: those parts are enclosed in square
brackets and marked with an asterisk.

30.3.2004

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Official Journal of the European Union

L 92/93

(10) APT and E & S would be performing on a lasting basis
all the functions of autonomous economic entities. They
would have their own management and sufficient
financial, personal,
tangible and intangible resources,
and on the markets on which they operate they would
play an active role.

(15)

(11)

The transaction therefore constitutes a concentration
within the meaning of Article 3(1)(b) of the Merger
Regulation.

IV. PROCEDURE

(12)

The Commission examined the notification and found
that the notified concentration fell within the scope of
the Merger Regulation and raised serious doubts as to
its compatibility with the common market and with the
functioning of the EEA Agreement. On 4 February 2003,
therefore,
initiate
proceedings in the case pursuant to Article 6(1)(c) of
the
the Merger Regulation
EEA Agreement.

and Article 57 of

Commission

decided

the

to

V. A COMMUNITY DIMENSION

The combined aggregate worldwide turnover of all the
undertakings concerned is more than EUR 5 000 million
(in 2001: Verbund EUR 1 784 million, EVN EUR
1 015 million, Wien Energie EUR 1 822 million,
Energie OÖ EUR 2 042 million, Bewag EUR 165 million
and Linz AG EUR 427 million) (9). More than two of
the undertakings have an aggregate Community-wide
turnover of more than EUR 250 million (in 2001:
Verbund EUR […]* million, EVN EUR […]* million,
Wien Energie EUR […]* million, Energie OÖ EUR
[…]* million and Linz AG EUR […]* million). The
undertakings in EnergieAllianz achieve more than two
thirds of their aggregate Community-wide turnover in
Austria, but Verbund achieves less than two thirds of its
aggregate Community-wide turnover
in Austria. The
notified concentration therefore has a Community
dimension within the meaning of Article 1(2) of the
Merger Regulation. It is not a case for cooperation with
the
the
EEA
EEA Agreement.

Surveillance

Authority

under

(13) On 10 April 2003 the Commission, in accordance with
Article 18 of the Merger Regulation, sent the notifying
parties a statement of objections, to which they replied
by letter of 25 April 2003. At the notifying parties'
request a hearing was held on 29 April 2003, which
was attended by the notifying parties and a number of
third parties. After proceedings were initiated and after
the hearing took place there were discussions between
the Commission and the notifying parties in which the
notifying parties were kept abreast of the progress of
the case.

VI. APPRAISAL PURSUANT TO ARTICLE 2 OF THE
MERGER REGULATION

A. The structure of the Austrian electricity
industry

1. The legal framework

(14) On 12 May 2003 the notifying parties

submitted
commitments which they proposed to enter into. The
Commission carried out a market test, in the course of
which it consulted third parties;
it concluded that the
commitments proposed were not sufficient to resolve
the competition concerns raised by the transaction, and
then
informed the parties accordingly. The parties
modified the commitments in such a way that
the
Commission can now clearly determine, on the basis of
its assessment of information already received in the
course of the investigation, including the results of prior
market
the need for any other
market
the competition problems that had
been identified have been resolved. The proposed
changes
submitted in
consultation of
to allow proper
sufficient
Member States, as required by the Commission notice
on remedies acceptable in accordance with Council
Regulation (EEC) No 4064/89 and in accordance with
Commission Regulation (EC) No 447/98 (the remedies
Notice) (7), (8).

testing, and without
test,

commitments were

to the
time

that

(16) Until 1999 the electricity industry in Austria was
governed by the second Nationalisation Act of 1947,
tasks and
which provided for a strict division of
far-reaching territorial protection for the undertakings
operating in the industry. Verbund was essentially
responsible
for generating energy in large power
stations, building and operating transmission grids, and
trading in electricity with foreign countries. The nine
Kelag
Bewag
Land
(Carinthia), EVN (Lower Austria), Energie OÖ (Upper
Austria), Salzburg AG (Salzburg), Steweag (Styria),
and Wienstrom
Tiwag
(Vienna) and the five city corporations in the Land
capitals Graz, Innsbruck, Klagenfurt, Linz and Salzburg
distributed electricity to all categories of customer in
their own areas. What the Land corporations did not
generally obtained from
generate
Verbund.

(Tyrol), VKW (Vorarlberg)

(Burgenland,),

corporations,

themselves

they

(17)

The Electricity Market Directive was initially transposed
into Austrian law by the Electricity Industry and

(7) OJ C 68, 2.3.2001, p. 3, paragraph 43.
(8) The full text of these modified commitments is attached in the

Annex to this Decision.

(9) Turnover calculated in accordance with Article 5(1) of the Merger
Regulation and with the Commission notice on calculation of
turnover (OJ C 66, 2.3.1998, p. 25).

L 92/94

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Official Journal of the European Union

30.3.2004

(18)

(19)

Act

(Elektrizitätswirtschafts-

Organisation
und
Organisationsgesetz). From 19 February 1999 all
final
consumers with an annual electricity consumption of at
least 40 GWh, or from 1 February 2000 20 GWh,
became entitled to access to the grid, and could freely
choose their electricity supplier. From 19 February 1999
operators
a
transmission network at their disposal, essentially the
Land and city corporations, were also entitled to grid
access.

networks who

distribution

had

of

In 2000 the Energy Liberalisation Act carried the
liberalisation of the Austrian electricity market further.
Since 1 October 2001 all customers are entitled to grid
access,
sales
their
volume, and are free to choose their supplier. The
coordination contracts between Verbund and the Land
corporations came to an end the same day.

consumption or

irrespective of

Producer

Output
(GWh)

Share of total
output
(%)

Wienstrom (c)

EVN (c)

Linz AG (b)

Bewag

Kelag

Salzburg AG

Tiwag (c)

VKW incl. VIW (a)

Other electricity suppliers
and industry

[1 000-6 000]*

[1 000-6 000]*

[0-4 000]*

0

[1 000-6 000]*

[0-4 000]*

[1 000-6 000]*

[1 000-6 000]*

[0-10]*

[0-10]*

[0-10]*

0,0

[0-10]*

[0-10]*

[0-10]*

[0-10]*

[10 000-15 000]*

[15-25]*

Total output (a)

62 250

100

Estimated.
Financial year 2000/01.

(a)
(b)
(c) Calendar year 2001.
Source: The parties, citing company reports and E-Control statistics.

The legal responsibility for market supervision and the
protection of competition, in particular industry-specific
regulation and supervision of unbundling,
rests on
Energie-Control GmbH (E-Control), which is a company
formed under private law and wholly owned by the
there is an
Republic of Austria. Above E-Control
independent
the Energy
state supervisory authority,
Control Commission, which is responsible for deciding
on appeals
taken by E-Control,
approving grid access charges, and settling disputes over
the granting of grid access.

against decisions

2. Present situation of electricity generation and supply

(21) Austria is divided into three control areas. Each of the
two western Länder, Vorarlberg and the Tyrol,
is a
control area by itself, and forms part of the German
control block. All the other Länder together, accounting
for by far the larger part of the country, make up the
eastern control area, or Austrian power grid (APG) area,
which is a separate control block. Here Verbund
operates the high-voltage grid, and as the control area
manager it is responsible under the rules of the UCTE
for maintaining a balance between generation and
consumption by providing or withdrawing balancing
energy.

(20)

In 2001 a total of 62 250 GWh of electricity was
generated in Austria. Hydroelectric production consisted
of 29 494 GWh from run-of-river power stations and
12 340 GWh from reservoir power stations. In 2001,
therefore, 67,2 % of total generation was in hydroelectric
power stations. Thermal stations generated 20 416 GWh,
the total. The following table shows the
32,8 % of
breakdown of electricity generation between the main
undertakings operating in this sector:

(22)

Table 1

Electricity generation in Austria in 2001

Producer

Verbund

Steweag-Steg (a)

Energie OÖ (b)

Output
(GWh)

Share of total
output
(%)

(23)

[20 000-25 000]*

[30-40]*

[1 000-6 000]*

[1 000-6 000]*

[0-10]*

[0-10]*

Land

corporations — the members

The
of
EnergieAllianz plus Steweag-Steg in Styria, Salzburg AG
in the Land of Salzburg, Kelag in Carinthia, Tiwag in the
Tyrol,
the
and VKW in Vorarlberg — operate
distribution grid in their traditional supply areas. They
obtain electricity both from Verbund and from their
own power stations and to some extent also from
foreign suppliers and energy traders.

corporations

supply
Both Verbund and the Land
electricity to final consumers. There are also a large
number of smaller local and private electricity supply
undertakings operating as distributors and supplying to
final consumers, some of whom currently have their
own generation capacities.

30.3.2004

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Official Journal of the European Union

L 92/95

B. Relevant product markets

supply to large customers, electricity trading including
supply to distributors and the provision of balancing
energy.

1. Introduction

(29)

consumer, by reason of

(24) A relevant product market comprises all those products
and/or services which are regarded as interchangeable or
substitutable by the
the
products' characteristics, their prices and their intended
use. The main tests indicated in the Commission notice
on the definition of relevant market for the purposes of
relevant market
Community competition law (the
definition notice)
supply
substitution and potential competition (10).

are demand substitution,

In their reply to the statement of objections, and at the
the parties changed their standpoint on the
hearing,
precise classification of
supply to large and small
customers. They now take the view that in this area a
distinction has to be drawn between price-oriented and
service-oriented
price-oriented
customers, price is the only decisive criterion in the
choice of a supplier of electricity, while service-oriented
customers need additional services such as full supply,
energy management or balancing energy, and will
consequently look at the quality of those services too
when choosing an electricity supplier.

customers.

For

( a ) T h e p a r t i e s ' a c t i v i t i e s o v e r l a p

(25)

The proposed concentration would group together the
existing electricity sales activities of Verbund and
EnergieAllianz.

consumers

and large

commercial

The parties' activities overlap essentially in supply to
industrial
(large
customers) and distributors, and in electricity trading,
and to a lesser extent in supply to households and small
businesses (small customers, in Austria also commonly
known as
also some
tariff
overlapping in the supply of
the balancing energy
needed to maintain a balance between generation and
consumption.

customers). There

is

(26)

(27)

(30) According to the parties view as they explained it at the
hearing, the price-oriented customers market includes
some distributors, namely the large regional suppliers
(large distributors, also known as ‘Land suppliers' or
‘Land corporations'), and the municipal utilities in Land
capitals;
few large
customers (11). All
in electricity
trading belong to the price-oriented customers market.
(small distributors) and large
All other distributors
customers belong to the
service-oriented customer
market. The provision of balancing energy continues to
be regarded as a separate market.

only
taking part

includes
those

very

but

it

the power

it generates only inside

In the generation and transmission of electricity there is
no overlapping between the parties' activities on the
market, because each party's power generation branch
supplies
the
organisation, so that power is available to the market
not at the generation stage but only at the downstream
commercial stage, while grid operation is in each case a
natural monopoly. But the position of the parties in the
generation of power must be taken into account when
assessing the effects of the concentration on the relevant
markets.

(31)

The Commission has already had occasion to consider
in the Verbund/Estag
market conditions
case (12). But
it open whether the
market in the supply of electricity in Austria should be
segmented by customer group.

in Austria,
that decision left

(32)

( b ) D i s t i n g u i s h i n g t h e r e l e v a n t p r o d u c t

m a r k e t s

In the present case the Commission has come to the
conclusion that, as suggested by the notifying parties,
there are separate relevant markets in supply to small
and small
customers,
distributors
as
‘service-oriented'), and supply to large distributors and
electricity
as
‘price-oriented').

customers
the

(described

(described

to large

traders

parties

parties

supply

the

by

by

(28)

The parties initially suggested that there were separate
relevant product markets in supply to small customers,

(10) OJ C 372, 9.12.1997, p. 5, paragraphs 7 and 13 et seq.

(11) One such being Österreichische Bundesbahnen (ÖBB), the federal

railway.

(12) Commission Decision

of
COMP/M.2485, Verbund/Estag.

