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EU competition chief Neelie Kroes won a crucial victory Wednesday when an appeals court upheld the European Commission’s prohibition of an Iberian energy deal. Validating the first merger prohibition under the Dutchwoman, the Luxembourg-based Court of the First Instance upheld the commission’s decision last December barring EDP-Energias de Portugal SA and Italy’s Eni SpA from jointly acquiring G�s de Portugal SGPS SA. The prohibition was the first to come under the court’s scrutiny since 2002, when it overturned three merger bans under her predecessor, Mario Monti, forcing him to fine-tune a reform of the entire vetting process. At seven months, it was also the fastest merger appeal to be concluded before the Court of the First Instance under an accelerated procedure available since November 2000. However, the court did not entirely approve of the commission’s handling of the case, saying that regulators made a number of errors in its decision concerning the gas markets — for example, by disregarding the effects of extra time given to Portugal for implementing new EU rules opening up gas markets to competition. Nevertheless, the court found that the commission made a correct assessment of the electricity markets, where the strengthening of EDP’s dominant positions was enough to justify the decision. The prohibition was the 19th out of more than 2,630 mergers notified since the EU first began vetting mergers in 1990 and was widely interpreted as a sign that the new commissioner would take a tough line against monopolies. The commission warned at the time that the Iberian deal — which Kroes called a “quasi-monopoly” — would strengthen EDP’s dominant position in the electricity wholesale and retail markets in Portugal and GDP’s dominant position in gas. EDP appealed the ruling, alleging among other things that the commission failed to make an impartial assessment of the remedies proposed by the companies to allay competition concerns and failed to give adequate reasons for its decision. The merger veto is the first upheld by the court since 2002, when it overturned three prohibitions within a four-month period: those of Swedish industrial group Tetra Laval International SA’s acquisition of French packaging equipment maker Sidel SA; French electrical switch maker Schneider Electric SA’s acquisition of domestic rival Legrand SA; and British discount holiday company Airtours plc’s bid for First Choice Holidays plc. Wednesday’s decision also represents a personal victory for Kroes, who came into her current charge under a storm of controversy amid fears that her extensive corporate board involvement would conflict with her role as the EU’s top antitrust watchdog. EDP was represented in its appeal by Latham & Watkins attorneys Andreas Weitbrecht and Javier Ruiz Calzado of Brussels and Carlos Botelho Moniz, Morais Leitao, Galvao Teles and Soares de Silva of Lisbon, as well as Brussels-based Ram�n Garc�a Gallardo of SJ Berwin. EDP has two months to decide whether to file an appeal to the EU’s highest court, the European Court of Justice. The only grounds on which it can appeal are points of law. Copyright �2005 TDD, LLC. All rights reserved.

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