Brussels, 26/09/2006 (Agence Europe) - The European Commission has decided that the decision of the Spanish Energy Regulator, CNE, subjecting E.ON's bid for Endesa to a number of conditions breaches Article 21 of the EU Merger Regulation on mergers (this Article stipulates that the Commission has competence in assessing the competitive impact of concentrations with a Community dimension and Member States cannot apply their national competition law to prohibit or impose conditions). The Commission's decision is based on two facts. First, the CNE's decision was adopted and entered into force without prior communication to, and approval by, the Commission, in violation of the communication and stand-still obligation of Article 21. Second, the CNE subjected E.ON's acquisition of control over Endesa to a number of conditions that are contrary to EC Treaty rules on free movement of capital and freedom of establishment. The Commission's decision that the conditions imposed by the CNE on E.ON are unlawful requires Spain to withdraw them. The Commission's decision is legally binding, and could be invoked before a national court or public authority in Spain. In February 2006, the German energy company E.ON launched a bid for the acquisition of the Spanish energy company Endesa. E.ON's offer was competing with another bid for Endesa, previously launched by the Spanish energy company Gas Natural. On 16 March 2006, E.ON notified the proposed transaction to the Commission and on 25 April 2006, the Commission authorised the operation (EUROPE 9179). Several days after the announcement of E.ON's bid over Endesa, the Spanish Council of Ministers adopted a new urgent legislative measure, Royal Decree-Law 4/2006, increasing the supervisory powers of the Energy Regulator CNE. On 3 May 2006, the Commission opened an infringement procedure against Spain with regard to this Royal Decree, arguing that it violated fundamental principles of EC Treaty rules such as the free movement of capital and the right of establishment (EUROPE 9184). The Commission also took a further step in this infringement procedure by sending a reasoned opinion to Spain, a step preceding that of going to the European Court of Justice.