14 December

2001

in Case

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Official Journal of the European Union

30.3.2004

(33)

In the present Decision it will not be necessary to
determine

(a) whether a distinction should be made between
to large

relevant product markets
customers and supply to small distributors;

in supply

(b) whether a distinction should be made between
to large

relevant product markets
distributors and supply to electricity traders;

in supply

(c) whether for competition purposes the provision of
balancing energy constitutes a separate relevant
product market.

1. Supply to final consumers: distinction between large and

small customers

(34) Although the Austrian market

the parties take the view that

is fully liberalised in
the
regulatory terms,
should be
supply of electricity to final consumers
divided into separate relevant product markets,
in
supply to small customers (private households, small
businesses and farms) and large customers (industry and
large commercial consumers); the parties now bracket
‘service-oriented
large customers in the category of
customers'. As a dividing line between large and small
customers, the parties propose the consumption and
load values below which under
legal
provisions in force in Austria standardised load profiles
are applied. Under the law as it stands, customers with
an annual consumption of
less than 100 000 kWh a
year, or in other words less than 0,1 GWh a year, or a
connected load of
than 50 kW, are offered
less
standardised load profiles.

the general

(37)

(38)

(35) According

to the

information assembled by

the
Commission in this proceeding, the supply of electricity
should indeed be segmented, as the parties propose,
into a market
in supply to small customers and a
market in supply to large customers (industrial and large
the Commission's enquiries
commercial consumers);
further
any
not
have
differentiation (13).

identified

grounds

for

(36) As

the parties

submit, and as

enquiries

confirm,

there

are

the Commission's
substantial differences

between the demand behaviour of large customers and
mass customers. Large customers are usually more
price-sensitive, and correspondingly more ready to
change suppliers than small customers are. Negotiating
power and conduct of negotiations are also different.
This is reflected in different sales strategies adopted by
the energy suppliers and a different level of prices. For
large customers value for money and flexibility of
supply are the major considerations, while for mass
customers there is a further marketing differentiation
(for example between ‘clean energy', especially from
domestic hydroelectric sources, and electricity from
fossil
and a qualitative
approach to customers.

fuels or nuclear

energy),

too helps

Large customers and mass customers usually take power
to
at different voltage levels, and this
differentiate them. It is true that the voltage at which
electricity is supplied is not in itself a barrier to entry, in
for
view of
the
through-transmission. But
the voltage at
which current is delivered, the higher the share of the
entire bill accounted for by the grid itself. The relative
advantage to the customer of a change of suppliers is
therefore lower at lower grid voltages with higher grid
prices.

stamp tariff' payable
the lower

‘postage

2. Supplying distributors: distinction between regional

distributors (Land corporations) and smaller distributors

they

classify

The parties initially argued that all supply to distributors
the electricity trading
should be considered part of
market, because the business of a distributor largely
matches the accepted definition of electricity trading,
namely the purchase and sale of electricity with a view
to gain. This classification also matches the practice of
Austrian electricity suppliers in their company reports,
where
and
supply
distributors together in the single category of ‘trading'.
In their
statement of
objections, and at the hearing, the parties changed their
position to argue that a specific group of distributors,
namely the
included
among the ‘service-oriented' customers, along with
industrial
consumers. They
pointed to similar prices, similar purchasing behaviour
and a need for
the
necessary power itself.

reply to the Commission's

small distributors,

to wholesalers

commercial

should be

and large

additional

alongside

services

to be separated from the other

(13) Consideration might possibly be given to the question whether a
limited number of very large consumers, such as ÖBB for example,
ought
large customers, and
excluded from the large customers market (or the large customers
and small distributors market). But this would not ultimately affect
the structure of the large customers market and consequently its
assessment for competition purposes, and if this segment is indeed
assessed separately no competition concerns in fact arise.

(39) According

to the

information assembled by

the
Commission, supply to the large regional distributors or
Land suppliers and supply to all other distributors must
indeed be assigned to separate relevant product markets.

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L 92/97

( a )

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

large

unlike

customers,

large customers, as their power requirements are not the
same (15). And
smaller
distributors compete within their own supply areas with
other, bigger distributors,
the
members of EnergieAllianz,
to supply to certain
categories of final consumer (usually small customers
with an annual consumption of less than 0,1 GWh and
commercial customers with an annual consumption of
0,1 to 4,0 GWh).

including especially

(40)

for

electricity

from smaller

enquiries have

established that
The Commission's
demand
distributors,
including all the municipal and local utilities and private
utilities (14), is clearly distinct from demand from large
distributors or indeed from the trading market. Small
distributors, whose annual turnover is in most cases
well below 500 GWh, are usually supplied under annual
or multiannual supply contracts, often coupled with a
full supplier contract that makes it unnecessary to buy
any additional energy and includes delivery of whatever
balancing energy is required. Because of their small size
these distributors have not got
financial and
administrative capacities they would need in order to
engage in active purchasing management on trading
markets. They therefore depend on long-term, stable
supply contracts, usually with just one seller, typically
an upstream regional supplier. For the same reasons,
separate purchase of balancing
these
distributors is at present the exception rather than the
rule. As the parties indicated at the hearing, full supply
with electric power is a core element, linking supply to
small distributors to the market for large customers.

energy by

the

(41) However,

the
there is also evidence to suggest
terms of supply to small distributors are different from
those of supply to industrial and large commercial
consumers. The small distributors supply mainly to
households and small firms, and given this customer
structure their purchasing behaviour differs from that of

that

and

also

them,

to the

the parties

excluding Verbund

(14) That is to say all Austrian distributors with the exception of the
Land suppliers (the EnergieAllianz companies plus Steweag-Steg,
Salzburg AG, Kelag, Tiwag and VKW) and the companies
and
associated with
EnBW Austria. In their reply to the Commission's statement of
objections
the
classification of some municipal utilities in Land capitals was not
straightforward, because their purchasing behaviour was closer to
small
that of
distributors. But this question is of no importance here, because
the precise classification of these municipal utilities does not affect
either the assessment for competition purposes of the market in
supply to small distributors
large customers and small
(or
distributors) or of the market in supply to large distributors (or the
market in electricity trading including supply to large distributors).

transaction argued that

the Land supplier

than to that of

the other

(42)

For the purposes of this Decision, however,
it is not
necessary to reach a final
judgment on the question
supply to small distributors constitutes a
whether
relevant product market of its own, separate from the
large customers market. It is clear that supply to small
distributors, who depend on full supply contracts, is in
any case not to be assigned to the same market as
supply to regional distributors or
energy traders.
Whether we suppose that there is one market in supply
to large customers and small distributors, or
two
separate markets, the transaction at issue would in any
case create or strengthen a dominant position on both
of these conceivable markets.

( b ) T h e r e i s n o n e e d t o d e c i d e w h e t h e r

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

(43)

Supply to the big Austrian distributors (Land suppliers,
Land corporations),
is to say the members of
EnergieAllianz and Steweag-Steg, Salzburg AG, Kelag,
Tiwag and VKW, is clearly distinguished by a number of
features from supply to smaller distributors.

that

entire

suppliers drew their

to which they were

(44) Until the Austrian electricity market was liberalised, the
requirements of
Land
electricity, apart from what they produced themselves,
bound by
from Verbund,
coordination contracts. When the market was fully
liberalised on 1 October 2001, and the coordination
contracts came to an end, the Land suppliers became
supply. Given the
free to choose their
volumes of electricity they need and their greater
financial and administrative capacities,
they are in a
stronger position than the small distributors to take
practical advantage of the scope legally open to them.

sources of

(15) This may be the reason why, as many small distributors have told
the Commission,
their suppliers give to small
distributors are less favourable than those offered to industrial and
large commercial consumers. This is contested by the notifying
parties.

the terms that

L 92/98

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30.3.2004

The regional suppliers take their electricity requirements,
apart from what they generate themselves, partly from
Verbund and partly from other Land suppliers, foreign
electricity suppliers and the trading market. They do not
usually conclude full supplier contracts, but conduct
their own energy management and make their own
arrangements
and
balancing energy.

to procure

additional

volumes

the Land
smaller distributors. As already explained,
suppliers' customers usually take all of their electricity
requirements (beyond what
they generate themselves)
from one and the same supplier. To guarantee their
customers full supply of this kind, the regional suppliers
depend on long-term fixed contracts for the greater part
of their electricity requirements at least.

The parties contend that supply to the Austrian regional
suppliers forms part of the broader market in energy
trading. But the Commission's enquiries provide clear
in supply to the regional
evidence that
suppliers has to be distinguished from the electricity
trading market proper.

the market

(49)

For this reason most of the electricity required by the
Land suppliers cannot be met
through short-term
exchange dealings. Whether more long-term supplies
purchased OTC on the open market would be sufficient
is not clear from the Commission's enquiries; at least
one regional supplier stated that the electricity trading
markets had not got
the necessary liquidity for this
either.

(45)

(46)

Electricity trading is to be understood as the buying and
selling of electricity at one's own risk and for one's own
account. In earlier decisions the Commission has found
in the process of
energy trading to be a market
formation, which was made possible only by customers
of
being
a
liberalisation (16).
traders
with no generating capacity or grid of
their own,
electricity traders include, on the supply side and to
some extent on the demand side as well, electricity
generators, distributors and importers.

In addition to independent

the wake

choice

given

free

in

(47)

Electricity trading can be divided essentially into the
following categories:

(51)

(a) over-the-counter

trading, where individual
bilateral contracts are negotiated and concluded
outside any central exchange or marketplace;

(OTC)

the

recently

(b) trade in physical electricity products on exchanges;
founded
Exchange
Energy
on
in Graz, spot deliveries are
Alpen-Adria (EXAA)
traded in the form of single-hour contracts, and
beginning in 2003 dealing in electricity futures will
also be possible;

(c)

trade in non-physical financial derivatives, known as
energy derivatives, which is only at its initial stages,
and in Austria still plays only a minor role.

(48)

Land

The
final
consumers (large customers and tariff customers) and

corporations

essentially

supply

(50) Although all

this suggests that

there is a separate
relevant product market in supply to the large regional
suppliers,
the question can remain unanswered here,
because the transaction would not create or strengthen
a dominant position on such a market.

3. Balancing energy

The supply of electricity differs from most other product
markets in that electricity cannot easily be stored and
the amount of energy to be supplied is not known with
any precision in advance. Consumption forecasts are
incorporated into schedules and load profiles. But the
forecasts do not as a rule coincide with actual consumer
behaviour. Specially generated balancing energy is
therefore needed to ensure that the difference between
electricity output and load is always met.

(52)

The balancing energy needed to maintain a balance
between production and consumption in a control area
is provided

(a) by adjusting the volume of electricity generated
inside the control area (this is known as secondary
regulation);

(b) by drawing on what is called the minute reserve,
which is an additional regulatory instrument that
can be called upon in the short term;

(16) Decision of 28 September 1999 in Case IV/M.1557, EdF/Louis
Dreyfus, paragraphs 16 to 18; decision of 13 June 2000 in
Case COMP/M.1673, VEBA/VIAG (OJ L 188, 10.7.2000, p. 1),
paragraph 18.

(c)

if complete adjustment cannot be achieved either by
secondary regulation or out of the minute reserve,
by ‘involuntary exchange' between a control area
and the surrounding UCTE control areas.

