CASE AT.39767 – E.ON GAS

(Only the English text is authentic)

ANTITRUST PROCEDURE Council Regulation (EC) 1/2003

Article 9 Regulation (EC) 1/2003 Date: 26/07/2016

This text is made available for information purposes only. A summary of this decision is published in all EU languages in the Official Journal of the European Union.

Parts of this text have been edited to ensure that confidential information is not disclosed. Those parts are replaced by a non-confidential summary in square brackets or are shown as […].

EN EN TABLE OF CONTENTS

1. Introduction ...... 3 2. Review of the Commitments on the Basis of Article 9(2) of Regulation No 1/2003 ... 5 3. Relevant market ...... 6 3.1. Gas wholesale markets ...... 6 3.1.1. Relevant product market ...... 6 3.1.2. Relevant geographic market ...... 7 3.2. Gas retail market ...... 8 3.2.1. Relevant product market ...... 8 3.2.2. Relevant geographic market ...... 8 3.3. Gas transport market ...... 8 3.3.1. Relevant product market ...... 8 3.3.2. Relevant geographic market ...... 9 4. Dominant Position ...... 9 4.1. Downstream wholesale market ...... 9 4.2. Retail market for the supply of gas to industrial customers ...... 10 4.3. Gas transport market ...... 10 5. Abuse of Dominance...... 11 5.1. The abuse set out in the 2010 Decision ...... 11 5.2. No risk of further foreclosure ...... 11 5.2.1. The implementation of the Commitments ...... 11 5.2.2. Regulatory changes ...... 12 5.2.3. Changes in commercial behaviour ...... 13 5.2.4. Significant spare capacities ...... 14 6. Conclusion ...... 14

EN 2 EN COMMISSION DECISION

of 26.7.2016

relating to a proceeding under Article 102 of the Treaty on the Functioning of the European Union (TFEU) and Article 54 of the EEA Agreement

Case AT.39317 – E.ON Gas

(Only the English text is authentic) THE EUROPEAN COMMISSION, Having regard to the Treaty on the Functioning of the European Union, Having regard to the Agreement on the European Economic Area, Having regard to Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty1, in particular Article 9(2) thereof,

Whereas:

1. INTRODUCTION (1) The present Decision is addressed to E.ON SE ('E.ON'), its indirect subsidiary Uniper Global Commodities SE ('UGC' which belongs to E.ON's direct subsidiary Uniper SE ('Uniper')) and Open Grid Europe GmbH ('OGE'). With the present decision, the commitments rendered binding by the Commission Decision of 4 May 2010 in this case are terminated. (2) On 4 May 2010, the Commission adopted a Decision pursuant to Article 9 of Regulation (EC) No 1/2003 ('the 2010 Decision') addressed to E.ON (at the time E.ON AG) including its subsidiaries E.ON Ruhrgas AG ('E.ON Ruhrgas', which was later renamed E.ON Global Commodities and subsequently became UGC) and E.ON Gastransport GmbH ('EGT', which was later renamed OGE) and thereby made legally binding the commitments which E.ON had offered ('the Commitments') in order to remove the Commission's competition concerns relating to E.ON's behaviour regarding the gas markets in Germany.2 (3) The Commission's preliminary analysis in the 2010 Decision found that E.ON – being a vertically integrated market player at the time with activities in the supply of gas (via its

1 OJ L 1, 4.1.2003, p.1. With effect from 1 December 2009, Articles 81 and 82 of the EC Treaty have become Articles 101 and 102, respectively, of the Treaty on the Functioning of the European Union ('TFEU'). The two sets of provisions are, in substance, identical. For the purposes of this Decision, references to Articles 101 and 102 of the TFEU should be understood as references to Articles 81 and 82, respectively, of the EC Treaty when where appropriate. The TFEU also introduced certain changes in terminology, such as the replacement of 'Community' by 'Union' and 'common market' by 'internal market'. Where the meaning remains unchanged, the terminology of the TFEU will be used throughout this Decision. 2 Commission Decision COMP/39.317 in the case E.ON Gas of 4 May 2010.

