Are steaks overrated for bulk
doi: 10.3000 / 17252423.C_2009.248.eng
of the European Union
Information and Notices
(1) Text with EEA relevance
NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES
Official Journal of the European Union
Euro exchange rates (1)
15 October 2009
2009 / C 248/01
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(1) Source: reference exchange rate published by the ECB.
Official Journal of the European Union
Opinion of the Advisory Committee on restrictive agreements and dominant position given at its meeting of 26 June 2009 regarding a draft decision relating to Case COMP / 39.401 - E.ON / GDF (1)
2009 / C 248/02
The Advisory Committee agrees with the Commission's assessment of the facts as agreements and / or concerted practices within the meaning as Article 81 of the Treaty as expressed in its draft Decision and communicated to the Advisory Committee on 12 June 2009.
The Advisory Committee agrees with the Commission that the complex of the agreements and / or concerted practices constitute a single and continuous infringement for the time frame in which it existed.
The Advisory Committee agrees with the Commission that the agreements and / or concerted practices have as object a restriction of competition.
The Advisory Committee agrees with the Commission’s assessment of the duration of the infringement, as being:
The Advisory Committee agrees with the Commission draft decision as regards the conclusion, that the agreements and concerted practices between the companies were liable to affect trade between Member States.
The Advisory Committee agrees with the Commission draft decision as regards the addressees of the decision, especially with reference to the imputation of liability to legal predecessors, i.e. companies acquiring control of or merging with companies of the groups concerned.
The Advisory Committee agrees with the Commission that a fine should be imposed on the addressees of the draft decision.
The Advisory Committee asks the Commission to take into account any other points raised under the discussions.
The Advisory Committee recommend the publication of its opinion in the Official Journal of the European Union.
Official Journal of the European Union
Opinion of the Advisory Committee on restrictive agreements and dominant position given at its meeting of 3 July 2009 regarding a draft decision relating to Case COMP / 39.401 - E.ON / GDF (2)
2009 / C 248/03
The Advisory Committee agrees with the Commission’s reasoning on the calculation of sales and on the basic amount of the fines.
The Advisory Committee agrees with the Commission on the periods to be taken into account for imposing the fines, as being:
The Advisory Committee agrees with the Commission’s assessment on the mitigating and aggravating circumstances.
The Advisory Committee agrees with the cap that the Commission applies and on the final amount of the fines.
The Advisory Committee recommends the publication of its opinion in the Official Journal of the European Union.
Official Journal of the European Union
Final report of the Hearing Officer in COMP / 39.401 - E.ON / GDF (1)
2009 / C 248/04
The draft Decision in this case gives rise to the following observations:
The Statement of Objections and Access to File
On 9 June 2008, the Commission adopted a Statement of Objections (SO), addressed to Gaz de France SA ('GDF'), E.ON AG ('E.ON AG') and E.ON Ruhrgas AG ('E. ON Ruhrgas') (together, 'E.ON').
The SO was received by GDF and by E.ON on 10 June 2008. Both addressees of the SO were originally granted a deadline of 6 weeks to provide their written comments on the SO from the date of receipt of the Commission's file in the form of a DVD. Upon their reasoned requests, I granted E.ON an extension to 29 August 2008 and GDF an extension until 8 September 2008.
Two letters of facts dated March 27, 2009 were subsequently sent to GDF and E.ON. Both parties requested an extension to the deadline to reply to these letters of facts, which was granted by the Directorate General for Competition. Both parties replied in time.
The parties did not address any issues concerning access to file to me beyond remarks on the organization of the file itself and the available language versions.
The Oral Hearing
All parties to the proceedings exercised their right to be heard in an oral hearing, which took place on October 14, 2008. On request by GDF, their presentation on the economic strategy in Germany was held in camera. A non-confidential version of the in camera session was subsequently provided by GDF to E.ON.
