Big Oil Mergers Face Serious Antitrust Objections

Federal Cartel Office President Ulf Böge said the companies now have until mid-December to allay its misgivings. He stressed that the operations had not been definitively given the red light. "The light is now yellow with a slight orange tinge," he said.

The mergers – which are separate deals, but are being examined together by the Cartel Office – would allow leading utilities E.On AG and RWE to divest their oil holdings to focus on their core activities of gas and electricity.

Düsseldorf-based E.On plans to sell its Veba Oel/Aral subsidiary to UK oil giant BP PLC in exchange for BP's 25.5% stake in German utility Ruhrgas AG. E.On is also seeking a 60% stake in Ruhrgas through a full takeover of Bergemann GmbH.

RWE plans to set up a joint venture between its RWE-Dea petroleum unit and the downstream business of Deutsche Shell GmbH, the German arm of Anglo-Dutch oil giant Royal Dutch/Shell Group, with the option of a complete divestment.

The Cartel Office's objections are outlined in a 39-page document. Primarily, it fears that the mergers will push the joint market share of the three sector leaders to over 60% in each of three segments – petroleum, jet fuel and bitumen.

The companies reacted to the antitrust authority's statement by expressing confidence in their ability to maintain an adequate level of market competition.

But the Cartel Office's demands are likely to be extensive, which is why the companies have sought prior support from the German government.

After a meeting with representatives of the energy industry, German Economic Minister Werner Müller, who is also Chancellor Gerhard Schröder's chief energy adviser, raised the possibility of granting ministerial clearance. This would override a Cartel Office rejection.

But that can only be formally sought by the companies if the Cartel Office rejects the deal. Müller said Thursday that the Ministry has yet to evaluate the Cartel Office's statement.