The EU Commission, which serves as Europe's anti-trust watchdog, said the energy giants had reached an agreement not to compete in one another's gas markets around the time they cooperated to construct the MEGAL gas pipeline.

As a result, the Commission said in a statement on Wednesday, they would have to pay penalties of 553 million euros each.

European Competition Commissioner Neelie Kroes, who delivered the statement, said E.ON and GDF Suez had "maintained the market-sharing agreement after European gas markets were liberalized."

She added that they had only abandoned the deal definitely in 2005, and had thereby deprived customers in two of the EU's largest member states of competitive prices and choice of supplier.

That, Kroes said, left the Commission with no option but to impose high fines.

Strong signal

"The decision sends a strong signal to energy incumbents that the Commission will not tolerate any form of anti-competitive behaviour," she said.

But GDF Suez is expected to appeal the fine. Ahead of the announcement, the head of the French company, Gerard Mestrallet, said the investigation was based upon "putative" facts about things that happened before the liberalization of energy markets.

Both GDF Suez and E.ON, joint owners of the MEGAL pipeline which imports Russian gas to France and Germany, have claimed that their business practises have been competitive for many years.

tkw/reuters/AP/dpa
Editor: Michael Lawton