E.ON's German Expansion Plans Blocked by High Court

By Karin Matussek

Nov. 11 (Bloomberg) -- E.ON AG, Germany's biggest utility, lost a high court ruling that may stop it from buying additional stakes in local utilities.

E.ON and competitor RWE AG have a ``market-dominant oligopoly'' on Germany's power market and allowing E.ON to buy into the utility of Eschwege, Germany, would have strengthened its dominance, Germany's highest civil court said today.

``There is not yet a free competition for electricity generated in Germany or imported to Germany,'' the Federal Court of Justice said in a statement on its Web site. Little power can cross borders into Germany, ``so foreign electricity producers can exert only very limited competitive pressure.''

Other utilities in Germany including EnBW Energie Baden- Wuerttemberg AG and Vattenfall AB can't exert ``sufficient competitive pressure'' against E.ON and RWE, the court said.

Josef Nelles, a spokesman for Dusseldorf-based E.ON, didn't immediately return a call seeking comment.

The Federal Cartel Office in Bonn, Germany's antitrust regulator, in 2003 blocked E.ON's plan to buy a 33 percent stake in Stadtwerke Eschwege GmbH.

``The ruling backs the line decisions we've taken for several years in the electricity sector,'' the regulator said. ``The Cartel Office has proved in two nationwide surveys the dominating position of E.ON and RWE in the power production and the distribution.''

E.ON and RWE already have acquired stakes in 204 power- distribution companies and further acquisitions would curtail competition, the court said.

The ruling is the first by the high court on a merger in Germany's power industry since the market was liberalized in 1998, the Karlsruhe-based court said.

Today's ruling is KVR 60/07.