EN 3 EN subsidiary E.ON Ruhrgas) as well as in the transport of gas as the owner and operator of one of the major gas transport grids in Germany (via its subsidiary EGT) – had infringed Article 102 of the Treaty by refusing access to its gas grid. E.ON had booked the largest part of the available transport capacities in its gas transport grid on a long-term basis. The 2010 Decision, on the basis of its preliminary analysis, set out that the long-term capacity bookings could be considered as refusal to give access to an essential facility leading to a foreclosure of competitors on the wholesale market on which regional wholesalers supplied gas to small local and regional distributors as well as on the retail market for the supply of gas to industrial customers. On both these markets E.ON was considered to be dominant. (4) In order to remove the Commission's concerns E.ON committed to significantly reduce its bookings of transport capacity in the EGT-grid. This reduction was supposed to be achieved in a two-fold manner: (i) via a one-off measure by annulling a certain amount of the E.ON long-term bookings3 by October 2010 ('Immediate Capacity Release') and (ii) by subsequently reaching a defined booking threshold ('the booking threshold') expressed as a certain share of E.ON's long-term bookings of the total available capacity4 ('E.ON's booking quota') at the latest until 1 October 2015. E.ON, moreover, committed to remain below the booking threshold for a further 10 years from the date on when it first reached it. E.ON's bookings fell under the booking threshold for the first time on 1 April 2011. On this basis, the Commitments are supposed to remain valid until 1 April 2021. As confirmed by the Trustee monitoring E.ON's compliance with the Commitments ('Monitoring Trustee'), E.ON has so far fully complied with the Commitments and has reduced its booking quota even significantly below the threshold defined in the Commitments. (5) By letter dated 25 November 2011, E.ON informed the Commission of its planned divestment of EGT, which was renamed Open Grid Europe (OGE), and asked for clarification about the validity of the Commitments. The Commission replied by letter dated 15 December 2011 that the Commitments rendered binding on EGT would continue to apply to OGE after the divestment. As set out in the Commission's letter, the remaining Commitments still binding on OGE consisted mainly of reporting obligations. (6) Apart from this it is also worth noting, that E.ON recently announced to spin off large parts of its business, in particular E.ON Global Commodities, which is the E.ON subsidiary active in the gas wholesale market and trading business accounting for by far the largest part of E.ON's bookings of gas transport capacities, into a company called Uniper. E.ON indicated that in this process, E.ON Global Commodities would become

3 The 2010 Decision defined 'long-term bookings' as bookings exceeding 1 year of duration. 4 The 2010 Decision considered as total available capacity the firm freely allocable capacities at all entry points in the relevant market area which can be booked long-term. A capacity is considered as firm if it is provided with the guarantee of no interruptions. Capacities are freely allocable if they can be booked in an entry-exit system which had been newly introduced in Germany in 2007. In an entry-exit system, gas transport customers do not any longer book a specific transport path for their gas, but reserve entry and exit capacities of the relevant grid separately and the transmission system operator ('TSO') organises the different flows of gas within the grid in order to ensure the delivery of gas at the relevant exit points for all gas transport customers. Ideally, in an entry-exit system all transport capacities should be freely allocable. However, sometimes capacities are restricted in that regard, for example, due to technical limitations of the grid (see 2010 Decision, recitals 9-10).

EN 4 EN UGC.5 E.ON will in the medium-term still have control over Uniper, but plans to reduce its shares to a minority shareholding in the long-run.6 (7) By letter of 24 June 2016, E.ON requested the termination of the Commitments arguing that a material change of the facts on which the 2010 Decision was based has occurred which allows for a re-opening of the proceedings pursuant to Article 9(2) of Regulation 1/2003 and that market circumstances have changed to an extent that renders the Commitments unnecessary for the future and justifies the termination of the Commmitments. The Commission informed OGE of E.ON's request. OGE did not raise any objections to a termination of the Commitments as requested by E.ON. The Commission has requested the Monitoring Trustee to provide an opinion on E.ON's request. By letter of 6 July 20167, the Monitoring Trustee confirmed E.ON's submission. (8) The Commission's analysis shows that the facts on which the 2010 Decision was based have indeed significantly changed since the 2010 Decision was taken. Firstly, E.ON's corporate structure has changed substantially: In 2012, E.ON divested OGE. E.ON is therefore no longer active as a supplier of gas transport capacity. Furthermore, structural changes in the markets (such as the creation of large market areas through the combination of several grids) allow for the definition of wider gas supply markets. It is not evident that E.ON would still be dominant on those markets. Besides this, regulatory changes, such as mandatory auctions for the allocation of transport capacities and certain limitations to the possibility to book capacities long-term, the existence of large free gas transport capacities and a changed business behaviour of market participants in the new, more competitive gas market environment significantly limit the risk of any future abuse by E.ON of the kind described in the 2010 Decision. (9) By the present decision the Commission considers on this basis that a change of material facts on which the 2010 Decision was based allows for the re-opening of proceedings pursuant to Article 9(2) of Regulation 1/2003 and that market circumstances have changed to an extent which justifies terminating the Commitments.