The draft decision
The draft decision narrows down the scope of the allegation made in the SO in concluding that GDF and E.ON engaged in a single and continuous infringement relating to the supply of gas transported over the MEGAL pipeline into Germany and France, and not concerning all sales of gas in these markets. The written agreement considered to represent the basis of the infringement (the 1975 side letters) was entered into exclusively in the context of the construction and operation of the MEGAL pipeline. The two other aspects of the infringement set out in the SO (namely the high level meetings held between 1999-2006, and the parties' non-aggression strategies) have been assessed in the draft decision with a view to considering whether the parties, many years later, considered themselves still bound by the 1975 side letters, thereby constituting a single infringement based on the illegality of the side letters in 1975. The parties have been granted the opportunity inter alia to express their views on this structure of the allegation.
Fines are imposed for a period from April 1998 to September 2005 as regards Germany and from August 2000 to September 2005 as regards France.
In my view, the draft Decision deals only with objections in respect of which the parties have been afforded the opportunity of making known their views.
In the light of the above, I consider that the right to be heard of all parties has been respected in the present case.
Brussels, 29 June 2009.
(1) Pursuant to Articles 15 and 16 of Commission Decision 2001/462 / EC, ECSC of 23 May 2001 on the terms of reference of Hearing Officers in certain competition proceedings (OJ L 162, 19.6.2001, p. 21).
Official Journal of the European Union
Summary of Commission Decision
of 8 July 2009
relating to a proceeding under Article 81 of the EC Treaty
(Case COMP / 39.401 - E.ON / GDF)
(notified under document C (2009) 5355 final)
(Only the French and German texts are authentic)
2009 / C 248/05
On 8 July 2009, the Commission adopted a decision relating to a proceeding under Article 81 of the EC Treaty. In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1), the Commission herewith publishes the names of the parties and the main content of the decision, including any penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets. A non-confidential version of the decision is available on the Directorate-General for Competition’s website at the following address:
The decision finds that E.ON AG ('E.ON'), jointly and severally with its wholly owned subsidiary E.ON Ruhrgas AG ('E.ON Ruhrgas'), and GDF Suez SA ('GDF Suez') have infringed Article 81 (1) of the EC Treaty by participating in an agreement and concerted practices in the natural gas sector and imposed a fine on these companies.
2. CASE DESCRIPTION
The case arose of the surprise inspections carried out on 16th May 2006 at the premises of Ruhrgas and GDF. On July 18, 2007, the Commission initiated proceedings within the meaning of Article 11 (6) of Regulation (EC) No 1/2003 and Article 2 (1) of Commission Regulation (EC) No 773/2004 (2). On June 9, 2008, a Statement of Objections ("SO") was addressed to E.ON, E.ON Ruhrgas and GDF. The parties replied to the SO on August 28, 2008 (E.ON / E.ON Ruhrgas) and September 8, 2008 (GDF Suez). On request of both parties, an Oral Hearing was held on October 14, 2008. The Commission sent to the parties also a letter of facts on March 27, 2009, to which the parties replied on May 4 and 6, 2009. The Advisory Committee on Restrictive Practices and Dominant Positions issued favorable opinions on June 26, 2009 (3) and July 3, 2009 (4). The Hearing Officer formulated its final report on 29 June 2009 (5).
2.2. Summary of the infringement
In 1975, when Ruhrgas and GDF decided to jointly build the MEGAL pipeline together to bring Russian gas into both Germany and France, they agreed not to enter each other's home markets through two side letters which prohibited GDF from supplying customers in Germany with the gas transported through MEGAL and Ruhrgas from transporting gas via the pipeline to France.
Until the expiry of the deadline for implementation of the First Gas Directive in 2000, GDF had a monopoly on the import of gas into France. Following the removal of the import monopoly and during the gradual liberalization of the European gas markets, the parties continued to apply the 1975 side letters. E.ON, E.ON Ruhrgas and GDF met on a regular basis at various levels and discussed the implementation of the agreement in the newly liberalized market. The parties ’contacts after 1999 confirmed the continued existence of the market-sharing agreement and the existence of a single and continuous restriction of competition by object, which violates Article 81 EC. Although the parties signed a pro forma agreement in August 2004 allegedly 'confirming' that the 1975 side letters were no longer valid, the market-sharing agreement continued to exist and produce effects from 1 January 1980 (as regards the German market) and from 10 August 2000 (as regards the French market) to at least 30 September 2005, when the parties started to take gas off the pipeline, to effect sales in the other's home market and entered into a new set of agreements regarding MEGAL.