30.3.2004

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Official Journal of the European Union

L 92/99

(53)

(54)

(55)

(56)

(57)

the

take

competitive
The parties
conditions for the provision of balancing energy are so
different
the other electricity supply
markets that there is a separate relevant product market.

from those of

view that

the

The position of the parties in the provision of balancing
energy, especially in the form of the minute reserve, is a
factor
that helps to create or strengthen dominant
positions on several electricity supply markets. This is
so whether or not the provision of balancing energy,
and especially of the minute reserve, is itself a separate
relevant product market. For purposes of this Decision,
the provision of
therefore,
balancing energy in the definition of product markets
can remain open.

the precise treatment of

C. Relevant geographic market

conditions

The relevant geographic market comprises the area in
which the undertakings concerned are involved in the
in which
supply and demand of products or services,
the
sufficiently
homogenous and which can be distinguished from
neighbouring
of
because
competition are appreciably different within those areas.
supply
The main tests
substitution and potential competition (17).

are demand substitution,

competition

conditions

areas

the

are

of

The notifying parties consider that in the case of supply
to large customers, distributors and energy traders, the
relevant geographic market
reaches beyond Austria,
while in the case of small customers it is confined to
Austria. They take the view that the relevant geographic
market in supply to large customers includes Austria
and Germany, essentially because of the capacity of the
interconnectors
can be
imported especially from Germany. They also argue that
the liberalisation of the electricity market pursuant to
the Electricity Market Directive, which has been fully
implemented in Austria, has opened the Austrian
market to foreign suppliers, and that this liberalisation
the relevant
must be reflected in the definition of
geographic market for purposes of merger control.

through which electricity

in
The Commission's enquiries have established that,
accordance with the criteria for the definition of the
in the
geographic market,
supply
small
to
of
distributors and small customers do not extend beyond
Austria. A possible market in supply to large regional
distributors may be wider.

the geographic markets
customers,

electricity

large

(58)

(59)

(60)

1. The market or markets in supply to large customers and
small distributors and the market in supply to small
customers are purely domestic

( a ) T h e s t r u c t u r e a n d t h e l e g a l f r a m e w o r k

o f t h e e l e c t r i c i t y m a r k e t s i n A u s t r i a a r e
f u n d a m e n t a l l y d i f f e r e n t f r o m t h o s e o f
t h e n e i g h b o u r i n g c o u n t r i e s

indicates that

The breakdown of market shares between the parties
and their competitors on the electricity supply markets
in Austria is fundamentally different from that in the
neighbouring countries or in the EEA as a whole, and
this in itself
in geographic terms the
relevant markets are confined to Austria (18). It will be
the main
enough here to point out
electricity suppliers at EEA level, such as EdF, E.On,
RWE or Enel, has a market share of 5 % or more of the
market in supply to small customers, large customers or
small distributors in Austria. The same applies to the
main competitors on the German electricity markets,
E.On, RWE, EnBW and Vattenfall. And no Austrian
electricity supplier has a share of 5 % or more of any
electricity
neighbouring
supply market
Member State or at EEA level.

that none of

in

a

The legal framework in Austria is quite different from
that
In
in neighbouring Switzerland or Germany.
Switzerland the Electricity Market Directive does not
apply. In Austria and Germany the Directive has been
implemented in very different ways: in Germany, there
is negotiated network access under what is known as an
associations agreement, and competition supervision by
is
the Bundeskartellamt;
given against
an
independent regulator has been set up.

in Austria, network access
stamp tariff',

‘postage

and

a

( b ) E l e c t r i c i t y i m p o r t s a r e m i n o r i n t h e

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

Imported electricity plays only a relatively small part in
supply to Austrian electricity customers. At the level of
in
are
energy

substantial dealings

trading

there

(17) Relevant market definition notice (see footnote 10), paragraphs 8

and 13 et seq.

(18) Relevant market definition notice (see footnote 10), paragraph 28.

L 92/100

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Official Journal of the European Union

30.3.2004

(61)

(62)

electricity, especially between Germany and Austria (19),
but at the level of structured supply to final consumers
and small distributors there are only limited exports of
electricity from Germany to Austria.

sales

to large customers

In 2002 total
in Austria
amounted to 25,6 TWh. The Commission's enquiries
have established that deliveries to large customers by
German suppliers (EnBW and E.On) (20) amounted to
less than 1 TWh. This is less than 3 % of total sales to
large customers in Austria. The Swiss supplier Atel did
not
supply any large customers. The Commission's
market investigation did not give any indication that
this situation might change decisively in the near future.

investigations

The same applies to small distributors. In the course of
the Commission asked Austrian
its
distributors to state their electricity suppliers. Out of
75 private, municipal or local electricity utilities only
one customer, a purchasing association of
smaller
distributors, said it had been supplied by a foreign
electricity supplied to the 75
supplier. The
in 2002 was about 3 500 GWh. The
distributors
amount
to the
purchasing association of smaller distributors in that
year was less than 200 GWh. This is less than 3 % of
total sales to small distributors in Austria. Since then the
foreign supplier has lost this customer, to Steweag-Steg,
in which Verbund has a holding.

supplied by the

foreign supplier

total

( c ) F o r e i g n s u p p l i e r s h a v e s o f a r r e s p o n d e d
t o A u s t r i a n i n v i t a t i o n s t o t e n d e r o n l y
t o a l i m i t e d e x t e n t , a n d h a v e
p r a c t i c a l l y n e v e r s e c u r e d c o n t r a c t s

(63)

Since the liberalisation of supply to large customers,
those customers have changed their supplier
in an
appreciable number of cases. But as a rule the new
to small
supplier was Austrian. The same applies
distributors, who have been less inclined to change than
large customers. When tenders were called for, foreign
suppliers put in bids only in a very few cases. The
foreign suppliers involved were mainly EnBW in the

(19) Austria traditionally exports peak-load power to Germany and

imports base-load power from Germany.

(20) In Austria RWE supplies final consumers only through its Austrian
subsidiary Kelag. Vattenfall has no dealings with final consumers
in Austria.

big

case of large customers and Atel in the case of smaller
distributors. In invitations to tender for supply contracts
since the liberalisation, the 123 customers questioned in
the enquiries (48 industrial and large
the course of
commercial
chain
including
consumers,
customers (21), and 75 smaller distributors) had asked
foreign suppliers to submit a bid only in what was very
much a minority of cases, and in almost all such cases
the foreign supplier was EnBW. Only very rarely did
foreign suppliers secure the contract. Once again the
sole exception was EnBW: four of the 123 customers
surveyed awarded the electricity supplier's contract to
EnBW in the year 2000, eight in 2001, and 12 in 2002.
The first and second alternative suppliers were as a rule
Austrian suppliers too, with the exception of EnBW in a
few cases. EnBW's share of the market in supply to large
customers was similarly small, at well below 3 %. Atel's
share of the market in supply to small distributors was
always well below 5 %. Other foreign suppliers did not
operate in Austria, with the exception of a marginal
presence of E.On on the large customer market (22).

(64)

Thus foreign suppliers export mainly on a wholesale
basis, but do not deliver to final consumers and supply
smaller distributors only to a limited extent.

( d ) A l t h o u g h t h e r e a r e n o t e c h n i c a l

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

(65)

The small part played on the market by foreign
suppliers cannot be attributed to technical barriers to

to large

in respect of bids made

(21) ‘Chain' customers are customers that draw power from a large
number of supply points. An example would be big retail chains.
(22) At a late stage in the proceedings the parties submitted figures for
customers of
conduct
EnergieAllianz, which suggest that conduct in respect of bids to
these customers was somewhat different. But the sample submitted
by the parties is considerably smaller than the sample used in the
Commission's investigation. In addition, the sample, with very few
exceptions, includes no small Austrian distributors. In addition, it
is not clear how many bids attributed to foreign suppliers
genuinely originated with those suppliers, or how many bids were
competitive offers that would have been seen by customers as
possible alternative sources of supply. The bulk of foreign bids
came from EnBW. For the other German suppliers the parties'
figures confirm the statements made here.

30.3.2004

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Official Journal of the European Union

L 92/101

(66)

(67)

access. The parties rightly point out that there are no
bottlenecks in the interconnectors between Germany
and Austria or between Switzerland and Austria. The
interconnectors have a capacity equal to some 25 % of
Austrian electricity consumption (23). In purely technical
terms, therefore, substantial imports would be possible.

Inside the eastern control area, however,
there is a
bottleneck between north and south. The two 380 kV
grids are linked by lines with the lower 220 kV voltage
level. Bottlenecks of this kind are ultimately barriers to
for consumption in areas
imports. Large deliveries
beyond the bottlenecks can quickly overload the grid.
The grid operator then has to intervene and manage
electricity flows in order to restore the security of the
grid.

for maintaining

The transfer charge payable for through-transmission of
electricity to another control area (the cross-border
tariff, or ‘CBT') acts as a barrier to entry only to a
limited extent. As has already been said, Austria is
divided into three control areas. In the eastern control
area, comprising the entire country with the exception
of Vorarlberg and the Tyrol, and in the east of the Tyrol
too, Verbund operates the high-voltage grid and is
responsible
the balance between
production and consumption. The Vorarlberg and Tyrol
control areas belong to the German control block. It is
true that on electricity transmitted direct from Germany
to the eastern control area there is a transfer charge of
EUR 0,5/MWh (24). But if the same electricity is routed
through Vorarlberg and the Tyrol there is in fact no
transfer charge to be paid. On legal grounds no transfer
charges are payable on through-transmission between
control areas inside Austria, and because the Vorarlberg
and Tyrol control areas belong to the German control
block
for
through-transmission from Germany to those areas
either.

transfer

charge

there

no

is

(68)

Competitors have submitted, however, that there are a
number of barriers to access that make it very difficult

(23) Source: UCTE, Statistical Yearbook 2001. The notifying parties
quote a figure over 25 %, because they refer exclusively to the
thermal transfer capacity of the interconnectors. But according to
E-Control, only the net transfer capacity is relevant in practice,
because that calculation takes account of
the whole grid and
makes projections on the basis of the weak points: it asks what
capacities are in practice available on the interconnectors in order
to ensure steady network operation in the event of the failure of a
circuit or transformer.

(24) The European Association of Transmission System Operators,
ETSO, is currently in the closing stages of discussion of a complete
abolition of transfer charges with effect
from 2004, and their
replacement by other methods of setting prices for cross-border
transfers of electricity.

(69)

(70)

for them to enter the market; these include:

— distribution and customer acquisition costs;

— the required minimum size of the balance group;

— the fragmentation of network operators; and

— the need for a large proportion of hydroelectric
power in the electricity mix, especially in the case of
small customers.

to be taken in respect of
the

The effect of these barriers to access is that the Austrian
markets in supply to large customers, small distributors
and small customers are still not integrated with the
German markets, even though there are no major
so despite the measures
technical barriers. This
is
already taken or still
the
electricity market
single market
as part of
programme, and especially the new Electricity Market
Directive shortly to be enacted (25). These measures are
that were
intended to open up domestic markets
the
another,
previously
Commission's enquiries
sought-after
the
results are not certain and immediate enough to justify
the conclusion that the relevant geographic market is in
fact
to the
forthcoming enlargement of
the European Union,
because for the integration of the electricity markets in
Austria and those of neighbouring candidate countries,
the Czech Republic, Slovakia, Hungary and Slovenia, the
technical and economic requisites are satisfied to a far
smaller extent than they are in the case of integration
with the markets of Germany.

larger. The same applies with respect

from one

show that

isolated

but

the distribution costs

Because of
that have to be
incurred, entry to the Austrian market with a view to
long-term supply to distributors and large customers is
worthwhile only if a certain minimum number of
customers can be secured. As well as bearing the costs
of establishing distribution arrangements, which are
needed for any market entry, a new supplier entering
the market has to set up a balance group which is big
enough to keep the risk of having to pay for balancing
energy within reasonable limits. The offset between
unexpected consumption surpluses and deficits is easier
within a big balance group than it is within the balance
group of a new entrant, which is necessarily small: such
competitors
percentage
requirement of balancing energy, involving a higher risk
of increased costs, to make up what they cannot meet
themselves for lack of generating capacity of their own
in the control area.

inevitably have

a higher

(71)

That the costs of balancing energy, and especially the
cost risk they involve, form a very appreciable barrier to

(25) Relevant market definition notice (see footnote 10), paragraph 32.
On the proposed amendment of the Electricity Market Directive,
see paragraph 103.

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Official Journal of the European Union

30.3.2004

entry was stated by the overwhelming majority of
market participants
in the Commission's market
investigation.

(72) A further cost factor in Austria is the fragmentation of
network operators. At local level Austria is covered by
more than 100 network operators, each with its own
through-transmission costs. This makes market entry
difficult for suppliers who do not possess a detailed
knowledge of the market. Even though larger industrial
firms often take electricity at higher network levels, and
are
consequently less affected by the number of
operators at the lower network level, this fragmentation
in the lower segments of the large customer market
does have the effect of a barrier to market entry.