2. REVIEW OF THE COMMITMENTS ON THE BASIS OF ARTICLE 9(2) OF REGULATION NO 1/2003 (10) Paragraph 24 of the Commitments refers to Article 9(2) of Regulation 1/2003 for a reopening of the procedure. According to Article 9(2) lit a) of Regulation 1/2003, the 'Commission may, upon request or on its own initiative, reopen the proceedings: a) where there has been a material change in any of the facts on which the decision was based'. (11) As will be set out below, the relevant facts on which the 2010 Decision was based have significantly changed. In addition, the Commission recognises that significant changes in market circumstances justify terminating the Commitments. (12) The most important changes compared to the time when the 2010 Decision was taken, in particular, relate to the definition of the relevant markets (see section 3), E.ON's market position on these relevant markets (see section 4), E.ON's booking quota and the amount of free transport transport capacities (see section 5.2.1) as well as the regulatory changes (see section 5.2.2) and changes in the commercial behaviour of market participants (see

5 In the second half of 2016 E.ON will transfer the majority of its shares in Uniper (53%) to the E.ON shareholders who may then trade such shares on the stock exchange. In the medium-term E.ON moreover plans to divest its remaining 47% of the Uniper-shares. 6 E.ON's letter of 22 October 2015. 7 Opinion by the Monitoring Trustee of 6 July 2016

EN 5 EN section 5.2.3). The assessment shows that E.ON is no longer dominant in the gas transport market due to the divestment of its grid and that it is not evident that E.ON could still have a dominant position in the relevant gas supply markets. Moreover, the risk of a future abuse as described in the 2010 Decision is very limited because such behaviour would contradict rational business behaviour.

3. RELEVANT MARKET 3.1. Gas wholesale markets 3.1.1. Relevant product market (13) The 2010 Decision considered different markets for gas supply on the wholesale level and for gas sales to end-customers on the retail level.8 (14) In the 2010 Decision, the Commission considered that the wholesale gas supply market itself consist of three different markets.9 It was considered that on the import (or upstream gas supply) market, producers (mainly located outside of Germany) sell gas to supra- regional gas wholesale companies within Germany. On the subsequent first downstream wholesale level these supra-regional gas wholesale companies sell the imported gas to regional wholesalers who do not have themselves access to gas imports. On the second downstream wholesale level the regional wholesale companies sell gas to small local and regional distributors, such as the local 'Stadtwerke'.10 (15) In the merger Decision of 3 December 2012 (M.6910 Gazprom/Wintershall/Target companies)11, the Commission found in its market investigation that a majority of market players considered the distinction between supra-regional wholesalers and regional wholesalers as no longer justified. The market definition was, however, left open. In its Decision of 23 October 2014, the German competition authority12 equally found that the previous distinction between supra-regional and regional wholesalers was no longer warranted. (16) The main reason considered by the German competition authority was related to the introduction of the entry-exit capacity booking system (see also footnote 4) and the subsequent shift of gas sales to the virtual trading point. In an entry-exit system, gas transport customers do no longer book a specific transport path for the transport of their gas, but reserve entry and exit capacities of the relevant grid separately. The transmission system operator ('TSO') subsequently organises all the different flows of gas within its grid. Entry-exit systems allow for the introduction of a virtual trading point ('VTP') where gas can be traded within the relevant grid or market area (a combination of two or more grids) without having booked capacities. The German competition authority found that following the introduction of the entry-exit system, producers had over time started to transport large parts of the nationwide gas imports to the VTP without the involvement of supra-regional gas wholesale companies. According to the German competition authority,

8 See Commission Decision COMP/39.317 in case E.ON Gas, recital 16. 9 See Commission Decision COMP/39.317 in case E.ON Gas, recital 16. 10 See Commission Decision COMP/39.317 in case E.ON Gas, recital 16. 11 See Commission Decision COMP/39.317 in case E.ON Gas, recital 94-95. 12 Decision by the German competition authority of 23 October 2014 in the case EWE/VNG – B 8 69/14, recital 79 and following.

