BIICL Conference London, 24 November 2006

1. BIICL ConferenceLondon, 24 November 2006 Championing National Or European Interests? Merger control and the integration and liberalisation of markets in the EU Nadia Calviño Deputy Director-General, DG Competition, European Commission

2. Overview • Open, competitive markets are key drivers for growth in Europe: Internal Market provides opportunities for expansion and prosperity – Lisbon Agenda designed to accelerate this process. • Integration of markets implies that industrial restructuring can take place across national borders. • Competitive process requires that industries can restructure as they see fit – including by changes in ownership. • European industry is seizing these opportunities and integrating at EU level and worldwide. Is there a “Europeanisation” of EU industry? What is a national champion?

3. EU cross-border mergers • Trends in EU cross-border mergers: • ECMR filing statistics: over 2/3 mergers notified to Commission in 2000-2005 period were not “domestic” (between firms within one Member State) • Geographical source of company revenues: over 50% from “home markets” (within one Member State) in 1997; less than 40% in 2005 • Marked increase in cross-border mergers in network industries (telecoms, transport – postal and energy sectors).

4. Merger control in regulated markets • Important role of competition policy in the liberalisation of the Telecoms markets. • Ongoing liberalisation in the energy market: - EU regulatory process: 2003 gas and electricity directives. - Absence of real european energy markets: outstanding national regulations and market structures. • Accelerating process of cross-border energy mergers + Commission’s sector enquiry: Preliminary report identifies market concentration (national markets with strong incumbents + vertical integration) as major concern. • merger control can facilitate energy market liberalisation by • ensuring that “horizontal” concentration does not impede effective competition by strengthening incumbents • ensuring that “vertical” integration does not impede effective competition by foreclosing access to national markets

5. Energy mergers: horizontal and non-horizontal effects EFFECTS • Unilateral effects, eliminating both: • Actual competition (EDF/Suez (2006)) • Potential competition (EDF/ENBW (2001);EDF/ENI/GDP (2004)) • Coordinated effects (VEBA/VIAG (2000)) • Input foreclosure (EDP/ENI/GDP (2004); Eon/MoL (2005); GDF/Suez (2006)). • Customer foreclosure (EDP/ENI/GDP (2004)) REMEDIES • Traditional remedies: divestiture of production/distribution assets; severing of ownership/supply links between competitors; gas/contract releases • “Ownership unbundling” remedies (i.e. structural separation into unaffiliated entities): objective is to achieve vertical separation, thereby contributing to market liberalisation – examples: Eon/MoL; DONG/Elsam/E2; GDF/Suez

6. National or European Champions? • Merger wave: Increasing numbers of transnational mergers. • EC merger control does not impede creation of European/global firms but aims at protecting effective competition: productive efficiency and consumer welfare. • Complex assessment in regulated markets: Concentrated structure, vertical integration, barriers to entry: The absence of an internal market. • Merger control is a powerful tool for reinforcing integration and liberalisation of EU markets but it is not the only one. • The Commission has played a relevant role in liberalisation of regulated markets (telecoms, rail, postal). • The need for an integrated European energy policy: Creation of a single market.