German renewable electricity retailer Naturstrom has lodged a legal action with the European Court of Justice against the RWE-Eon merger that will result in a €40bn global renewables company.
The lawsuit, brought by Naturstrom and 10 other independent mid-sized German energy suppliers, challenges the decision by the European Commission approving RWE’s takeover of conventional and renewable generation assets owned by Eon on the grounds the merger “significantly restricts” competition in electricity generation and marketing.
The lawsuit forms an action for annulment pursuant to Article 263 of the Treaty on the Functioning of the European Union, lodged with the European Court in Luxembourg.
It seeks to review the legality of acts of the Union institutions.
Naturstrom chief executive Thomas Banning (pictured) said: “By waving through the deal between RWE and Eon to split up the energy market without any serious conditions, the Commission abandoned the goal of fair competition in the German and European energy market.
He said the decision is a “backwards” step considering that the Commission has been “pursuing liberalisation of the electricity market for over 20 years”.
Naturstrom was set up in 1998 as the first nationwide supplier of clean electricity.
Banning added: “We and others have fought for years against the old monopolies and central structures with large, environmentally harmful power plants.
“We have followed our path, consistently relying on renewable energies and decentralised structures, thus forming the counter-model to the business models with which RWE and Eon have become rich.
“We now supply more than 300,000 households and companies nationwide with energy in a sustainable way, customers who don’t want to be served by a group through central structures.
“Like us, others are successful with decentralised and regenerative concepts in the energy market and it is becoming increasingly clear that the business models of RWE and Eon will no longer work.”
He said that the merger terms, designed to avoid competition among Eon and RWE, will enable each to gain market share several times larger than that of the other market participants.
Last year RWE took control of Eon’s renewables assets. The deal involved the acquisition by Eon of Innogy’s distribution and retail business, to pave the way for a complex asset swap between Eon and Innogy’s owner, RWE.
In February 2019, ahead of the merger, the Commission had approved the acquisition by RWE of certain generation assets owned by Eon, including renewables, but investigated the retail side of the deal over concerns about reduced competition in several EU markets.
Following the investigation, the Commission concluded the deal would not result in significant loss of competition in Germany, nor would the two companies increasingly compete against each other in Slovakia as a result of the transaction.
“Electricity generation and wholesale contracts will be concentrated at RWE and network and end customer sales will be concentrated at Eon. This coordinated redistribution of the market also included the transfer of Eon’s generation systems and wholesale electricity to RWE, which the European Commission approved by decision on 26 February 2019 (case M.8871),” said Banning.
“They can and will play out their dominant position in the respective areas and force municipal utilities and medium-sized competitors out of the market,” Banning said.
He added: “In the medium term, this will also be at the expense of customers.”
Naturstrom had expressed concerns about competition in the German energy market created by the merger in a detailed statement to the European Commission.
“Since the Commission did not or did not adequately acknowledge the concerns raised in its decision, Naturstrom calls for a judicial review,” said the company.