EN 6 EN there are, therefore, no longer significant differences between the supra-regional and regional wholesale companies.13 (17) Due to the presence of domestic and foreign producers at the VTP, the supra-regional wholesale companies have become less important since regional wholesalers can source from producers directly at the VTP. On this basis, the Commission considers that on the first or upstream wholesale market, producers sell gas to both supra-regional and regional wholesalers who in turn sell gas to small local and regional distributors on the downstream wholesale market which is the relevant wholesale market in this case. This view of the market definition is also shared by E.ON.14 (18) Besides this, the Commission no longer defines separate markets for high calorific gas (H-Gas) and low calorific gas (L-Gas).15 In the merger case Gazprom/Wintershall/Target Companies, the Commission's investigation has shown that the distinction between H- and L-gas would, in the near future, likely become obsolete due to the possibility of conversion between H- and L-gas.16 Equally, in another merger Decision of 23 October 2014 in the case EWE/VNG, the German competition authority defined a market for downstream wholesale gas supply17 without making a distinction between H- and L-gas, considering also that conversion was possible without raising extra costs for the gas suppliers (the costs for conversion are factored into the general fees for the usage of the grid).18 3.1.2. Relevant geographic market (19) In the 2010 Decision, the Commission defined the market for the supply of gas to small local and regional distributors as grid-wide in scope. At the time of the 2010 Decision, the market area NetConnect, which combined the OGE-grid for H-gas with three other (significantly smaller) grids in a joint entry-exit system had just been created. This development did not, in the Commission's view at the time, justify a wider market definition for the gas supply markets. Due to a lack of available free transport capacities in the OGE-grid, the competitive pressure that competing gas suppliers could exert within the OGE-grid on E.ON was considered to be limited. This supported a grid-wide market definition. (20) In the meantime, further transport grids were combined to create even larger market areas. At the time of the 2010 Decision, seven H-gas market areas and three L-gas areas existed in Germany. As of 1 April 2011, the OGE L-gas market area as well as the Thyssengas H- and L-gas grids (formerly RWE) were merged with the NetConnect H-gas market area. Today only two large market areas exist in Germany: the H-/L-gas market area Gaspool and the H-/L-gas market area NetConnect. (21) In the merger case Gazprom/Wintershall/Target Companies, the Commission's investigation showed that the geographic market would have to be considered as (at least)

13 Decision by the German competition authority – B 8 69/14, recital 87. 14 E.ON's submission of 23 March 2016, page 1. 15 Commission Decision COMP/39.317 in case E.ON Gas, recital 15. 16 Commission Decision COMP/M. 6910 in case Gazprom/Wintershall/Target Companies of 3 December 2013, recital 82. 17 With this decision, the German competition authority gave up its previous distinction between sales to regional wholesalers and to distributors on the downstream wholesale market. Decision by the German competition authority of 23 October 2014 in the case EWE/VNG, recitals 83-84. 18 Decision by the German competition authority of 23 October 2014 in the case B8-69/14 EWE/VNG, recital 91, 109.

EN 7 EN national.19 Also the German competition authority considered in its Decision EWE/VNG, that the geographic market had to be defined as (at least) national since gas can be freely traded within each market area and no capacity bottlenecks exist between the two German market areas.20 3.2. Gas retail market 3.2.1. Relevant product market (22) At retail level, the Commission distinguished in its 2010 Decision between the supply of gas to large industrial customers and the supply of gas to households. The market investigation in the merger case Gazprom/Wintershall/Target Companies confirmed this market definition.21 This is also in line with the definition applied by the German competition authority.22 3.2.2. Relevant geographic market (23) In the 2010 Decision, the relevant geographic market for the retail supply was considered as grid-wide in scope for the same reasons as mentioned for the downstream wholesale market (see recital (19)).23 However, the market investigation in the merger case Gazprom/Wintershall/Target Companies showed that the majority of market participants considered the market to be national in scope. The market definition was ultimately left open.24 The German competition authority considered the retail market for the supply of gas to large industrial customers as being national in scope due to the fact that despite a certain regional focus gas suppliers deliver gas to a significant extent to industrial customers on a nationwide basis.25 3.3. Gas transport market 3.3.1. Relevant product market (24) The 2010 Decision defined the relevant product market regarding gas transport distinguishing whether the transport capacity is contracted as firm or interruptible capacity.26 Moreover, the Commission distinguished between the transport of H-gas and L-gas.27 (25) It is likely that the definition has changed at least with respect to the distinction between H-gas and L-gas considering that several H- and L-gas grids were merged within the existing market areas, including in the relevant market area NetConnect. The market

19 Commission Decision COMP/M. 6910 in case Gazprom/Wintershall/Target Companies of 3 December 2013, recital 98. 20 Decision by the German competition authority of 23 October 2014 in the case EWE/VNG – B 8 69/14, recital 91. This applies particularly since the costs (conversion fee - 'Konvertierungsumlage') incurred by the conversion of gas will be recovered by the grid utilisation charge by 1 October 2016. 21 Commission Decision COMP/M. 6910 in case Gazprom/Wintershall/Target Companies of 3 December 2013, recital 100-102. 22 Decision by the German competition authority of 23 October 2014 in the case EWE/VNG – B 8 69/14, recital 164-165. 23 Commission Decision COMP/39.317 in case E.ON Gas, recital 21. 24 Commission Decision COMP/M. 6910 in case Gazprom/Wintershall/Target Companies of 3 December 2013, recital 105-106. 25 Decision by the German competition authority of 23 October 2014 in the case EWE/VNG – B 8 69/14, recital 164-165. 26 Commission Decision COMP/39.317 in case E.ON Gas, recital 14. 27 Commission Decision COMP/39.317 in case E.ON Gas, recital 15.

