The European Union's antitrust chief has threatened to break up individual energy giants that violate antitrust law, while the European Commission recommended spin-offs by big gas and electrical firms.

Competition Commissioner Neelie Kroes issued the unprecedented threat at a press conference called to discuss a Commission report, which found "serious competition problems" among gas and electric utilities.

The threat could be carried out against individual companies that use their control over production and distribution to muscle out potential competitors.

"What type of remedies can you take within the competition (rules)? Indeed with the splitting, unbundling, that is a very important one," Kroes said.

Asked to confirm that she could use her current powers to break up a company whose structure is judged to be part of an antitrust problem, Kroes replied: "Absolutely."

Separately, the commission used a broad review of energy policy to recommend that EU states approve the unbundling of ownership of production and distribution "as the most effective means to ensure choice for energy users and to encourage investment".

The commission offered but did not endorse an alternative proposal to put distribution networks under the control of separate entities.

The commission proposal drew immediate fire from the French government and a German utility but praise from a British utility, threatening to ignite a shouting contest in Brussels.

Commission President Jose Manuel Barroso said the Commission offered the proposal to spark debate, choosing not to exercise its power to propose new laws to the European Parliament.

"I'm sure that today if we were to propose directives instead of proposing the documents, the probability of such directives being adopted would be virtually nil," he told reporters.

Not since 1911

As if on cue, French Industry Minister Francois, bristling at the idea of unbundling, told Parliament's lower house the French would "make ourselves heard" on the issue.

"The Germans, who hold the presidency (of the European Union), are completely on our side," he declared.

A German government spokesman was reticent to criticize the Commission, but Germany's biggest utility, E.ON, as well as peer RWE, dismissed the idea that separating supply and distribution businesses would improve competition.

"It amounts to an expropriation of our shareholders. Such radical intervention would lead to less competition and endanger security of supply in the end," E.ON said.

The commission last year raided the offices of some German utilities including E.ON and RWE that were suspected of anti-competitive behaviour. In December, it raided companies in the German electricity sector.

The commission says break-ups would encourage alternative energy producers and big companies in adjacent countries into markets that are now locked up.

But the commission has never ordered the break-up of any company, and even the originator of antitrust law, the United States, has rarely invoked that legal right.

The US Supreme Court in 1911 forced John D. Rockefeller's Standard Oil to break up. In 1982 the AT&T telephone monopoly agreed to be broken up. But a 2001 government attempt to break up software giant Microsoft failed.

The largest energy supplier in one of the most liberalized energy markets in the EU, however, reacted positively to Brussels.

"A critical element must be effective separation of Europe's gas and power networks from the supply businesses who currently operate them, policed by tough regulation," said Sam Laidlaw, chief executive of Britain's Centrica.

Source: China Daily/agencies