(73)

(74)

a

component

sizeable hydroelectric

In addition, for marketing reasons, a new entrant has to
have
in the
electricity mix in order to supply small customers. In
Austrian electricity generation hydroelectric power plays
a paramount role, accounting for more than 67 % of
total generation. Especially in the case of supply to
small customers, this has the effect of a further barrier
to entry. A substantial proportion of small Austrian
customers attach great importance to ‘clean' electricity,
that is to say electricity generated using domestic water
power rather than fossil or nuclear fuels. On the small
customers market, therefore, Austrian energy suppliers,
an
whose
additional advantage over foreign suppliers, who have to
ensure
of
hydroelectric power and build up an appropriate brand
image for their small customer business.

is mainly hydroelectric, have

availability

sufficient

capacity

have

they

that

that

prices

a
for

argues

in electricity

A study commissioned by the parties from the firm
relatively small
Frontier Economics
increase
large Austrian
customers, of around [0 to 5 %]*, would be enough to
make the investment in distribution costs and customer
acquisition costs on entering the market profitable in
the short to medium term. Applying the ‘SSNIP' test, the
conclusion is that the relevant market extends beyond
Austria. The following points need to be made here.

(75)

The Frontier Economics study does not — as the SSNIP
test would suggest — explain satisfactorily how an
increase in the prices of the incumbent (regarded as a

and

undertaking)

the
hypothetical monopolistic
subsequent movement of customers to one or more
new market entrants would affect its profitability. Even
if a new market entry coincides with a small but
permanent price increase (in the range of 5 to 10 %) by
the monopolistic undertaking and the undertaking loses
market share as a result, this still does not prove that it
would not profit from the price increase nevertheless,
on account of
in the profit
a marked increase
margin (26).

the

Another crucial weakness in the Frontier Economics
model is that it fails to take sufficient account of real
competitive prices, basing itself on notional prices
instead (27). These notional prices are higher than the
real prices for two reasons. First, the study erroneously
equates ‘opportunity costs' (which serve as a basis for
the hypothetical calculation of the competitive price in
the market for large customers) with (wholesale) trading
prices, and in so doing fails to take account of the fact
that the vendor on the (wholesale) trading market incurs
(opportunity) costs over and above its production costs
(i.e.
profit
and
margins (28). If these are taken into account, it is clear
that the sale of electricity on the (wholesale) trading
market becomes less attractive for Austrian producers
than direct sales to final consumers, and hence that the
large customers in Austria is
competitive price for
overestimated (29). Second,
the Commission's market
investigation revealed that retail prices in the Austrian
market for large consumers are often lower than the
(wholesale)
therefore
overestimates the actual competitive prices in Austria
and hence the scope for profit
for a new entrant
following a further price increase.

achievable

trading

prices.

price)

study

cost

The

the

The statements made by market participants suggest
that the parties' assumption regarding the acquisition
discount
is also
to be granted by new entrants
somewhat unreliable. On this evidence, it seems highly
than
probable that
assumed by the parties and that even according to the
parties' model — which is based on hypothetical

in fact higher

the discount

is

(76)

(77)

(26) Relevant market definition notice (see footnote 10), paragraph 17.
(27) ‘Since the market for service-oriented customers is in a transitional
phase, and the historical prices for last year (2002) give little
indication of the prices to be expected in this and subsequent
years, we use a hypothetical approach as a basis for calculating the
(Frontier Economics, Gutachten zur Frage der
competitive price'
Marktabgrenzung, p. 61).

(28) For more details see recital 89.
(29) Conversely, these costs, which — except for the CBT — also fall
on the buyer, push up the possible arbitrage costs of a new
entrant wishing to sell traded electricity to final consumers in
Austria.

30.3.2004

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Official Journal of the European Union

L 92/103

assumptions — entry would become profitable in the
short
term only after a price increase of well over
5 % (30).

presented by the parties in the Frontier Economics
study.
Indeed, when other real factors are taken into
account, the most likely conclusion appears to be that
far more than 5 %
in some cases price increases of
would certainly be profitable
a hypothetical
for
monopolistic undertaking in the market to supply large
customers and small distributors in Austria.

(78)

To sum up, there are serious doubts as to the practical
scenario
relevance

the validity of

and hence

the

for

the

the

that

request

contrast,

to argue

impossible

investigation

Commission's market

reply to the Commission's

(30) For example, the Frontier Economics study bases its estimate of
the short-term profitability of a new entrant — who retains
customers for one year — on the assumption of a [<1 %]*
acquisition discount for customers with an annual consumption of
over 100 GWh and a discount of [<5 %]* for customers with an
annual consumption of 4 to 20 GWh and 20 to 100 GWh. In
their
information of
2 May 2003, the parties extended this assumption of a [<5 %]*
discount to large customers with an annual consumption of 0,1 to
4 GWh.
By
of
undertakings whose competitive situation in the eastern control
area is comparable to that of a new entrant came up with average
values which, at the upper end of the scale, were 300 %, 63 %,
100 % and 183 % (for customers consuming >100 GWh, 20 to
100 GWh, 4 to 20 GWh and 0,1 to 4 GWh) higher than the
assumptions made in the Frontier Economics study. Even at the
lower end of the scale only one value, that of the 20-100 GWh
customer group, fell within the range of the study's assumptions,
whereas the other three values were in some cases much higher,
by 50 % for the over 100 GWh group, by 25 % for the 4 to
20 GWh group, and by 133 % for the 0,1 to 4 GWh group. It is
therefore
study's assumptions
correspond to the real market conditions on this crucial point.
In reply to the Commission's request for information of 2 May
2003, the parties presented a sensitivity analysis of the study's
results in relation to higher acquisition costs. However,
this
analysis went no further than acquisition costs that were 50 %
higher than the original estimates. As explained above, in some
cases this lies well below the results of the market investigation.
However, even on these assumptions a price increase of over 5 %
was
required to make a profit on customers with annual
consumption of 4 to 20 GWh and 20 to 100 GWh. For large
customers consuming 0,1 to 4 GWh the profit threshold of new
entrants was a price increase of over 5 % even without any
increase in the assumed acquisition costs in the context of a
sensitivity analysis (no such analysis was undertaken by the
parties).
(For this group of customers the market investigation
showed that acquisition costs were 133 % to 188 % above the
value stated by the parties. This suggests that an increase in prices
of well over 10 % would be needed before profitability could be
reached in this customer group.)
So a critical view of
the assumptions made in the Frontier
Economics study leads to the conclusion that price increases of
well over 5 % would be required to make market entry profitable
in the short term under the Frontier Economics model.
Note on the market investigation: the Commission asked for the
views of seven undertakings which are sufficiently familiar with
the market in Austria and whose market position in the eastern
control area is comparable to that of a market entrant, namely the
German undertakings E.On and EnBW, the Swiss firm Atel, the
western Austrian suppliers Tiwag and VKW and two undertakings
that are operate only in the lowest segment of the large customer
market — MyElectric and Ökostrom. The Commission received
replies from six of the seven undertakings, which in some cases
quoted an upper and a lower limit on discounts for the one-year
customer acquisition of market entrants. The question they were
asked was,
‘In your experience, what is the first-year acquisition
discount which your firm may obtain from a supplier at present
for the same electricity product in order to induce a customer in
the APG area to switch supplier? Please give this discount as a %
of the net electricity price (excluding through-transmission costs
and extra charges).'

( e ) T h e r e t a i l p r i c e l e v e l i s l o w e r i n
A u s t r i a t h a n i n t h e n e i g h b o u r i n g
M e m b e r S t a t e s

(79)

(80)

In addition to all these barriers to entry, there is the
decisive point that the level of the prices charged to
large customers in Austria is well below the German
level. According to information supplied by the parties,
the gap in prices to industrial customers was about
20 % in 2001, and in the case of households it was
twice as big (31).

assessed the

In their reply to the statement of objections and at the
hearing the parties claimed that
there was already
substantial convergence of retail prices in Germany and
the parties failed to produce any
Austria. However,
this claim, which runs
concrete evidence to support
counter to statements by other market participants. The
statements by large
Commission has
customers and small distributors
regarding the net
energy prices they have paid from 2000 to 2003. This
statistical analysis shows that, overall, the prices paid in
Austria by the market participants consulted appear to
have remained at the same level since the end of 2001.
On average prices fell substantially in 2001 — by
around 15 % for large customers and by around 20 %
for small distributors. After another slight drop in 2002
(around 0 to 5 % for large customers and around 5 to
10 % for small distributors), prices rose again slightly in
2003 by an average of around 2 to 5 % for large
customers and small distributors. Combined with the
abovementioned statements by the parties on price
levels in Austria in 2001,
this means that prices in
Austria must still be well below those in Germany,
especially as the parties do not assume a drop in prices
in Germany.

(81) A major factor in this difference in prices is the low
average production costs of Austrian hydroelectric
generators. Against
that
hydroelectric
schemes do not necessarily enjoy a
production cost advantage, because their capital costs
are higher than those of other power stations. But this
argument is not convincing, for the following reasons.

parties

argue

this

the

(31) Presentation,

‘Österreichische Stromlösung',

January 2002, p. 9.
Prices for consumption of 24 GWh per year. Source: Eurostat,
international regulators.

L 92/104

EN

Official Journal of the European Union

30.3.2004

is

power

generated

[…]* years. Of

(82) A large proportion of Austrian electricity production is
hydroelectric based. This applies especially to Verbund:
hydroelectric power accounts for [about 90 %]* of its
[More than two thirds]* of
total electricity output.
Verbund's
in
hydroelectric
run-of-river power stations, and [less than one third]* in
reservoir power stations. From information on the cost
structure of hydroelectric stations
supplied by the
parties it appears that run-of-river power stations are
written off over a period of
the
electricity generated by Verbund in run-of-river power
stations, [well over half] is generated in stations more
than […]* years old; the bulk of Verbund's hydroelectric
production is therefore extremely cheap. By [the year
…]* another [… %]* of Verbund's run-of-river capacity
will have been fully written off. From information
supplied by Verbund it also appears that the period of
depreciation of reservoir power stations is […]* years.
Of Verbund's reservoir station output, […]* is generated
in stations more than […]* years old. By [the year …]*
another […]* of Verbund's reservoir station capacity will
have reached the limit for full depreciation. Less than
[10 to 30 %]* of Verbund's reservoir station output
comes from power stations built in the last […]* years.

draw towards the German level. According to the
wholesale prices recorded by Platts, the price differences
shrank further in 2002 and came close to German
prices. The parties conclude that
in
Austria is not a barrier to entry.

the price level

(86) When seeking to define the geographic market, however,
one must not look at the cost price, that is to say the
wholesale price. Although many electricity customers
have a price adjustment clause in their contracts with
their suppliers which refers to the level of wholesale
prices, the final price is not identical to the wholesale
price.

(87)

Since liberalisation, prices to final consumers in Austria
have been well below prices
in the neighbouring
Member States, as shown above. In the case of prices to
small customers, the parties do not dispute this fact. But
in particular
customers
retail prices
fell
began. Although
liberalisation
appreciably when
wholesale prices have risen in Austria in recent years,
retail prices have not moved to the same extent. They
continue to be below the level of prices
in the
neighbouring Member States.

to large

(83)

In the case of more recent run-of-river stations (and one
thermal station) another cost factor of potential benefit
to Verbund is the possibility of claiming compensation
for ‘stranded costs' (32).

(88)

(84)

For these reasons it can be accepted that the largest
Austrian electricity producer, Verbund, has a favourable
production cost base. This finding can be extrapolated
to Austrian electricity production as a whole.