EN 8 EN definition can, however, be left open, because E.ON is no longer active as supplier of gas transport capacities since the divestment of EGT. 3.3.2. Relevant geographic market (26) In the 2010 Decision, the relevant geographic market regarding the gas transportation was defined by the size of the EGT-grid since every gas supplier wanting to sell gas to a customer connected to the EGT-grid would need access to precisely this grid without being able to substitute such access by transport capacity on another grid. While this was considered to be valid with respect to the L-gas grid, a slightly different perspective was taken regarding the H-gas grid. In this respect, the 2010 Decision considered that the geographic market would correspond to the newly created market area which combined EGT's H-gas grid with the H-gas grids of bayernets, Eni, GVS and GDF in Germany to form the NetConnect market area, since all customers connected to the EGT-grid could from then on also be reached via entry points to these other grids.28 (27) In the meantime, grids have been further merged to ultimately result in only two market areas in Germany which do not show any bottlenecks between them29. It is on this basis likely that the market definition would be wider today considering the nationwide transport of H- and L-gas as the relevant market. However, this market definition can be left open, since it does not change the assessement in this case.

4. DOMINANT POSITION 4.1. Downstream wholesale market (28) In its 2010 Decision, the Commission considered E.ON to be dominant with a market share of 55%-65% on the grid-wide wholesale market for H-gas supply to small local and regional distributors and of 75%-85% on the grid-wide wholesale market for the supply of L-gas to small local and regional distributors. (29) Based on a revised market definition as set out above (see section 3.1), E.ON's market share on a national market for the supply of gas (H-gas and L-gas) to small local and regional distributors is estimated by E.ON at [25 – 35]% for the year 2014.30 (30) In the Commission's Decision Gazprom/Wintershall/Target Companies, E.ON's market share was similarly estimated at 30-40% (H-gas same as for L-gas) on the German downstream wholesale market (a separate analysis for sales to regional wholesalers and distributors led to the same result) for the year 2011 based on estimates provided by Gazprom.31 (31) It is on this basis not evident that E.ON could still have a dominant position on the downstream wholesale market. (32) E.ON is, moreover, currently restructuring its business.32 It is in the process of spinning of parts of its business to a separate company called Uniper which in the long-term is no

28 Commission Decision COMP/39.317 in case E.ON Gas, recital 18-20. 29 Decision by the German competition authority of 23 October 2014 in the case EWE/VNG – B 8 69/14, recital 91. This applies particularly since the costs (conversion fee - 'Konvertierungsumlage') incurred by the conversion of gas will be recovered by the grid utilisation charge by 1 October 2016. 30 E.ON's submission of 23 March 2016, page 3. 31 Commission Decision COMP/M. 6910 in case Gazprom/Wintershall/Target Companies of 3 December 2013, recital 111. 32 By letter of 22 October 2015 E.ON informed the Commission about the planned restructuring of its corporate structure.

EN 9 EN longer supposed to be controlled by E.ON. In the future, E.ON will focus on renewable energies, electricity and gas grids and electricity and gas retail activities. All other activities, including the gas wholesale and trading business (for which most of the bookings of the transport capacities in the OGE-grid had been made) will be split from E.ON. E.ON's market position on the market for the supply of gas to small local and regional distributors will in the future be taken over by Uniper. 4.2. Retail market for the supply of gas to industrial customers (33) The 2010 Decision considered that E.ON was dominant on the grid-wide markets for the supply of gas to large industrial customers with market shares of 75%-85% (H-gas) and 80%-90% (L-gas).33 (34) E.ON estimates its market share for 2014 on the national retail market for the supply of gas to large industrial customers (H- and L-gas together) at [15 – 25]%34 applying the method of calculation used by the German competition authority for the market shares of EWE and VNG in 201335 with updated figures for 2014 from the most recent Monitoring report issued jointly by the German energy regulator and the German competition authority ('Monitoring report')36. While the Commission Decision in the case Gazprom/Wintershall/Target Companies still considered high market shares for E.ON on a nationwide basis (40-60%) for 201137, the German energy regulator together with the German competition authority concluded in the Monitoring Report 2015 that market concentration on this market is clearly below the level which would point towards dominance considering that the cumulated market share of the three leading providers on the market for supply of large industrial customers is estimated at 32 %.38 (35) It is on this basis unlikely that E.ON could still have a dominant position on the market of gas supply to industrial customers. 4.3. Gas transport market (36) The 2010 Decision considered that E.ON was the dominant provider of transport capacity on both markets with a market share of 100% for the provision of transport capacity on its L-gas grid and a market share of 75%-85% for the provision of transport capacity in the NetConnect market area.39 (37) Since its divestment of OGE, E.ON no longer owns or controls gas transport infrastructure and is therefore no longer active as supplier of gas transport capacity.40

