EU Competition Controversy Brewing Over French Protectionism
March 20, 2006
The Italian electricity giant Enel is reported to be weighing a hostile bid for the French water and power group Suez, confronting the French head on and putting European Union competition authorities on the spot.
At issue are conflicting visions of how a single, open-market economy should function.
On one hand there is an EU commitment in principle to the free flow of capital across national borders to outlets where it can be most productive and supportive of competition.
On the other hand there is mounting determination among certain EU members to preserve long-cherished, sheltered national industrial icons.
Italian authorities contend that in order to thwart Enel the French government accelerated the pace of efforts to merge Suez with the state-controlled gas utility Gaz de France and thereby indulged in an unacceptable act of economic protectionism.
The French counter that the Suez-GDF tie-up makes good business sense and would immensely benefit the operation of the national energy sector.
The three companies were set this week to appeal to the European Union in Brussels to sort out the row.
Enel wants assurances before lodging massive bid
Before launching into a 50 billion euro ($60 billion) takeover tussle, Enel wants to be sure France will not throw up roadblocks and that EU Competition Commissioner Neelie Kroes will prove to be a fair referee.
The Suez-GDF merger plan has also raised serious competition concerns in Belgium, where Suez and GDF both have important operations.
A merged entity would have a huge share of the energy market in Belgium, since it would combine under one roof Suez's Belgian subsidiary, Electrabel, and SPE, the country's second largest electricity provider, which is 51 percent controlled by GDF and Britain's Centrica.
On the Belgian gas market GDF would no longer compete with Distrigaz, in which Suez has a 57 percent stake.
On Friday Belgian Prime Minister Guy Verhofstadt called on Suez to sell assets if it pushed ahead with the planned merger with GDF to ensure competition in Belgium.
"We want solutions now," he insisted after meeting with the EU commission's Neelie Kroes.
Chiefs to meet competition commissioner Monday
The heads of the two French companies, Gerard Mestrallet and Jean-Francois Cirelli, were set to meet Kroes Monday to explain their proposed merger. Both reiterated during the last week that they had not had any contact with Enel.
"We are living in the modern world," said Cirelli last Thursday. "There are telephones and if the Enel management wants to get in touch with us we will take their call and listen to them."
Enel chief Fulvio Conti for his part was set to meet Kroes Tuesday to outline his takeover plans.
The EU Commission has meanwhile been examining written explanations submitted by the French government of how the proposed Suez-GDF merger evolved and is expected to give its opinion by the end of March.
French Economy and Finance Minister Thierry Breton, who met last Monday in Brussels with Italian counterpart Giulio Tremonti, said there had previously been no negotiations between Italy and France. But he added that he planned another encounter with Tremonti on the Suez-GDF tie-up.