(89)

(85) However,

since
liberalisation wholesale prices in Austria have tended to

the notifying parties

submit

that

(90)

(32) In order to compensate for the higher costs of unprofitable power
stations that were built in the expectation of continued monopoly
rights and on the basis of obligations imposed and guarantees of
operation given by the authorities (stranded costs), the Electricity
Market Directive provides that aid may be granted for a limited
time. By decision of 25 July 2001 the Commission authorised aid
of EUR 560 million for a number of run-of-river hydroelectric
stations and one thermal station belonging to Verbund (State aid
measure No N 34/99, Austria, compensation of stranded costs). The
parties point out that this decision is unlikely to be put into effect
in Austria. Nevertheless, a partial limit on production cost risks is
a beneficial cost factor.

pricing

policies

phenomenon,

by predatory

The parties to the merger argue that this situation is
pursued
explained
liberalisation, and can only be a
immediately after
transitory
Austrian
electricity producers would find it more economic —
even in the short term — to sell electricity on the
to final
international markets instead of supplying it
consumers
prices
lower
(arbitrage).

in Austria

otherwise

possibly

as

at

First of all it must be pointed out that if markets had
already been integrated the parties' explanation should
also apply to Germany, and the price level on retail
markets in Germany should therefore also have fallen
temporarily below the market price. However, this is
not the case, nor is any such claim made by the parties.
With regard to likely developments in the near future,
the parties'
the
is not
following reasons.

convincing,

argument

for

in the

transport

First, the sale of energy on the trading markets entails
significant costs and risks. When exporting energy for
trading purposes, Austrian electricity suppliers must
factor
costs, which consist of
through-transmission charges, network costs and the
CBT payable on electricity leaving Austria — currently
EUR 0,5 per MWh. Selling electricity on the trading
markets
also involves
administrative and other transaction costs (e.g. charges
for trading on the stock exchange). Moreover, demand
and prices are much more volatile on the trading

example, Germany

for

in,

30.3.2004

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Official Journal of the European Union

L 92/105

(91)

(92)

(93)

markets than in the retail business, while the risk of
default on the trading market is much higher, as the
Enron case has
shown. The notifying parties have
clearly taken these points on board. At the hearing they
cited as one of EnergieAllianz's main reasons for the
proposed merger its efforts to reduce its dependence on
the ‘volatile international trading markets'.

a

Second, according to the information available to the
Commission, Austrian undertakings have
strong
tendency to hold on to customers in their home supply
area. This is explained by the fact that the Austrian Land
suppliers are under the majority control of regional
authorities. There is also an economic justification for
this strategy in that the density of customers in a given
factor in calculating distribution
area is a pertinent
costs. This basic
strategy of Austrian
corporate
electricity suppliers, which is also pursued to a limited
extent by Verbund vis-à-vis ‘its' Austrian customers, will
continue to exist after
the merger and provide an
incentive to keep Austrian customers even at very
favourable prices. The Commission has even been told
that this fact alone — and the close customer relations
it generates — raises additional barriers to market entry.

and the
low,

switching rates of
so that

Austria this market still has strong local and regional
characteristics. It is true that it was not liberalised until
October 2001,
small
the overwhelming
customers are still
majority of
still obtain
and regional
electricity
distributors. The parties therefore deduce that at present
the traditional supply area of each Austrian distributor
constitutes a separate relevant geographic market
in
supply to small customers.

small Austrian customers

from their original

local

(96) However,

or

by

firms

reveal

statements

the parties

that
customers do switch to other Austrian regional
suppliers, in particular new suppliers such as Switch (a
subsidiary of EnergieAllianz), MyElectric and Unsere
Wasserkraft,
supplying
other
environment-friendly electricity, whether nationwide or
in the eastern control area. Small customers also come
together to form supra-regional purchasing pools and
organise their supplies of electricity at a level reaching
though still within Austria (33).
beyond their region,
This
the
integration of small customer markets within Austria,
without however extending the market beyond Austria's
borders.

is evidence of a definite

trend towards

low-cost

Finally, mention must also be made of the significant
volume of
in-house production in Austria,
which rules out any clear correlation between the cost
prices of Austrian electricity suppliers and prices on the
trading markets.

( g ) C o n c l u s i o n

For the abovementioned reasons it cannot be assumed
that developments in retail prices and in the prices for
supplying small distributors in Austria and Germany
will be driven by sufficiently homogeneous factors in
the foreseeable future, even if the cost factor of trading
prices were to behave in similar fashion. This is not
commercial
belied by
considerations, Austrian electricity suppliers,
including
the parties to the merger, are striving to increase profit
margins by tying retail prices as closely as possible to
risen
developments
sharply over the last two years.

in trading prices, which have

that, because of

fact

the

(94)

For the reasons set out, therefore, the lower price level
in Austria acts as a barrier
to entry. A significant
number of the parties' current and potential competitors
have confirmed as much in the market investigation.

( f ) S p e c i a l f a c t o r s i n d e f i n i n g t h e

g e o g r a p h i c m a r k e t f o r s m a l l c u s t o m e r s

(95) With regard to the relevant geographic market in supply
to small customers, the notifying parties argue that in

(97)

(98)

(99)

these reasons,

it must be supposed that

For
the
geographic markets in supply to large customers, small
distributors and regional suppliers do not extend beyond
Austria.

2. The market in supply to Austrian regional distributors

could extend beyond Austria

The parties express the view that the geographic market
in supply to the large regional distributors does not
extend beyond Austria. However, for the purposes of
this Decision this question need not be answered.

The fact that the Austrian Land suppliers traditionally
from
draw most of
Verbund, apart
they produce themselves,
does suggest a geographic market confined to Austria,
significant volumes are also
as does

electricity requirements

their
from what

the fact

that

(33) It

is of

less importance here whether

these pools of small
electricity consumers should already be classified in the lower
segment of
in the small
the large customer market or still
customer market. Internal documents of the parties suggest that
the parties are trying to keep these customers associated with the
market for small customers.

L 92/106

EN

Official Journal of the European Union

30.3.2004

between Land

foreign suppliers

corporations. Only

since
supplied
liberalisation have
and electricity
traders come into the picture as sources of electricity.
Individual Land suppliers have argued that, because of
the volumes of electricity required, the low prices in
a high proportion of
Austria
hydroelectric power, they are very much dependent on
supplies from Verbund in order to continue delivering
power to small customers.

and the need for

(100) On the other hand, there are signs of a geographic
market extending beyond Austria. The parties have
submitted that in 2002 the regional suppliers that were
members of EnergieAllianz received [>60 %]* of their
supplies
from non-Austrian sources. Only around
[<30 %]* of EnergieAllianz's requirements for bought-in
electricity came from Verbund, while [<15 %]* came
from other Austrian suppliers. Given that EnergieAllianz
makes only relatively small purchases on the trading
market,
it can be assumed that a major share of the
electricity it delivers to customers but does not produce
from foreign suppliers. The Austrian
itself
regional distributors also draw a significant proportion
of their electricity supplies from non-Austrian suppliers.
This is particularly true of Tiwag and VKW, whose
supply areas technically belong to the German control
block and which traditionally obtain considerable
amounts of electricity from Germany.

comes

(101) Nevertheless, the question of the geographic market in
the supply to regional distributors can be left open, as
even if
the
proposed merger would not create or strengthen a
dominant position on that market.

this market were confined to Austria,

3. A conceivable geographic market in the provision of

balancing energy would be confined to the eastern control
area

(102)

If the provision of balancing energy is taken to be a
relevant product market, that market is geographically
confined to the particular control area. Under the rules
that govern European transmission grids, balancing
energy can be provided in Austria only inside a control
area. The minute reserve component
in balancing
energy, which is decisive for purposes of cost, cannot be
transmitted over control area borders. Even taking into
account the ongoing negotiations on opening up the
eastern control area to Germany,
situation is
unlikely to change in the short term. In the present case
the relevant geographic market would therefore be the
the
eastern control
responsible control area manager.

for which Verbund is

area,

this

4. Effects of liberalisation measures

(103)

In all probability a new electricity market directive and
a Regulation on cross-border energy exchanges will
enter into force in the near future (34). Some major
components in this legislative package are to take effect
on 1 July 2004, and other aspects are to take effect by
1 July 2007. The package comprises a series of
provisions that can be expected to make market entry
by foreign providers considerably easier in the medium
these provisions are concerned with
term. Most of
network access,
tougher unbundling measures, and
harmonised rules on cross-border transfers of electricity.
This aspect is considered in section VIII, as part of the
assessment of commitments.

D. Effect of the merger

1. The merger would create a dominant position on the

market in supply to large customers and small distributors

(104) The proposed merger would place the firms concerned
in a dominant position on the market or markets in the
supply of electricity to large customers and small
distributors in Austria.

(105) The Court of Justice of the European Communities has
defined a dominant position as a position of economic
strength enjoyed by an undertaking which enables it to

internal market

the
96/92/EC

and, most
resolution on the Council

(34) Common Position (EC) No 5/2003 of 3 February 2003 adopted by
the Council, acting in accordance with the procedure referred to in
Article 251 of the Treaty establishing the European Community,
with a view to adopting a directive of the European Parliament
and of the Council concerning common rules for the internal
market in electricity and repealing Directive 96/92/EC (OJ C 50 E,
4.3.2003, p. 15);
recently, European Parliament
common position for
legislative
adopting a European Parliament and Council directive on common
in electricity and repealing
rules
for
Directive
–
2001/0077(COD)), 4.6.2003 (P5_TA-PROV(2003)0242).
Common Position (EC) No 4/2003 of 3 February 2003 adopted
by the Council, acting in accordance with the procedure referred
to in Article 251 of
the Treaty establishing the European
Community, with a view to adopting a regulation of the European
Parliament and of the Council on conditions for access to the
network for cross-border exchanges in electricity (OJ C 50 E,
4.3.2003, p. 1); and, most recently, European Parliament legislative
resolution on the Council common position for adopting a
European Parliament and Council regulation on conditions for
access to the network for cross-border exchanges in electricity
(15527/2/2002 – C5-0036/2003 – 2001/0078(COD)), 4.6.2003
(P5_TA-PROV(2003)0244).

(15528/2/2002

C5-0034/2003

–

30.3.2004

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Official Journal of the European Union

L 92/107

prevent effective competition being maintained on the
relevant market by affording it the power to behave to
an appreciable extent independently of its competitors,
its customers and ultimately of consumers. Such a
position does not preclude some competition, but
if not to
enables the undertaking which profits by it,
determine, at least to have an appreciable influence on
the conditions under which that competition will
develop, and in any case to act largely in disregard of it
so long as
such conduct does not operate to its
detriment.

factors which,

taken separately,

(106) The existence of a dominant position may derive from
several
are not
necessarily determinative, but, among these factors, a
highly important one is the existence of very large
market shares. In addition, the relationship between the
market shares of
involved in the
the undertakings
concentration and their competitors, especially those of
the next largest, is relevant evidence of the existence of
a dominant position (35).

( a ) T h e m e r g e r w o u l d g i v e

Ve r b u n d / E n e r g i e A l l i a n z a v e r y h i g h
c o m b i n e d m a r k e t s h a r e

(107) The merger would result in very high combined market
share for the firms involved, which, according to the
case-law of the Court of Justice, is itself an indication of
a dominant position (36).

Supplier

Supply (GWh)

Market share

Wienstrom

[3 500-7 000]*

[15-25]*

Total EnergieAllianz

[10 500-13 000]*

[45-55]*

Steweag-Steg

[1 500-3 500]*

[5-15]*

Kelag

Salzburg AG

Tiwag

VIW/VKW

Other

[0-2 000]*

[0-10]*

[0-2 000]*

[0-10]*

[0-2 000]*

[0-10]*

[0-2 000]*

[0-10]*

[0-2 000]*

[0-10]*

Total

24 900

100,0

Source:

Information from Verbund
information of 28 February 2003.

in response

to request

for

(109) Verbund's

share of

in supply to large
the market
customers in 2001 was [5 to 15 %]*. The market share
of the companies belonging to EnergieAllianz was [45
to 55 %]*. The direct combined market share of the
parties to the merger was therefore [55 to 65 %]*. In
addition, Steweag-Steg, which is jointly controlled by
Verbund and Estag, achieved a market share of [5 to
15 %]*. All remaining competitors have market shares of
less than 10 % (37).