33 Commission Decision COMP/39.317 in case E.ON Gas, recital 28. 34 E.ON's submission of 23 March 2016, page 3. 35 Decision by the German competition authority of 23 October 2014 in the case EWE/VNG – B 8 69/14, recital 166. 36 Monitoring report 2015, page 253. 37 Commission Decision COMP/M. 6910 in case Gazprom/Wintershall/Target Companies of 3 December 2013, recital 111. 38 Monitoring report 2015, p. 10. 39 Commission Decision COMP/39.317 in case E.ON Gas, recital 41. 40 The 2010 Decision sets out that E.ON owned 90%-100% of the EGT L-Gas grid transport capacity and 75%- 85% of the H-gas capacity in the NetConnect market area. The NetConnect market area has been further enlarged, in particular by the addition of the Thyssengas H- and L-gas grids (former RWE-grids). E.ON customers connected to the OGE-grid can now be reached via entry points to several grids belonging to the NetConnect market area. The current share of OGE-transport capacity within the NetConnect market area should therefore be below the shares which had been investigated in the 2010 Decision (75-85% for H-Gas und 90-100% for L-gas). It is questionable whether in the new regulatory framework including its mandatory auctions, TSO's would still be dominant regarding the marketing of their transport capacities.

EN 10 EN 5. ABUSE OF DOMINANCE 5.1. The abuse set out in the 2010 Decision (38) By adopting the 2010 Decision the Commission found that E.ON might have abused its dominant position under Article 102 of the Treaty by foreclosing the markets for gas supply through long-term bookings of almost the entire relevant entry capacity on E.ON’s gas transport grid. In the gas year 2009/2010, E.ON's H-gas bookings accounted for 78% of the relevant total capacities which at that time accounted still for 70% in 2019. For L- gas, E.ON booked up to 100% (in gas year 2010/2011) of the relevant total capacities and 96% remained blocked until at least 2019.41 The analysis as set out in the 2010 Decision showed that there was very significant unsatisfied demand for capacity in the OGE-grid and that the lack of available capacity formed the major obstacle to entry for competitors into the relevant gas supply markets served via the OGE-grid. (39) The 2010 Decision considered that these long-term capacity bookings could be considered as refusal to supply and to give access to an essential facility and therefore as an infringement of Article 102 of the Treaty.42 5.2. No risk of further foreclosure (40) The risk of a further foreclosure by E.ON in the way described in the 2010 Decision can be excluded. This results both from compliance with the Commitments by E.ON as well as from changes in the market which render any such behaviour by E.ON or Uniper with its subsidiary UGC unlikely in the future. 5.2.1. The implementation of the Commitments (41) By its 2010 Decision, the Commission accepted and rendered binding the Commitments which E.ON had offered in order to remove the Commission's concerns. As indicated above (see recital (4)), the Commitments consisted of a release of transport capacities at a number of entry points into E.ON’s gas transport network. This release was supposed to allow competitors to access the gas supply markets served via the E.ON grid, which until then were largely foreclosed due to the large share of E.ON’s long-term bookings of transport capacity. The release was supposed to be carried out in two steps: in the first step, the Immediate Capacity Release, E.ON had to release a significant amount of entry capacities into its gas transmission grid at short notice (by October 2010). In the second step, E.ON had to reduce its overall share of long-term bookings to 50 % in the NetConnect market area for H-gas and 64% in its grid for L-gas. In the case of a merger between the two market areas for H- and L-gas (as was under discussion at the time of the decision), the booking threshold was defined at 54% for H- and L-gas combined. (42) E.ON had to reach the booking threshold at the latest by 1 October 2015 and remain below the threshold for a further 10 years from the date on when it first reached it.43 E.ON's bookings fell under the threshold for the first time on 1 April 2011 – after the merger of further H-/L-gas grids with the NetConnect market area.44 On this basis, the Commitments remain valid until 1 April 2021. (43) The Monitoring Trustee has supervised E.ON's booking behaviour and confirmed to the Commission that E.ON had complied with the Immediate Capacity Release and that its

41 Commission Decision COMP/39.317 in case E.ON Gas, recital 37. 42 Commission Decision COMP/39.317 in case E.ON Gas, recital 24. 43 Commitments to the 2010 Decision, definition of capacity release phase 2 ('Kapazitätsfreigabephase 2'). 44 Special report by the Monitoring Trustee of 5 February 2015, page 6.

