Eon/Ruhrgas and Eon/Endesa: A comparative analysis

1. Eon/Ruhrgas and Eon/Endesa: A comparative analysis The Legitimacy of the “Change of Control clause”

2. EON’S TAKEOVER OF RUHRGAS • 15 August 2001: Eon’s application to Federal Cartel Office, FCO • 17 January 2002: FCO’s prohibition of merger on the grounds that the merger would strengthen Eon’s dominant position on the gas and electricity market to a serious extent, section 36 (1) of the Act against Restraints of Competition (GWB) • 15 February 2002: Eon’s application for Ministerial Authorization according to section 42 (1) GWB • 21 May 2002: Negative appraisal of intended merger by Monopolies Commission • 5 July 2002: Issue of Ministerial Authorization by Ministry of Economics because “the restraint of competition is outweighed by advantages to the economy as a whole and an overwhelming public interest”, section 42 (1) GWB

3. The Ministry’s conditions imposed on Eon • Downstream Distribution: Eon was to sell shares of its subsidiaries VNG, SWB, EWE and Bayerngas • Gas Release-Program: Ruhrgas was to sell 200 billions kWh • “Change of Control clause”: The Ministry is allowed to veto any foreign takeover of Eon if it gives rise to the assumption that German gas supplies are put at risk. In this case, Eon is forced to sell Ruhrgas to a third party subject to the Ministry’s permission. The permission can only be denied if national energy interests are at stake. It is considered to have been issued if the Ministry does not react to a notification within a month.

4. Justification for the “Change of Control clause” • The clause falls under the definition of Article 21 (4) of the Merger Regulation because it is “an appropriate measure to protect legitimate national interests”. • In 2002 the ICJ held comparable rules by Belgium to be valid (C-503/99). It described Belgium’s golden share in gas distribution business Distrigaz as “a legitimate measure to promote the national interest – the supply of gas in an emergency”. • According to the Court, a golden share can be justified if the objective pursued • falls within the ambit of a general strategic interest • and the measures prescribed are based on precise criteria which are known in advance, are open to review by the courts and • cannot be attained by less restrictive measures.

5. Principle of Proportionality • The change of control clause constitutes an appropriate means to provide for security of supply. • It is a necessary means to guarantee security of supply. The objective cannot be attained by a less restrictive measure. • The clause is a proportionate means because it acts as a safeguard for legitimate national interests.