As French officials defend the deal they brokered to keep the French utility Suez out of Italian hands, another, potentially broader clash with the European Union over energy is just getting under way. This one, involving antitrust issues, could determine to what extent European countries like France are able to refashion their national champions to exert greater control over European energy markets. Within weeks, the French authorities are expected to ask the European antitrust authorities for permission to merge Suez, which provides electricity, waste and water services, with Gaz de France, the dominant French natural gas company.

The deal would create the world's largest utility by sales in a country that already includes one of the world's most valuable electricity companies, Electricite de France.

Opponents, including some big power users in heavy industry, are already pushing the European Union's competition commissioner, Neelie Kroes, to scrutinize, and perhaps even block, the French deal on the grounds that it could set back efforts to break down national barriers in the energy sector. "The EU should not be allowing consolidation in markets like energy where we haven't even established competition yet," said Jeremy Nicholson, the director of the Energy Intensive Users Group, which is based in London and includes the aluminum company Alcan and the industrial gases company BOC.

But any attempt by Kroes to block the deal would be difficult, lawyers say, because she might need to show that remedies would not repair a loss of competition in the sector, or that there would be the potential for the newly merged company and the other big player in France, EDF, to coordinate their strategies. EU courts have been skeptical about such theories.

In fact, the markets of the merging companies, Suez and GDF, overlap very little, said Colette Lewiner, a senior vice president at Capgemini in Paris. But GDF and Suez "could have been competitors without the merger," she said, because GDF has ambitions to get into the electricity business. The deal, though, could still be "a plus for competition if Suez and GDF bundle their offerings to give customers like industry better offerings, perhaps in the form of a single bill for electricity, gas and water," she said. She also called the political outcry against the deal in parts of Europe somewhat hypocritical, particularly since natural gas and electric companies in Spain and Germany have been allowed to merge.

According to International Oil Daily, the new entity would be the second-largest utility in Europe, after Electricite de France, and ahead of the German utility E.ON. But E.ON would take the top spot if it succeeds in its bid for Endesa, a Spanish power company.

A major difference in the French case is that Prime Minister Dominique de Villepin announced the deal on Feb. 25, contributing to the perception that state-led protectionism is on the rise. Some smaller players in France even see potential advantages to the deal. "The good news is that existing competitors become an even better alternative for customers especially if the EU forces them to sell assets in France and Belgium that we can then buy," said Charles Beigbeder, chief executive of the French power company Poweo. "The bad news," Beigbeder acknowledged, "is that we will have two giants very close to the French state seeking to regulate tariffs and with the potential to set back liberalization."

The French deal is already the subject of a European Union investigation into suspected actions by the French to stop a rival Italian bid for Suez. During the competition inquiry, the EU will ask whether the French merger would mean higher prices and fewer new entrants in a market that it regards as malfunctioning. The EU is expected to review the deal because Suez does a significant amount business beyond France, notably in Belgium, said Jonathan Todd, a spokesman for Kroes.

The French authorities are expected to argue that the merger is a legitimate measure to help guarantee energy security at a time when prices are volatile and steady supplies of natural gas from countries like Russia which supplies a quarter of European energy needs are in doubt.

At first glance, a merger between Suez and Gaz de France would also appear to create a stronger potential competitor to EDF. EDF has long been a nemesis of EU regulators because of the way it kept a lock on competition at home while pursuing aggressive moves into neighboring markets. But critics like Nicholson said it would be naive to expect the French government to expose either company to greater competition. The government has a controlling stake in EDF and would still control GDF by holding a third of the shares after a merger with Suez.

"Back in the real world one must recognize that the French government will be calling many of the shots," Nicholson said about the management of EDF and Suez-GDF. Breaking open cozy national arrangements in energy markets is supposedly a major goal for Kroes, who has staked her tenure as competition commissioner on new companies' being able to offer better prices to customers. Besides requiring the French to sell some holdings in Belgium, the European Union could also require access to natural gas distribution networks to allow entrants into the market. But proving that a merged Suez- GDF could cooperate with EDF as a duopoly could be much harder.

Despite protests from the Italians and skeptical comments from the German chancellery minister, Thomas de Maiziere, over the weekend, the French seem determined to press forward with the deal. Gaz de France's chief executive, Jean-Francois Cirelli, told Europe 1 radio on Saturday that a major rationale for the merger was to allow the state to continue determining strategy and setting prices. "The state will still have considerable influence in this sector," he said, "because it's a strategic sector."