Legal And Policy Issues Of Energy Mergers In The EU

Under the influence of the neo-liberalism in the1970s, Western countries began to de-regulate traditional monopoly industries, and energy industry, as a very policy-oriented industry is no exception. Beginning in the1990s, since the EU began the process of energy industry liberalization, it has introduced three large-scale Energy Packages, mainly related to the market-oriented reforms of the electricity and natural gas industries. Electricity and natural gas industry are typical natural monopoly industries, power generation/production, transportation, distribution, and retail sectors through the energy networks and pipelines form a vertically integrated industry structure. EU Energy Packages focus on breaking the vertical monopoly in the energy industry, unbundling energy networks and pipelines, facilitating third party access, enhancing the interconnecting facilities between the EU member states and establishing sound energy regulators.The liberalisation of the energy markets has led to the "fragmentation" of the energy industries. Therefore, along with the reform, the EU energy market has witnessed a large-scale "merger wave". For liberalization, M&A is a double-edged sword. On one hand, cross-border M&A in some cases can break geographical barriers of the energy industries and promote the formation of the European internal energy market; On the other hand, M&A can also lead to industry concentration, and deal a blow on the fragile competition in the energy markets, undermining the policy of liberalization.The EU and the member states have divergences of energy policies. Based on the analysis of energy M&A, this article tries to answer two questions:First, the EU Commission’s legal review of energy M&A; Second, the conflict of policies between Member States and the European Union on energy M&A.The First Chapter of this dissertation starts from the EU energy market liberalization and analysizes how the EU promoted market reform at the Community level. Then it discusses the causal relationship between market liberalization and EU energy "mergers wave", pointing out that the merger wave conflicts with the goal of liberalization and would seriously undermine the liberalization process.The Second Chapter analyzes the policy divergences between the EU and the Member States for energy M&A. Since liberalisation,"free market" has been the core of EU energy policy. The EU views "free market" in the long term, can contribute to the security of energy supply for the EU as a whole and promote the utilization of renewable energy. Also it’s conducive to build an Internal Energy Market. However, for the Member States, market liberalization may threaten the security of their energy industry. Member States, based on their own industrial policy considerations, may forbid the takeover of its own energy companies by foreign ones, and at the same time, take the initiative to promote mergers of its own energy companies to create "national champions" in order to enhance the competitiveness of its industry.In terms of the jurisdiction of the energy M&A, although the EU Merger Regulation provides the Commission "exclusive jurisdiction", Member States still try to use some exceptions provisions, such as the "Legitimate Interests Clause","Two-Thirds Rules" to exert influence on energy M&A. This chapter argues that the Commission take positive measures to counterattack Member States influence, unswervingly pushing forward the market liberalization reform.The Third Chapter and Fourth Chapter both focus on the Commission’s review of energy M&A. The review process of the European Commission in regards of mergers can be divided into three parts:the definition of relevant markets, the substantive review and remedies. The Third Chapter discusses the policy considerations of Commission when defining relevant markets and reviewing substantive matters. In defining the relevant market, the Commission does not adopt the traditional division energy market, in stead, Commission takes into account of the process of market liberalisation and is inclined to a more detailed and comprehensive definition. In terms of substantive examination, the Commission’s standard of review is more demanding, and pays more attention to unilateral effect of the possible merger. This scrutiny reflects the determination of the European Commission to promote the liberalization process.The Fourth Chapter examines the remedies regarding energy M&A. Through the study of a large number of cases, the chapter discusses the main types of remedies for energy M&A and their characteristics. It argues that remedies are an important tool for the Commission to promote its policy, by ways of divestiture and unbundling of energy networks. Through remedies, Commission can change the structure of competition in the market to promote the liberalization policies.The Fifth Chapter discusses energy M&A and the EU external energy policy. With the deepening of the reform of the EU energy market liberalization, the EU energy industry also faces external risks, especially the acquisition by Russian companies. At the same time, energy frictions between Russia and the EU have become more than often, the EU began to focus on building a common external energy policy, and actively "export" EU energy legislation. The export of EU energy legislation is specified in the "third country clause", which requires third-country enterprises to comply with the EU unbundling rules in order to acquire the EU energy networks. This paper analyzes the policy orientation of the "third country clause" as well as its future influence on EU energy M&A.Through the legal and policy research in regards of energy M&A. It can be seen the multiple driving force behind the EU energy market liberalization, including the top-level policy design, sector legislations and antitrust regulation. Based on this conclusion, the Sixth Chapter of this paper discusses the path of the Chinese energy market liberalization, pointing out that in order to effectively liberalize the Chinese energy market, we should have a reform-oriented energy policy, combined with sector legislations and the application of Anti-trust Law.