In the ongoing process of E.ON’s bid to acquire Endesa (last reported in Brussels Brief on 22 December 2006) the European Commission sent a second letter of formal notice to Spain on 1 February 2007. The Commission required Spain to explain why the conditions imposed upon the bid had not been fully withdrawn. Spain argued that the conditions were necessary to secure national energy supplies, but the Commission was not convinced and still sees the conditions as protectionist and aimed at creating a national champion. Consequently, the Commission has now started ‘second stage’ infringement proceedings which could lead to a reference to the European Court of Justice if the Commission does not receive a satisfactory reply from Spain by 16 March 2007. If a court action ensues it would run in parallel to another action reported in Brussels Brief on 26 January 2006 regarding the powers of Spain’s gas and electricity regulator to review the E.ON bid.