Ruhrgas, which during the determined period of infringement changed its name to E.ON Ruhrgas without however changing its legal identity, and since January 2003 E.ON exercising decisive influence and effective control over E.ON Ruhrgas, on the one hand and GDF, which merged in July 2008 with Suez to become GDF Suez, on the other hand, participated in the infringement found in this decision.
The decision requires E.ON, E.ON Ruhrgas and GDF Suez to bring the infringement to an end to the extent that they have not already done so, to refrain from repeating any act or conduct having the same or equivalent object or effect, and imposes fines on the above undertakings.
2.4.1. Basic amount of the fine
The decision follows the 2006 guidelines on fines for the purpose of calculating the amount of the fines. The basic amount of the fine is determined as a proportion of the value of the sales of the relevant product made by each undertaking in the relevant geographic area during the last full business year of the infringement, multiplied by the number of years of the infringement, plus an additional amount to deter the companies from even entering into collusive practices.
The sales affected by the infringement are sales of gas transported by E.ON and GDF over the MEGAL pipeline in Germany except the sales of gas volumes under E.ON's Gas Release Program and to eligible customers in France (estimated as a percentage of GDF's overall sales of gas transported over the MEGAL). For France, the decision exceptionally uses the average of the affected sales during the infringement instead of the last full year because the number and type of eligible customers increased significantly during the infringement as a result of the French legislation.
As regards sales in France, taking into account the duration of the infringement from August 2000 to 30 September 2005, for the individual legal entities involved, the variable amount is multiplied by 5.5. As regards Germany, only the period after April 1998, when the German legislator removed the previous de facto barriers to competition, was taken into account with regard to the fines (7.5 years). The decision applies a starting percentage of 15% of affected sales in consideration of the nature of the infringement, a secret market-sharing agreement covering a substantial part of the market for natural gas in Germany and France which was implemented. According to Point 25 of the 2006 Guidelines on fines, the decision imposes an additional amount of 15% of the value of sales on the addressees.
2.4.2. Adjustments to the basic amount
No aggravating circumstances have been found. Since the parties were aware that they were infringing competition law and only the period after liberalization was taken into account for the calculation of the fine, the draft decision does not foresee mitigating circumstances. The decision does not apply any additional specific increase for deterrence, the fine in this specific case being in itself sufficiently deterrent.
Given that the infringement consisted in a market-sharing agreement concerning the gas transported through a pipeline jointly owned and operated by the parties and that the different degree of implementation of liberalization in France and Germany should not influence the determination of the fine, the Commission imposed an identical fine of EUR 553,000,000 to E.ON Ruhrgas AG, jointly and severally with E.ON, and GDF.
2.4.3. Application of the 10% turnover limit
The final amounts of the fines for both undertakings are clearly below 10% of the worldwide turnovers of each of the undertakings concerned.
E.ON Ruhrgas, E.ON and Gaz de France (now GDF Suez S.A.) have infringed Article 81 (1) EC by participating in an agreement and concerted practices in the natural gas sector. The duration of the infringement was for E.ON Ruhrgas and for Gaz de France at least from 1 January 1980 to 30 September 2005, as far as the infringement in Germany is concerned, and at least from 10 August 2000 to 30 September 2005 as far as the infringement in France is concerned. The duration of the infringement for E.ON was from 31 January 2003 to 30 September 2005. For the infringement, a fine of EUR 553 000 000 is imposed on each E.ON Ruhrgas, jointly and severally with E.ON, and GDF Suez .
(1) OJ L 1, 4.1.2003, p. 1.
(2) OJ L 123, April 27, 2004, p. 18th
(3) See page 2 of this Official Journal.
(4) See page 3 of this Official Journal.
(5) See page 4 of this Official Journal.
PROCEDURES RELATING TO THE IMPLEMENTATION OF THE COMPETITION POLICY
Official Journal of the European Union
STATE AID - GERMANY
State aid C 17/09 (ex N 265/09) - Recapitalization and asset relief for LBBW
Invitation to submit comments pursuant to Article 88 (2) of the EC Treaty
(Text with EEA relevance)
2009 / C 248/06
By means of the letter dated 30 June 2009 reproduced in the authentic language on the pages following this summary, the Commission notified the German authorities of its decision to initiate the procedure laid down in Article 88 (2) of the EC Treaty concerning the above- mentioned measure.
