German Federal Cartel Office Curbs Acquisitions of Public Utilities by Energy Suppliers

The wave of acquisitions in the German energy industry has subsided. Current examinations by Dr. Patrick Beschorner and Martina Lauk of the Centre for European Economic Research (ZEW) in Mannheim suggest that in the period from the beginning of 2004 to August 2007, only eight public utility services were taken over by major energy suppliers. From the beginning of 1999 until the end of 2003, however, 130 acquisitions of local suppliers by interconnected firms had taken place. According to the ZEW researchers, the decreasing number of acquisitions in the energy sector is largely due to the German Federal Cartel Office's decision in 2003 to prohibit the merger between E.ON AG, one of the two major vertical players, and a public utility service, this was the first ruling of its kind.

In 2007, this fundamental ruling was confirmed by the Higher Regional Court of Düsseldorf and seems to have currently stopped the vertical expansion drive of the interconnected firms in Germany. If until 2002, the rather restraining examination of the German Federal Cartel Office had favoured the vertical expansion policy of the major energy suppliers, similar acquisitions tend to be granted from then on solely under strict conditions, if at all.

Although there still are hundreds of independent electricity suppliers and thus potential takeover candidates in Germany, the change in theGerman Federal Cartel Office’s behaviour seems to have dampened the energy suppliers’ desire for national mergers. The acquisition of local energy suppliers by financial investors that industry experts had consequently expected, largely failed to appear as well. This might be due to the possible lack of attractive remaining public utilities or due to the fact that unlike interconnected firms, financial investors do not benefit from the potential synergy with local suppliers.

Contact

Dr. Patrick Beschorner, E-mail: beschorner@zew.de

Martina Lauk, E-mail: lauk@zew.de