Court Reduces Fines Tied to EU Energy Monopoly

(CN) - The EU General Court shaved $291 million off each fine levied against two energy companies for anticompetitive agreements, finding that the fines relied on a miscalculated duration of wrongdoing.

The commission imposed $691 million in penalties each on France's GDF and German E.ON in 2009 after an investigation revealed the two companies had an agreement not to sell natural gas in each other's markets. The compact reached back to 1975, when the companies co-built the MEGAL pipeline across Germany to import natural gas from Russia into France and Germany.

The commission decided that GDF began its infringement when the EU passed its first law opening up the gas market in 2000. It believed that E.ON's infraction began much earlier - in 1980, when the MEGAL pipeline became operational - since Germany already had an open market for natural gas.

Since the agreements were legal under German law before 1998, however, the commission calculated the fines from that year.

Even though both companies regarded their anticompetitive agreements null and void by 2004, the commission added a year for market residual effects and decided the infringements ended in 2005 in assessing the penalties.

The General Court in Luxembourg largely upheld the penalties Friday, but found that the commission made two miscalculations with regard to the companies' fines.

First, the General Court annulled a portion of the decision after found a lack of evidence concerning potential competition between the two companies in the German market from 1980 to 1998. The court noted, however, that this time period did not affect the fine assessment.

The commission also did not show that the companies were still committing violations in the French market past their agreement in 2004, though documents showed infringements continued into 2005 in the German market, according to the decision.

As such, the court reduced the fines - though by far less than the companies hoped.

"The consequence of the application of that method to the corrected figures concerning the duration of the infringement in France and the average sales in connection with the infringement on the French market during that period would entail a reduction in the applicants' fine which is greatly disproportionate to the relative importance of the error which has been found to exist," the decision states. "Although the commission's error relates only to the French market and only to 12 and a half months of the five years and one month initially established by the commission for the infringement committed on that market, the application of the commission's method would result in a reduction in the fine of more than 50%."

"What is more, the application of the commission's method would, in setting the amount of the fine, underestimate the relative importance of the infringement committed on the German market in comparison with that committed on the French market," the court concluded, which set the fines at $400 million each for the "duration and the gravity of the infringement."

E.ON and GDF have two months to appeal the General Court decision to Europe's high court on points of law only.

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