Interested parties may submit their comments on the measure in respect of which the Commission is initiating the procedure within one month of the date of publication of this summary and the following letter, to:
Directorate-General for Competition
State aid Greffe
1049 Bruxelles / Brussel
BELGIQUE / BELGIË
Fax +32 22961242
These comments will be communicated to the German authorities. Confidential treatment of the identity of the interested party submitting the comments may be requested in writing, stating the reasons for the request.
On 30 April 2009, Germany notified to the Commission the intention to provide a recapitalization of the Landesbank Baden-Württemberg (LBBW) and an asset relief measure for two portfolios.
For assessing the asset portfolios, the Commission has drawn on technical assistance provided by experts from the ECB and by experts under contract by the Commission.
Landesbank Baden-Württemberg (LBBW) is an internationally operating commercial bank which focuses on Baden-Württemberg, Rhineland Palatinate and Saxony. Its business model is mainly focussed on SMEs (Mittelstand). It is also the central bank of the savings banks in Baden-Württemberg, Rhineland Palatinate and Saxony.
Since the beginning of the year, regulatory capital requirements for its portfolios of securitized assets, the so-called ABS securitization portfolio (or "ABS portfolio") and Sealink portfolio, increased significantly.
Against this background, the German authorities have decided to intervene in the form of a recapitalization and an impaired asset relief measure.
LBBW's owners will inject EUR 5 billion of tier 1 capital (core capital). The bank will pay an overall remuneration of 10% for the capital provided.
Asset relief is to be achieved via a guarantee structure, not through a sale of assets. In the case of the first portfolio, the so-called ABS portfolio of EUR 17.7 billion, the first loss amount borne by LBBW is EUR 1.9 billion and the State will guarantee up to EUR 6.7 billion (second loss) . In the case of the second portfolio, the so-called Sealink portfolio, LBBW provided a junior loan of EUR 8.75 billion. Beyond a first loss amount borne by […] (1) of EUR 2.75 billion, the State of Baden Württemberg will provide a guarantee of the remaining EUR 6 billion for this loan.
The State guarantees reduce the regulatory capital requirement by EUR [> 3] billion.
The guarantee is provided for a term of five years and can be terminated at the request of LBBW. In return, LBBW commits to pay an initial fee based upon a capital relief effect of EUR [> 3] billion, to which a 7% interest rate is applied. For the first year, the fee will amount to EUR [250-350] million and will be reviewed in the restructuring procedure.
Both measures in favor of LBBW constitute State aid. The Commission finds that the capital injection complies with the requirements set out in the Recapitalization Communication. As regards the asset relief measures they do fulfill the conditions on eligibility of assets, asset management arrangement, transparency and disclosure and a guarantee fee as stipulated in the impaired asset communication.
The Commission has doubts on the valuation assumptions, in particular as regards (i) the choice of default probabilities and correlations for a significant part of the portfolio, namely the CDO's and CLO's contained therein; (ii) the choice of recovery rates in particular for corporate entities in the ABS portfolio; (iii) house price assumptions in some key geographies such as the United States, the United Kingdom and Spain, which represent a significant proportion of RMBS securities in the ABS portfolio; and (iv) other valuation issues such as that - for instance - lower rated assets show a higher real economic value than other higher rated assets. As the doubts concerning the valuation also affect the Commission’s assessment of burden sharing, the Commission cannot reach a conclusion on these principles.
However, with due considerations for need to preserve financial stability, the Commission has decided to approve the capital injection and the guarantee measures for six months. Nevertheless, in the light of the foregoing considerations, the Commission has also decided to initiate the procedure laid down in Article 88 (2) of the EC Treaty on the asset relief to verify the conditions of the IAC regarding valuation (including the valuation methodology) and burden sharing of the measure. After three months the beneficiary bank needs to provide a restructuring plan, which the Commission will assess in order to decide about a prolongation of the aid after six months.