(110) The Commission's investigations have established that
in supply to small

the market

the
structure of
distributors is as follows:

Table 3

Electricity sales to small distributors

(in %)

(108) The structure of the market in supply to large customers

is shown in the following table:

Verbund

2000

0-5

Table 2

Electricity sales to special customers 2001

Supplier

Supply (GWh)

Market share

Verbund

Bewag

[1 500-3 500]*

[0-2 000]*

[5-15]*

[0-10]*

Energie AG OÖ

[1 500-3 500]*

[5-15]*

EVN

[1 500-3 500]*

[5-15]*

Linz Strom AG

[0-2 000]*

[0-10]*

EnergieAllianz

40-50

Parties combined

40-55

Steweag-Steg

30-40

Salzburg AG

Kelag

Atel

Tiwag

0-5

0-5

0

10-15

100

2001

0-5

30-40

30-45

30-40

0-5

0-5

0-5

15-20

100

2002

5-10

30-40

35-50

20-30

0-5

0-5

0-5

15-20

100

(35) Court of Justice in Case 85/76 Hoffmann-La Roche v Commission
[1979] ECR 461, paragraph 39; see also Court of First Instance in
Case T-102/96 Gencor
ECR II-753,
v Commission
paragraphs 201 and 202.

[1999]

(36) Hoffmann-La Roche (see footnote 35), paragraph 39.

Source: Commission's market investigation (data from the parties and
competitors). In order to avoid revealing any business secrets,
only ranges are given.

(37) On market shares in 2002, see recital 122.

L 92/108

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Official Journal of the European Union

30.3.2004

(111)

In 2002, Verbund and EnergieAllianz had market shares
of between 35 % and 50 %. Steweag-Steg's share was 20
to 30 %. The merged entity,
including Steweag-Steg
(jointly controlled by Verbund), would therefore have a
market share of 70 to 80 %. Its remaining competitors,
less than
with one exception, have market shares of
5 % (38).

(115) Verbund's share in gross electricity generation in Austria
in 2001 was around [35 to 45 %]*.
Its already
pre-eminent position on this market prior to the merger
would be considerably strengthened by the addition of
EnergieAllianz's capability (some [10 to 20 %]* of
the post-merger
generation in Austria),
combined share of the parties to some [55 to 65 %]* of
total electricity generation in Austria.

bringing

be

are

the

basically

shares
not

the markets

(112) Besides the parties, the remaining competitors in both
of
affected
Land
corporations Salzburg AG, Kelag, Tiwag and VKW. The
and those of
gap between their market
significantly
Verbund/EnergieAllianz will
narrowed in the foreseeable future. Moreover,
the
parties to the merger have holdings in two of their
remaining competitors. As already mentioned, Verbund
has a minority shareholding in Kelag, which is jointly
controlled by the Land of Carinthia and RWE. Besides
the Land and the City of Salzburg, Energie OÖ has a
26,13 % share
Energie OÖ's
shareholding carries participation rights conferred by
the articles of association, relating in particular to the
appointment of the managing board and major energy
transactions, which go beyond the statutory rights of a
minority shareholder (39).

Salzburg AG.

in

(113) Since the parties, with Steweag-Steg, have similar shares
of
the markets for both small distributors and large
customers (in both cases over 70 %), and since the
structure of the competition is similarly fragmented on
both markets, the same applies if we assume only one
market for the supply of
large customers and small
distributors.

( b ) T h e p a r t i e s ' p r e - e m i n e n t p o s i t i o n
w o u l d b e s e c u r e d b y t h e i r l e a d i n g
p o s i t i o n i n e l e c t r i c i t y g e n e r a t i o n

on

on

the

their

(114) The parties' pre-eminent market position is primarily
based
upstream
position
electricity-generation market. Their position on this
market has the direct result of increasing barriers to
entry on the markets in supply to large customers and
small distributors, and increases the risk that existing
is
competitors will be marginalised still
therefore unlikely that
the parties' position on the
relevant market will be disputed in the foreseeable
future.

further.

It

(38) Tiwag's market

supply to the
share falls to below 15 % if
Innsbruck municipal plants, which are affiliated with Tiwag, is left
out. At the same time, the combined market share of the parties
would increase by a number of percentage points.

(39) Reply from Salzburg AG dated 27 February 2003 to a request for

information from the Commission.

(116) Verbund/EnergieAllianz's position would also ensure that
they could improve the cost base of generation by
closing down unprofitable thermal stations and could
cover the generation costs of a considerable block of
hydroelectric resources by claiming, depending on the
market situation, compensation for stranded costs (40).

(117) Of particular significance in this connection is the
parties' position on the market for hydroelectric power
generation. In Austria, tariff customers in particular set
great store by being supplied with ‘clean' electricity, i.e.
electricity which has not been generated by nuclear
power and which to a large extent comes from local
hydroelectric
electricity from
hydroelectric sources is cheap to generate, especially
where the power stations concerned have been written
off (41).

In addition,

sources.

to

small

applies

particularly

(118) This dependence of their competitors on the parties to
local
the merger
distributors, which often — despite the possibility of
through-transmission — in practice cannot, for lack of
their own resources, take part in the wholesale market
and thus depend on Verbund/EnergieAllianz for their
small
electricity
and
supply. Numerous
private
in the course of the
municipal power utilities stated,
Commission's investigation,
their suppliers, with
that
which they competed for delivery to large customers,
at
customers
supplied
cheaper prices and on better terms than themselves.

and commercial

industrial

( c ) T h e c o s t s o f b a l a n c i n g e n e r g y p l a c e t h e

r e m a i n i n g c o m p e t i t o r s a t a
d i s a d v a n t a g e v i s - à - v i s
Ve r b u n d / E n e r g i e A l l i a n z a n d a t t h e
s a m e t i m e c o n s t i t u t e a b a r r i e r t o e n t r y
f o r n e w c o m p e t i t o r s

(119) The Commission's investigations have shown that the
risk of facing unplanned costs for balancing energy is
greater for smaller market players than for large ones.
This was the line taken by a majority of the competitors
which provided the Commission with comments on the
subject. Many of them consider balancing energy to be a

(40) See footnote 32.
(41) See recital 82.

30.3.2004

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significant factor in the minimum size required for a
new competitor to enter the market. The merger will
make it even easier for the parties to achieve cost
benefits through the coordination of
their balancing
energy costs and the fact that these costs will be easier
remaining and new
to plan. The impossibility for
competitors to derive similar benefits from their size
will help to marginalise remaining competitors even
further and make market entry more difficult (42). The
merger will therefore raise the threshold for entering the
customers and small
markets
distributors, which is already high for small companies
and new entrants given the difficulty of planning
balancing energy costs.

in supply to large

increase its market share, but still by significantly less
than the parties.

(123) The same is true of

in supply to small
the market
distributors. Enquiries made by the Commission of small
private and municipal power utilities in the course of its
investigation revealed that, when power procurement
contracts were put out to tender after liberalisation, in
many cases competition for the contract was between
EnergieAllianz and Verbund. The previous
supplier
(regional supplier) was often in a privileged position in
these negotiations owing to the regional customer
frequently
the municipal utilities, and it
loyalty of
obtained the
strong
the
contract. This underlines
position of the regional suppliers in this respect.

(120) This

effect would be heightened by the parties'
pre-eminent position in the provision of balancing
energy. Verbund and EnergieAllianz are the largest
suppliers in this area, with a combined market share,
depending on the supply period, of between 60 % and
90 %.

(124) As a result of the merger, therefore, Verbund would
disappear as a competitive force from the market for
large customers and the market
in supply to small
distributors. On both markets, Verbund was the biggest
to the already very strong position of
challenger
pre-eminent
EnergieAllianz. Given
position of Verbund/EnergieAllianz,
the
ensuing market structure is likely to be consolidated.
The impact of the legislation discussed in recital 103
cannot be expected with sufficient certainty to counter
such consolidation within a sufficiently short time.

combined

therefore,

the

( d ) T h e m e r g e r w o u l d e l i m i n a t e Ve r b u n d a s
a c u r r e n t a n d p o t e n t i a l c o m p e t i t o r a n d
w o u l d t h u s r e m o v e a m a j o r c o m p e t i t i v e
f o r c e i n A u s t r i a

( e ) C o n c l u s i o n

(121) Following the merger, Verbund would cease to compete
to attract customers, and will disappear as a current and
potential competitive force. Following the liberalisation
of
the Austrian electricity market, Verbund, as the
largest electricity generator, was the most important and
active new entrant on the markets in supply to large
customers and distributors.

(122) Thus, it was able (without Steweag-Steg) to increase its
share of the large-customer market from [5 to 15 %]* to
[10 to 20 %]* between 2000 and 2002. On this market,
it is by far the biggest competitor with EnergieAllianz,
which increased its market share in the same period [by
0 to 5 %]*. One other company, EnBW, was able to

(42) This follows from the statistical fact that within the large-customer
market the balancing energy risk — and with it the balancing
energy cost risk — falls as the size of the balance group increases.
Likewise, the parties' argument that very small balance groups had
lower balancing energy costs, since they did not
reach the
threshold of energy deviation that triggered the minute reserve, is
not convincing, at least as far as the large-customer market is
concerned. This is because in the large-customer sector even a few
customers can purchase significant amounts of energy.

its

position

compared with

(125) The merger would combine the existing generation and
sales activities of Verbund and EnergieAllianz into a
single economic entity, which would hold a pre-eminent
market
remaining
competitors. Verbund would be eliminated as a current
and potential competitor, although prior to the merger
it was a major competitive force in the only very
recently liberalised Austrian electricity market. This
would considerably worsen the structure of competition,
and decidedly reduce alternatives for large customers
and small distributors. The merger would thus create a
dominant position on the Austrian markets in supply to
large customers and smaller distributors.

2. The merger would strengthen a dominant position on the

market in supply to small customers

(126) The merger

is

likely to strengthen EnergieAllianz's
dominant position on the market
in the supply of
electricity to small customers (households and small
businesses) in Austria.

L 92/110

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Official Journal of the European Union

30.3.2004

( a ) E v e n b e f o r e t h e m e r g e r , E n e r g i e A l l i a n z
a l r e a d y h a s a d o m i n a n t p o s i t i o n o n t h e
m a r k e t i n t h e s u p p l y o f e l e c t r i c i t y t o
s m a l l c u s t o m e r s

(127) The market in supply to small customers is structured as

follows:

Electricity supply to Austrian tariff customers in 2001

Table 4

Supplier

Supply (GWh)

Market share

Verbund

BEWAG

[0]*

[0]*

[0-2 000]*

[0-10]*

is

that

rates

supplier

between

switched

suppliers

is noticeable

figure (44). What

in the
Switching

first 12 months
collected

after
electricity
liberalisation (43).
by
EnergieAllianz over a period of 14 months give a very
similar
a
significant proportion (between 20 % and 30 %) of these
within
customers
EnergieAllianz, and that consequently EnergieAllianz as
a whole showed a switching rate that was below
average. EnergieAllianz pursues a dual-brand strategy,
whereby supply from the respective regional supplier
supplemented by a
belonging to EnergieAllianz is
cheaper supplier from EnergieAllianz, Switch, in order
to retain price-sensitive customers likely to be lost to
new suppliers. Internal documents from EnergieAllianz
show that only Switch positioned itself in price terms in
relation to the new suppliers. It was therefore possible
for EnergieAllianz to behave to an appreciable extent
independently of its competitors and customers.

Energie AG OÖ

[1 000-3 000]*

[5-15]*

EVN

[2 000-4 000]*

[10-20]*

(130) An overall assessment of these factors shows that, prior
to the merger, EnergieAllianz already has a dominant
position on the small-customers market.