EN 11 EN bookings have dropped over time to [CONFIDENTIAL]% (status 1 January 2016).45 The remaining long-term bookings by E.ON correspond to import contracts for gas from [CONFIDENTIAL].46 This booking quota is the result of a steady decline: Starting from a booking quota of 100% in L-gas and 78% in H-gas in 2010, E.ON's bookings decreased to below [CONFIDENTIAL]% for both H- and L-gas together for the first time in the year 2011 reaching a level even below [CONFIDENTIAL]% in 2014.47 Table 1: Development of E.ON's booking quota after the 2010 Decision E.ON's booking quota* (at the indicated dates) H-gas (NCG) L-gas (EGT-grid) finding in 2010 Decision  for gas year 2009/2010 (H-gas) 78% 100%  for gas year 2010/2011 (L-gas) Immediate Capacity Release (Capacity Release Phase 1) 60-70% 70-80% Extended market area cooperation and combination of H- and L-gas as of H-/L-gas (NCG) 01.04.2011 01.04.2011 (start of Capacity Release Phase 2) [CONFIDENTIAL]% 28.07.2011 [CONFIDENTIAL]% 30.01.2012 [CONFIDENTIAL]% 01.07.2012 [CONFIDENTIAL]% 01.01.2013 [CONFIDENTIAL]% 01.07.2013 [CONFIDENTIAL]% 01.01.2014 [CONFIDENTIAL]% 01.07.2014 [CONFIDENTIAL]% 01.01.2015 [CONFIDENTIAL]% 01.07.2015 [CONFIDENTIAL]%** 01.01.2016 [CONFIDENTIAL]% * Sources: 2010 Decision, regular Trustee Reports ** The reduction results from a seasonal adjustment which was applied for the first time in 2015. (44) E.ON did not remain close to the booking threshold of 54% (for H- and L-gas combined), but over time its bookings went far below. There are no indications that E.ON would come close to the booking threshold again in the coming years. 5.2.2. Regulatory changes (45) Shortly after the 2010 Decision, a new regulation for access to the gas grid ('the grid access regulation')48 entered into force in Germany which significantly changed the regulatory environment in the gas and the gas transport markets.49 It defined standardised capacity products (short- and long-term, firm and interruptible)50, introduced explicit

45 Trustee report of 18 February 2016, p. 6. 46 E'ON's submission of 23 March 2016, page 11. 47 Special report by the Monitoring Trustee of 5 February 2015, page 6. 48 Grid access regulation – 'Verordnung zur Neufassung und Änderung von Vorschriften auf dem Gebiet des Energiewirtschaftsrechts sowie des Bergrechts' (Gasnetzzugangsverordnung) of 3 September 2010, German official journal (Bundesgesetzblatt) 2010 part I No. 47 49 Special report by the Monitoring Trustee of 5 February 2015, p. 5. 50 Paragraph 11 of the grid access regulation

EN 12 EN auctions for the allocation of capacities51 thereby replacing the previous 'first-come-first- served-principle', reserved 20% of the total capacity for shorter-term bookings (up to two years) and defined that capacities may be booked for longer than 4 years only up to a limit of 65% of the total capacity52. Further rules were set up which should maximise the available transport capacities and prevent hoarding (as further detailed by the German energy regulator in the rules 'KARLA Gas').53 As of 1 November 2015, the Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems ('CAM NC')54 entered into force mirroring to a large extent those provisions of the grid access regulation and detailing further in particular the auctioning rules. (46) Since the divestment of OGE, E.ON is no longer active as supplier of the related gas transport capacities. Moreover, the described regulatory changes (see recital (45)) provide for certain safeguards against foreclosure through a strategy as described in the 2010 Decision. (47) First of all, the acquisition of a number of subsequent yearly capacity products leading to long-term bookings would only be possible on the basis of auction procedures. Any new bookings would therefore be the result of a competitive process. They would not follow the first-come-first-served principle which favoured, in particular, gas suppliers who also owned gas grids in the past, such as E.ON. (48) Moreover, 20% of the total available capacity can only be booked on a shorter-term basis (two years in advance). This regularly gives competitors the chance to take over such capacity via successful bids in the relevant auctions. Even if one market player were to reserve a large share of transport capacity on a long-term basis, this rule would ensure that at least 20% of the total transport capacity would remain accessible on a shorter-term basis. E.ON is on this basis prevented from adopting a behaviour similar to the one described in the 2010 Decision. This also creates further opportunities for competitors compared to the situation in 2010. 5.2.3. Changes in commercial behaviour (49) Market participants have increasingly preferred short-term bookings.55 Several factors have led to this significant change in the booking behaviour of market participants: due to a better integration of the gas supply markets, increased competition and the improved conditions for gas trading, customers on the downstream wholesale market have in recent years switched from long-term supply contracts to shorter-term procurement. Accordingly, gas wholesalers prefer shorter-term bookings, which have become increasingly attractive since they allow flexible adjustments to the market demand.56 Booking significant amounts of capacity on a longer-term basis has become unreasonable from an economic point of view as it is too costly in a competitive market.

