Under the EU Merger Regulation, the European Commission has opened an in-depth investigation to assess the proposed acquisition of Innogy by E.ON, the EU’s competition chief said.

E.ON and RWE, which controls Innogy, are both energy companies based in Germany. They are active across the energy supply chain, from generation and wholesale to distribution and retail supply of electricity and gas.

“Our in-depth investigation aims to ensure that the acquisition of Innogy by E.ON leaves sufficient competition in the market to allow for this and does not lead to price increases,” EU Competition Policy Commissioner Margrethe Vestager, reiterating the EU’s pledge that European households and business customers should be able to buy electricity and gas at competitive prices.

According to the Commission, the two companies are engaged in a complex asset swap. Following this asset swap, E.ON will focus on the distribution and retail supply of electricity and gas, whereas RWE will be primarily active in upstream electricity generation and wholesale markets.

As part of the asset swap, E.ON would acquire the distribution and consumer solutions business and certain electricity generation assets of RWE’s subsidiary, Innogy. The Commission’s initial investigation has shown that the parties have a strong combined market position in several retail markets on a national or sub-national level in Germany, the Czech Republic, Slovakia, and Hungary. The proposed acquisition will remove a significant competitor in the retail supply of energy in these four Member States, the Commission said.

At this stage, the Commission said the EC is concerned that the remaining competition would be insufficient to constrain the market power of the combined entity and avoid price increases for consumers. The Commission will now carry out an in-depth investigation into the effects of this transaction to determine whether its preliminary competition concerns are confirmed.