TEXT OF LETTER
On April 30, 2009, Germany notified the Commission of an increase in the equity of Landesbank Baden-Württemberg (LBBW) and risk immunization for two portfolios. Germany had already presented a preliminary plan for the bank's recapitalization during an informal meeting with the Commission on December 15, 2008, and at that time the possibility of a guarantee for risky securities was mentioned.
Several meetings between the German authorities and the Commission took place in May and June 2009. Germany also provided additional information by email and telephone.
The Commission was supported by external experts under contract and technical experts from the ECB for questions relating to the method of asset valuation in the context of risk immunization. Several conference calls were held at expert level as part of the portfolio assessment. The audit was based on the information submitted by Germany and the methodological approach was explained in detail.
The commission learned from an email on June 2 that LBBW has been operating with less than the regulatory capital since the end of the first quarter of 2009.
After Germany had a series of talks with the Commission, Germany made several pledges on June 22 that changed the previously examined structure of risk immunization.
II. DESCRIPTION OF THE MEASURE
1. The beneficiary
Landesbank Baden-Württemberg (LBBW) is an internationally operating commercial bank with a focus on Baden-Württemberg, Rhineland-Palatinate and Saxony. It has more than 200 branches mainly in these regions, but also in other parts of Germany. In addition, it has 26 bases worldwide. The bank has around 12,250 employees. Doing business with medium-sized companies (SMEs) is a focus of their business model. In addition, LBBW acts as the central bank for the savings banks in Baden-Württemberg, Rhineland-Palatinate and Saxony. With total assets of around EUR 450 billion, it is the fifth largest bank in Germany. At the end of 2008, the bank's risk-weighted assets were around EUR 180 billion.
The bank's shareholders are the state of Baden-Württemberg (Land-BW) with a stake of 35.611%, the Sparkassenverband Baden-Württemberg (SVBW) with 40.534%, the city of Stuttgart (Stuttgart) with 18.932% and the Landeskreditbank Baden-Württemberg (L -Bank) with 4.923%. All shareholders are either public bodies or are state owned.
2. Events underlying the measure
At the beginning of 2008, LBBW rescued SachsenLB, Landesbank of the State of Saxony. SachsenLB had become illiquid after the commercial paper (CP) market dried up in the summer of 2007. It was unable to refinance several special purpose vehicles that held structured assets that were not yet impaired at the time. As part of the takeover, LBBW agreed to include some structured assets in its balance sheet (they are now part of the ABS portfolio described below) and to finance a newly established special purpose vehicle - the so-called SEALINK portfolio (also described in detail below). The loan to SEALINK amounts to EUR 8.75 billion, but is secured by a senior risk borne by the State of Saxony in the amount of EUR 2.75 billion. The Commission approved the restructuring of SachsenLB and found that the sale to LBBW at a negative price (as a result of the guarantee) did not constitute State aid. (2)
The deepening financial crisis hit, among other things. in LBBW's securitization portfolios. The bank made a loss of EUR 2.1 billion in 2008.
Since the beginning of the year, the regulatory capital requirements for their portfolios of securitized claims (some of which stem from the takeover of SachsenLB), the so-called ABS portfolio and the SEALINK portfolio, have increased considerably. Regulatory capital backing for both portfolios on May 30, 2009 was EUR [> 3] billion
As a result of the massive increase in the regulatory capital requirement, the bank's total capital ratio fell to […]% at the end of quarter 1/2009 and was thus below the prescribed minimum of 8%, while the core capital ratio of […] (3)% was above the prescribed level Equity capital remained. According to the projections of the bank, the capital ratios are likely to deteriorate further at the end of quarter 2/2009 without the measures - the total capital ratio to […]% and the core capital ratio to […]%.
The German banking supervisory authority BaFin initially refrained from initiating measures against the bank, as its shareholders have agreed to provide LBBW with the required capital.
3. The aid measures
The planned aid measures for LBBW consist of a capital increase and risk immunization, with which two portfolios of structured assets are shielded.
3.1 Capital increase
The owners of LBBW will inject core capital of EUR 5 billion into the bank in the form of a new category of capital stock ('capital class B'). They will participate in the capital increase according to their quotas, with the state of Baden-Württemberg and L-Bank participating through a subsidiary. The share capital class B is designed in such a way that the new share capital is given priority in the distribution in relation to the existing share capital.
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