Linz Strom AG

[0-2 000]*

[0-10]*

Wienstrom

[3 500-5 500]*

[15-25]*

Total EnergieAllianz

[10 000-12 500]*

[45-55]*

STEWEAG-STEG

[0-2 000]*

[0-10]*

KELAG

Salzburg AG

TIWAG

VIW/VKW

Others

[0-2 000]*

[0-10]*

[0-2 000]*

[0-10]*

[0-2 000]*

[0-10]*

[0-2 000]*

[0-10]*

[3 000-5 500]*

[15-25]*

Total direct supply

22 992

100

Source:

Information provided by Verbund in response to request
information of 28 February 2003

for

eight

a dominant position. That
the market

(128) So, EnergieAllianz alone already has a market share of
[45 to 55 %]*, which is sufficient reason to suspect the
existence of
is
share
share of
approximately
EnergieAllianz's nearest competitors Steweag-Steg and
Kelag. A large proportion of the market ([15 to 25 %]*)
is divided between numerous small and very small
private or municipal distributors. The traditional supply
area of the firms in EnergieAllianz, on the other hand,
covers most of Austria.

times

(129) Given the reluctance of Austrian final consumers to
switch supplier, it is unlikely that this market situation
will change much in the short to medium term. Only
1,9 % of small customers in Austria changed their

( b ) T h e m e r g e r w o u l d i n c r e a s e

E n e r g i e A l l i a n z ' s a l r e a d y v e r y h i g h
m a r k e t s h a r e

is

small,

Steweag-Steg, which is

(131) Although Verbund's current share of the small-customer
market
jointly
controlled by Verbund, has a [0 to 10 %]* market share.
With Steweag-Steg, Verbund/EnergieAllianz's market
to
share would come to [50 to 60 %]* and thus
approximately 10 times the market share of the nearest
existing market
remaining
structure,
strong
share is
evidence that the merger would strengthen a dominant
position.

competitor. Given the
this addition of market

( c ) T h e m e r g e r w o u l d e l i m i n a t e Ve r b u n d a s
a c u r r e n t a n d p o t e n t i a l c o m p e t i t o r a n d
t h u s a s i g n i f i c a n t f o r c e f o r c o m p e t i t i o n
o n t h e h o u s e h o l d c u s t o m e r s m a r k e t i n
A u s t r i a

(132) A majority of household customers who have switched
supplier since the start of liberalisation switched to a
company in which Verbund had an interest, namely
(formerly RWA
MyElectric or Unsere Wasserkraft

(43) Figure based on amounts purchased; 0,8 % of households and 3 %
of other tariff customers. E-Control, Annual Report 2002, p. 70.
(44) Annex 10 to EnergieAllianz's reply to the Commission's request
for information of 28 February 2003. The data for WienEnergie
have not been included, because the reply was incomplete in this
respect.

30.3.2004

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Official Journal of the European Union

L 92/111

Wasserkraft). More than [35 to 45 %]* of all customers
who switched from the largest EnergieAllianz suppliers,
EVN and Wienstrom, switched to one of
these two
companies. According to figures from EnergieAllianz, as
much as [75 to 85 %]* of small customers formerly
supplied by EnergieAllianz switched between July 2002
and March 2003 to MyElectric or Unsere Wasserkraft.
in Unsere
While Verbund has
Wasserkraft
from internal
as
documents (45), this was done in connection with the
merger, this does not change the fact that, through its
holdings, Verbund is still a challenger to EnergieAllianz
on a market
low.
Further evidence of this is the fact that a significant
those
proportion (more
switching from EnergieAllianz switched directly to
Verbund (46).

in which switching rates are still

than [20 to 25 %]*) of

reduced its

and while,

share

clear

is

( d ) E x i s t i n g l i n k s b e t w e e n

Ve r b u n d / E n e r g i e A l l i a n z a n d t h e i r
c o m p e t i t o r s , t h e i r p o s i t i o n o n
n e i g h b o u r i n g m a r k e t s a n d s p e c i f i c
b a r r i e r s t o e n t e r i n g t h e s m a l l
c u s t o m e r s m a r k e t a l s o c o n t r i b u t e t o
s t r e n g t h e n i n g t h e i r d o m i n a n t p o s i t i o n

(133)

In addition to the links between Verbund/EnergieAllianz
and their competitors already described in relation to
the markets for large customers and small distributors, a
further factor in supply to small customers is that such
customers are often interested in being supplied with
electricity and gas at
time. For many
the
customers who purchase both sources of energy, the
annual costs of gas exceed those of electrical energy.
especially
Numerous
municipal utilities, are therefore active in both areas
(multi-utilities).

suppliers of

customers,

small

same

(134) EnergieAllianz has a very strong position in natural gas
in Austria as a supplier of gas to final consumers and as
a gas wholesaler, the latter through a joint venture with
OMV, Econgas, and a joint venture that its partner EVN

(45) Verbund-Austrian Power Vertriebs GmbH (HGB)

shareholders'

in this

committee, seventh meeting, 28 November 2002, agenda, item 3.
(46) Annex 10 to EnergieAllianz's reply to the Commission's request
for
for
information dated 28 February 2003. The data
WienEnergie have not been included, because the reply was
rates
incomplete
submitted by
in the nine months
EnergieAllianz at
between July 2002 and March 2003 it was Verbund which gained
from
most
EnergieAllianz,
Its
percentage share of customers switching from EnergieAllianz fell
in this period to some [<15 %]*, which is unsurprising in the light
of the planned merger.

Switching
the hearing show that

and Unsere Wasserkraft.

after MyElectric

customers

switching

level 7)

(network

respect.

small

has with E.On. This also makes market entry and
expansion more difficult
rival suppliers on the
for
market in the supply of electricity to households, either
because they themselves do not supply gas or because
they depend on Econgas for their gas supply (47).

(135) The barriers to entering the market in supply to small
customers are high. This is because of the reluctance of
small customers to switch supplier and the relatively
high costs of advertising and other measures to attract
and support customers. In this area, it is also necessary
to invest considerable sums in building up brands.
Suppliers without
to hydroelectric
sufficient access
resources or similar ‘ecological' energy are at a serious
disadvantage in Austria.

(136) Generally, municipal utilities depend on supply in the
form of what is known as ‘full supply'. In addition to
various technical and administrative services, full supply
includes the supply of balancing energy. This increases
the municipal utilities' dependence on the parties, who
are large providers of such services.

( e ) C o n c l u s i o n

(137) The

would

merger

strengthen

secure
EnergieAllianz's existing pre-eminent position on the
small customer market
(or markets) by removing
Verbund as a competitive force. It would thus strengthen
a dominant position on the market in the supply of
electricity to small customers in Austria.

and

3. The merger would not create a dominant position on a

supposed Austrian market in supply to regional suppliers

(138) For the following reasons, the merger would not create
a dominant position for the parties on a supposed
Austrian market
to Austrian regional
suppliers.

in supply

(139) Unlike small distributors and large customers,

the
Austrian regional
suppliers can already buy to a
significant extent from foreign companies. Unlike the
former, they can more easily increase such purchases
purchase
because

energy

their

have

own

they

(47) Planned cooperation between Ruhrgas AG and Salzburg AG with a
view to supplying final consumers on a multi-utility basis has not
been realised to date.
If such cooperation had come about,
Ruhrgas AG would ultimately have been competing with of EVN,
the EnergieAllianz member linked with E.On.

L 92/112

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30.3.2004

energy from
management and can thus purchase
suppliers which do not have their own sales set-up in
Austria.
It can therefore be expected that supply is
sufficient for Austrian regional suppliers. As regards the
Land corporations in the Tyrol and Vorarlberg, Tiwag
and VKW, their supply areas form part of the German
control block and they have therefore developed supply
links with Germany over time which differ significantly
in a liberalised cross-border
from import business
electricity market.
area,
the
In
Steweag-Steg has long-term supply contracts with its
parent
the
merger, only the regional suppliers of Salzburg and
Carinthia, Salzburg AG and Kelag as customers in the
market for the supply of Austrian regional suppliers. It
is expected that
there would be sufficient potential
competition for the supply of these two corporations.

firm, Verbund. This would leave, after

control

eastern

self-generation

(140) Furthermore, all Austrian regional suppliers which are
independent of the parties to the merger have a degree
of
from
capability,
hydroelectric resources (48). Since hydroelectric supply
is not a relevant purchase criterion for all customers
(this applies to most industrial customers) and since
hydroelectric power may at least to a limited extent be
purchased outside Austria,
the Austrian regional
suppliers are not dependent on hydroelectric supply
from Verbund (49).

especially

of

the

results

summary,

In
the Commission's
investigations have not produced sufficient evidence to
conclude that
the merger would create a dominant
position on an Austrian market in supply to regional
suppliers.

VII. COMMITMENTS ENTERED INTO BY THE
NOTIFYING PARTIES

(141)

(142)

to overcome

In order
competition concerns
identified by the Commission, the notifying parties have
submitted the commitments described below, the full
text of which is set out in the Annex to this Decision.

the

(a)

(143) Verbund undertakes:

(a)

to sell its 55 % holding in APC to an independent
to be approved by the Commission,
third party,

(48) See Table 1 in recital 20.
(49) It can also be presumed that the legislation discussed in recital 103
will make it easier to supply Austrian regional suppliers from
abroad.

before the notified merger takes place;

(b) to transfer existing contracts with final consumers,
to the
and any such contracts concluded prior
transfer, held by APC in the name and for the
account of Verbund, before the sale of its holding in
APC;

(c)

to sell its 20 % holdings in MyElectric and Unsere
Wasserkraft;

(d) to refrain from exercising the voting rights deriving
from its holding in Steweag-Steg until
[…]*,
wherever its vote could influence the competitive
the undertaking, particularly with
behaviour of
regard to pricing and products, distribution and
to withdraw its members
procurement,
indefinitely from the Steering Committee
that
develops distribution policy for Verbund/APC and
Steweag-Steg;

and

(e)

Salzburg

to remedy all the problems regarding the Austrian
domestic grid (380-kV Styria line and if necessary
the
the
interconnectors to Italy and Slovenia as soon as the
authorities have given the necessary authorisation
and approval.

develop

line)

and

to

(144) Energie OÖ undertakes to transfer to an independent
trustee to be approved by the Commission the rights
deriving from its holding in Salzburg AG (apart from its
right
to dividends) and the rights deriving from the
shareholder agreement concluded with the Land and
City of Salzburg, by […]*.

(145) Verbund and EnergieAllianz undertake:

to ensure that APT offers APC an electricity supply
contract with a duration of at least four years in the
first place, under the terms of which APC will be
able to take 3 TWh of electricity per year in the
form of more
structured
supplies, at the prices at which Verbund supplies the
new E & S; the contract may be terminated after
four years
the Commission
concludes that at that time there are enough other
sources;

requested and if

described

precisely

if

(b) to make available through APT 450 GWh of
least 50 % will
satisfying the
for

electricity per year, of which at
derive
characteristics of

the standard load profile,

from hydroelectric plants,

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Official Journal of the European Union

L 92/113

auction in lots of 20 to 40 GWh, to be supplied to
Austria's high-voltage grid until 30 June 2008 under
more precisely specified conditions for the supply of
final consumers;

(c)

to implement measures described in greater detail
regarding the provision of balancing energy; these
primarily concern efforts to open up the eastern
control area towards the Tyrol and Germany, an
offer to Kelag to dissolve the storage partnership
between Kelag and Verbund at no additional cost,
and for a transitional period [pricing provisions
for]*
by
provided
Verbund/EnergieAllianz as the market maker;

balancing

energy

(d) to allow customers who now find themselves with
the new E & S a unilateral right to terminate their
electricity supply contracts early, at a date six
months following the conclusion of the merger, as
long as they give three months' notice, and to
ensure that in the first two years after it has started
customers
operating the new E & S offers
one-year electricity supply contracts;

its

(e)

to implement as quickly and comprehensively as
possible the provisions regarding unbundling that
will be enacted within the framework of Austria's
implementation of
the revised Electricity Market
Directive.

VIII. APPRAISAL OF THE NOTIFIED OPERATION
PURSUANT TO ARTICLE 2 OF THE MERGER
REGULATION IN THE LIGHT OF THE COMMITMENTS
ENTERED INTO

(146) The commitments set out in recitals 143 to 145 will
overcome
regarding the
competition concerns
Austrian markets for the supply of electricity to small
distributors and large and small customers.

the

will be transferred to the purchaser; this represents a
market share of over [5 to 15 %]* in terms of
large
customers. The purchaser must be an independent third
party that can guarantee that APC will grow and
continue to compete actively with the parties and other
large customer and distributor
competitors
market.

in the

(148) The commitment to conclude a long-term contract with
APC providing for the structured supply of 3 TWh/year
on specified conditions will place APC in the same
position with respect to that amount as the parties' own
big-customer company E & S. The amount of power
referred to in the commitment covers the bulk of what
APC has been taking from Verbund/APT. This removes
the electricity supply risk to APC's buyer, and the need
for the buyer to structure the electricity supply itself.
The commitment is therefore likely in the short term
either to facilitate the entry of a buyer into the Austrian
market, or to make it possible for a buyer substantially
to expand its Austrian business. The buyer would be
enabled to offer effective competition to the parties after
the concentration, and effectively to restrict their market
power. This commitment will last for four years in the
first place. It may be extended if there are not enough
alternative sources of supply available to buyers at the
end of that time.

