Europe's competition authorities launched an inquiry yesterday into the €33.3bn (£22.8bn) merger between Suez and Gaz de France, in a move likely to force the disposal of key assets.
The European Commission said that initial investigations showed the planned tie-up "would raise significant competition concerns" in Belgium and France. It has until 25 October to produce a ruling.
The announcement came as unions in France prepared for a strike today in protest at the proposed tie-up which has become a hot political issue in France.
The planned merger, which would block a possible bid for Suez by Italy's Enel, caused political controversy when it was announced in February, prompting accusations of economic nationalism.
Together GdF and Suez would create the world's second-largest publicly traded utility.
Suez owns Electrabel, Belgium's biggest electricity producer as well as having stakes in Distrigaz, the nation's largest natural-gas distributor, and Fluxys, which operates the Belgian gas grid.
The Commission said it was worried that the planned merger "would combine the supply activities of the two main gas and electricity operators in Belgium and of two of the three main gas operators in France". It would also "give the new entity control of most gas imports into both Belgium and France".
Finally, it said that problems would arise from control over essential infrastructure such as transmission and transport networks and storage facilities.
Neelie Kroes, the European competition commissioner, said: "I must ensure that industry and consumers in Belgium and France do not pay the price for this merger."
The Commission's inquiry is not the only problem confronting the deal, which is politically sensitive in France.
In order to allow the merger the French government has proposed reducing its stake from 70 per cent, pledged when GdF was partly privatised last year, to 34 per cent.
In the politically charged run-up to next year's French presidential elections the issue has divided the ruling centre-right party. The split has made it unclear whether the necessary legislation will have enough support to pass through the Assemblée Nationale.
The French premier, Dominique de Villepin, said yesterday that he was making progress on the issue and planned to lay down a timetable for dealing with the crisis.Reuse content