51 Paragraph 12 (1) of the grid access regulation required from the TSOs to create until 1 August 2011 a capacity trading platform on which all primary capacities (firm, not interruptable) would pursuant to §13 of the grid access regulation have to be traded. At first the platform Trac-X was created which since April 2013 been replaced by the European trading platform Prisma. 52 Paragraph 14(1) of the grid access regulation 53 Paragraph 16 of the grid access regulation. 54 Commission Regulation (EU) No 984/2013 of 14 October 2013 establishing a Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems and supplementing Regulation (EC) No 715/2009 of the European Parliament and of the Council OJ L 273, 15.10.2013, p. 5–17. 55 Special report by the Monitoring Trustee of 5 February 2015, page 5. 56 E.ON's submission of 23 March 2016, page 10.

EN 13 EN (50) These changed preferences are also reflected in the capacity offer relating to the former OGE-grid. OGE auctions the annual capacity products for a maximum of three years in advance reflecting the buyers' preference for shorter-term capacity bookings.57 5.2.4. Significant spare capacities (51) There are, moreover, significant spare transport capacities. The Trustee report shows that at the majority of the entry points to the NetConnect market area significant amounts of capacity were not booked by any market participant. The Monitoring Trustee finds that overall 54.8% of the entry capacities have remained free for the gas year 2015/2016 and 55.5% for the gas year 2014/2015. For 2014/2015, out of all relevant entry points, 19 had free capacities of more than 70%, 6 between 50% and 70% and 6 below 50%. Among the latter entry points with less than 50% of free capacities, only one entry point was effectively fully booked. However, [CONFIDENTIAL] bookings there were made by third parties – E.ON had [CONFIDENTIAL] bookings at that point. (52) Also the existence of significant free transport capacities points to a very limited risk of a foreclosure by E.ON. E.ON's booking quota roughly corresponds to its market position on the gas supply markets. In order to reach again the booking threshold defined in the 2010 Decision, E.ON would have to add significant amounts of transport capacities to its bookings in order to reach a level which could lead to foreclosure. E.ON would have to reserve those capacities without having the corresponding gas supply contracts for which such capacity could be used. (53) Such a strategy would contradict rational business behaviour in the current market situation. E.ON's low booking quota regarding long-term capacity reservations confirms this. (54) On this basis it can be excluded that E.ON could again foreclose the market in the way described in the 2010 Decision and that the market circumstances could be reversed to the situation which prevailed in 2010. Against this background, the Commitments do no longer serve any purpose and can be terminated.

6. CONCLUSION (55) To conclude, the risk of a future foreclosure by E.ON via extensive long-term transport capacity reservations as set out in the 2010 Decision can be considered as excluded for the coming years for the reasons set out above. It is also not evident that E.ON is still dominant on the relevant gas supply markets. The German gas markets have been opened in the recent years and could not be foreclosed again by abusive behaviour by E.ON of the type described in the 2010 Decision. The Commitments therefore no longer have any purpose. (56) The overall assessment therefore shows that there have been significant changes in the gas markets as well as in E.ON's corporate structure which the Commission considers as a material change of facts pursuant to Article 9(2) of Regulation 1/2003 and which allow for a reopening of the procedure. Further, the Commission recognises that market circumstances have changed to an extent that justifies terminating the Commitments.

57 E.ON's submission of 23 March 2016, page 7, third bullet point.

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HAS ADOPTED THIS DECISION:

Article 1 The procedure in the case 39317 E.ON gas is reopened pursuant to Article 9(2) Regulation 1/2003.

Article 2

The Commitments rendered binding on E.ON AG (now E.ON SE), E.ON Ruhrgas AG (now Uniper Global Commodities SE) and E.ON Gastransport GmbH (now Open Grid Europe GmbH) by Commission Decision of 4 May 2010 in the case 39317 E.ON gas are terminated.

Article 3 This Decision is addressed to:

E.ON SE Brüsseler Platz 1 DE-45131 Essen Germany

Uniper Global Commodities SE Holzstraße 6 DE-40221 Düsseldorf Germany

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Open Grid Europe GmbH Kallenbergstraße 5 DE-45141 Essen Germany

Done at Brussels, 26.7.2016

For the Commission Margrethe VESTAGER Member of the Commission

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