B. Steweag-Steg

concerning

competition

to refrain from exercising its
(149) Verbund's commitment
in Steweag-Steg with regard to
controlling rights
[…]* (50)
decisions
neutralises existing structural
links between Verbund
and Steweag-Steg for a transitional period. This will
least during this period
have
Steweag-Steg's market share will not further reinforce
the
merged
market
Verbund/EnergieAllianz.

position

effect

until

that

the

the

of

at

A. APC

C. Unsere Wasserkraft and MyElectric

(147) The

commitment

to divest Verbund's

controlling
majority share in APC prevents the accumulation of the
Verbund and EnergieAllianz shares of the market for
supply to large customers that would have resulted from
the merger. APC is responsible for all of Verbund's
distribution activities in this field. The undertaking has
all
resources,
including know-how, a target group list, an e-commerce
platform, back office and systems management to enable
the purchaser to enter the market for large customers
immediately. All of APC's existing customer relations

the necessary human and material

(150) Verbund's commitment to divest its minority holding in
Unsere Wasserkraft and MyElectric will mean that these
undertakings will be unaffected by any influence and
financial interest on behalf of the merged entity and will
be able to compete with it on the market to supply
power
to small customers. Unsere Wasserkraft and
MyElectric have majority holdings in Estag and Salzburg
the most
AG respectively, which will be two of
the
important

remaining Austrian competitors

for

(50) This period is to be seen against the background of the legislation

discussed in recital 103.

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Official Journal of the European Union

30.3.2004

merged undertaking Verbund/EnergieAllianz. These have
been the two companies most successful at attracting
small customers since liberalisation and through them
Verbund has ventured beyond Steweag-Steg's traditional
supply market to operate on the small customer market.
commitment,
The Commission takes note of
without making it a condition or an obligation. The
consortium agreement
and
EnergieAllianz requires Verbund to divest these holdings
in their entirety.

Verbund

between

this

D. Salzburg AG

the

area

energy

in the

supplied

balancing

eastern control

is
balancing energy
strengthened by the possibility of being able to end the
current storage cooperation arrangements with Verbund
economically. At the same time, the price cap imposed
on
by
Verbund/EnergieAllianz during the period of transition
until there is full competition on Austrian power-supply
markets will limit the cost risk to potential customers
for balancing energy. Furthermore, the opening-up of
the eastern control area towards the Tyrol and Germany,
which the notifying parties have undertaken to help
bring about, will ensure more competition regarding the
supply of balancing energy in the medium and long
term.

(151) Obliging Energie OÖ to transfer the rights deriving
from its minority holding in Salzburg AG to a trustee
by the end of December 2007 (51) will ensure that at
least for the foreseeable future there will be no danger
that Energie OÖ's current rights to exert influence and
obtain information might
capacity of
Salzburg AG to compete actively with the new merged
this
undertaking. During
commitment will help to ensure that the parties do not
influence the competitive behaviour of Salzburg AG in
its dealings with large customers.

transitional

reduce

period

the

a

E. Liquidity

(152) The commitment

to make available to third parties
through auctions an annual supply of 450 GWh, of
which at least 50 % derives from hydroelectric plants,
thereby satisfying the characteristics of the standard load
in quantities suitable for the supply of small
profile,
customers ensures that new competitors entering the
market for the supply of small customers now and in
the future will have access to additional capacity for
power generated in Austria. Moreover, they will be able
to supply any customers requesting hydroelectric power.
This commitment will increase the liquidity available to
facilitate new entries and the expansion of existing
market shares by undertakings competing with the
and
parties
MyElectric, who are already competing with the parties
in the small customers market, will likewise be enabled
to expand their market shares and to safeguard their
supplies of power (52).

the merger. Unsere Wasserkraft

to

F. Balancing energy

(153) The commitments to make balancing energy available
will ease access to balancing energy for
third-party
suppliers on electricity markets, particularly for new
entrants. Kelag's position as an alternative supplier of

(51) This period is to be seen against the background of the legislation

discussed in recital 103.

(52) This period is to be seen against the background of the legislation

discussed in recital 103.

(154) The commitments relating to balancing energy were
agreed between the notifying parties and the Austrian
regulator E-Control. The plan is
to
the
fulfilment of
monitor
Commission's
the
trustee.
Commission that
these commitments will suffice to
solve the competition problems detected relating to
balancing energy.

the
E-Control

for E-Control

commitments

as
told

has

(155)

Improved access to balancing energy in the eastern
control area, particularly for new entrants onto the
market, will overcome or reduce what the Commission
investigations revealed to be a key obstacle to entry
onto the market. This will enable potential competitors
in and outside Austria to enter Austria's electricity
markets and compete with Verbund/EnergieAllianz.

G. Further commitments

rights

granted

contracts

to terminate

contained in the

(156) The other commitments entered into by the notifying
parties regarding the improvements to the Austrian
domestic grid, the interconnectors to Italy and Slovenia,
special
to
Verbund's large customers who now find themselves
with the new E & S and quicker implementation of the
unbundling provisions
amended
Electricity Market Directive do not in themselves alter
the structure of
the competitive conditions brought
about by the merger. Moreover, the implementation of
some of them does not depend solely on the wishes of
the parties, as it may require the involvement of third
parties (approval by the authorities, the agreement of
foreign
and
implementation by the appropriate Austria authorities
of the Electricity Market Directive) or simply relate to
the fulfilment of (future) legal obligations. However, they
contribute to the gradual removal of current obstacles
preventing entry onto the market and integrating
Austrian electricity markets in relevant geographical
in the
stretching beyond national borders
markets

transmission

operators

system

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L 92/115

medium to long term. In this way, these commitments
entered into regarding behaviour may help to ensure
that
the other obligations set out above, particularly
those of a structural nature, succeed in fully restoring
effective competition. Although they will not be made
conditions attached to the exemption decision, they will
help to ensure that the remedy package contributes to
the real removal of the competition concerns noted.

H. Summary appraisal of the commitments

full

e.g.

a major

power-supply

to enter
for

taken place,
this commitment

(157) The divestiture of Verbund's holdings in APC goes most
of the way towards removing the market-share overlaps
between Verbund and EnergieAllianz on the market for
the supply of large final consumers. Selling APC to an
independent third party creates the opportunity for a
company
newcomer,
and
currently operating outside Austria,
large
compete actively on the Austrian market
customers. The parties have undertaken not
to
implement the merger before a Commission-approved
so that
disposal of APC has
full
implementation of
is guaranteed.
During the period from the opening up of the market
liberalisation (53)
the positions of
and until
Steweag-Steg and Salzburg AG as competitors will be
strengthened by
their
involvement with Verbund and Energie OÖ respectively.
impact of the combination of Verbund's
The vertical
and
dominant
capacity
EnergieAllianz's position as
leading electricity
supplier in Austria will be offset at least in part by the
fact that sufficient liquidity will be made available on
competitive terms to APC and the suppliers competing
on the market for small customers. The measures to
improve access to balancing energy and the opening of
Austrian markets to outside competition in the medium
term will also help to overcome obstacles to access to
the markets and to increase competition in the markets
concerned. Were any competition concerns to arise
relating to a conceivable market
to the supply of
regional distributors, they would be overcome by the
remedies.

power-generating

freezing of

temporary

the

the

IX. CONDITIONS AND OBLIGATIONS

(159) The first sentence of the second paragraph of Article
8(2) of
the
the Merger Regulation states
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.

that

the

to be

form of

imposed in the

the Commission decision

(160) Measures that effect a structural change to the market
‘conditions';
are
implementing steps necessary to achieve this result are
to take the form of ‘obligations'. If a condition is not
fulfilled,
the
concentration compatible with the common market is
null and void. Where the undertakings concerned
commit a breach of an obligation, Article 8(5)(b) of the
Merger Regulation empowers the Commission to revoke
a clearance decision; Article 14(2)(a) and Article 15(2)(a)
of the Merger Regulation empower it to impose fines or
periodic penalties on the parties (55).

declaring

(161)

this

line with

fundamental

the
In
Commission should make it a condition of its decision
that the parties comply in full with the commitments by
which they undertake:

distinction,

(a)

to sell their shares in APC to a third party approved
by the Commission, to ensure that APT offers APC
an electricity supply contract entitling APC to take 3
TWh a year, and to refrain from implementing the
notified transaction until the sale of the shares in
APC is effective (Annex (56), point A.1);

(b) to make available through APT 450 GWh of
electricity for auction each year until 30 June 2008,
to be supplied to the Austrian high-voltage grid
(Annex, point C);

(c) not

to implement

the concentration before the
necessary authorisations have been obtained (Annex,
end).

(158) The overall package of

remedies

submitted by the
notifying parties and other commitments will therefore
ensure that
the notified merger does not create a
dominant position on the markets for the supply of
electricity
final
consumers, nor will it strengthen the dominant position
of EnergieAllianz on the market
the supply of
electricity to small customers in Austria (54).

distributors

small

large

and

for

to

(162) These commitments are intended to effect a structural
change to the market. Of the other commitments, the
details of the continued operation of APC, the terms of
the non-exercise of
APC's electricity supply contract,
voting rights in Steweag-Steg, the transfer to a trustee of
the shareholder's rights in Salzburg AG, the terms of the
auction
ensure
competition on the market in balancing energy and the
grant of a unilateral right to early termination of the
electricity supply contracts of large customers who now

the measures

electricity,

of

to

(53) See recital 103.
(54) Remedies Notice, recital 30.

(55) Remedies Notice, recital 12.
(56) See footnote 8.

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Official Journal of the European Union

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find themselves with the new E & S should be made the
subject of obligations. Essentially they serve to ensure
that the conditions already mentioned have the desired
effect on competition, or that they are put into effect as
planned.

Article 3

This Decision is subject
the other
commitments entered into by the undertakings referred to in
Article 1 and set out in the Annex, with the exception of
points A2, A3, B and F, must be complied with in full.

to the obligation that

X. CONCLUSION

(163) For these reasons, provided the commitments entered
into by the notifying parties are fully complied with, it
can be accepted that the concentration does not create
or strengthen a dominant position as a result of which
effective competition would be significantly impeded in
the common market or in a substantial part of
it.
Subject to full compliance with the commitments set
out in the Annex, therefore, the concentration should be
declared compatible with the common market and the
EEA Agreement pursuant to Articles 2(2) and 8(2) of
the Merger Regulation and Article 57 of
the EEA
Agreement,

HAS ADOPTED THIS DECISION:

Article 1

notified

concentration

by which Österreichische
The
EVN AG, Wien
Elektrizitätswirtschafts-Aktiengesellschaft,
Energie GmbH, Energie AG Oberösterreich, Burgenländische
Elektrizitätswirtschafts-Aktiengesellschaft
and Linz AG für
Energie, Telekommunikation, Verkehr und Kommunale Dienste
acquire joint control, within the meaning of Article 3(1)(b) of
the Merger Regulation, of the undertakings E & S GmbH and
Verbund Austrian Power Trading AG is hereby declared
compatible with the common market and the EEA Agreement.

Article 4

This Decision is addressed to:

Burgenländische Elektrizitätswirtschafts-AG
Kasernenstraße 9
A-7000 Eisenstadt

Energie AG Oberösterreich
Böhmerwaldstraße 3
A-4021 Linz

EVN AG
EVN Platz
A-2344 Maria Enzersdorf

Linz AG für Energie, Telekommunikation,
Verkehr und Kommunale Dienste
Fichtenstr. 7
A-4021 Linz

Österreichische Elektrizitätswirtschafts-AG
Am Hof 6a
A-1010 Vienna

Wien Energie GmbH
Schottenring 30
A-1010 Vienna

Article 2

Done at Brussels, 11 June 2003.

Article 1 shall apply subject
the
commitments entered into by the undertakings referred to in
Article 1 and set out in point A1, clauses 1, 4 and 6, point C,
clause 1, and the last sentence on page 6 of the Annex are
complied with in full.

to the condition that

For the Commission

Mario MONTI

Member of the Commission

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L 92/117

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