A European court upheld the European Union's decision to block a merger of energy companies in Portugal, restoring credibility to Europe's beleaguered antitrust regulator after several court defeats and breathing new life into efforts to inject competition into Europe's energy sector.

The Court of First Instance upheld last year's prohibition of the takeover of the former state-owned gas company, Gas de Portugal, by a consortium of the country's main electric company, Energias de Portugal SA, and Italian energy concern Eni SpA. It was the first merger the E.U. had blocked since the courts overturned three of its decisions in 2002. The court said regulators had made technical errors in how they analyzed the case but had ultimately made the right call.

The ruling could affect other European energy mergers. E.U. Competition Commissioner Neelie Kroes said she would "take account" of the decision in reviewing plans by German energy company E.On AG to buy the natural gas business of Hungarian oil and gas group MOL Rt. -- a deal that would combine all of Hungary's domestic and imported natural gas resources in one company.

The court ruling also could lead regulators to take a tougher stance on Spanish utility Gas Natural SDG SA's $27.4 billion bid for compatriot electricity utility Endesa SA.

In the Portuguese energy case, the court concluded that the combination would have impeded competition in the country. "That conclusion is in itself sufficient to justify the commission's decision," the court said in a statement.

It said that the regulators erred in concluding that gas competition would be hurt, since Gas de Portugal already was a state-owned monopoly at the time, but that they were right that the merger would impede liberalization plans. There was no immediate indication whether the companies would appeal.

Europe's electricity and natural gas sectors are still dominated by state-owned utilities, which the European Commission says keep prices unreasonably high. Regulators say they want to increase local competition by preventing consolidation -- as in Portugal -- and at the same time encourage giant utilities to cross into each other's territories in a bid to create pan-European competition.

Blocking the Portuguese merger was one of the first decisions made by Kroes, who took over as competition commissioner last November. A European official close to Kroes said the court's affirmation is crucial to her stature as an effective antitrust regulator.

"The court's judgment confirms the standard against which mergers involving energy incumbents should be assessed in Europe," Kroes said in a statement after the ruling. "This type of merger can result in higher prices for consumers and industrial users and, thus, in a loss of competitiveness for the whole economy."

Soon after taking office, Kroes said one of her main priorities as Europe's top antitrust official would be an in-depth study of the energy market. She is expected to publish her findings early next year.

After three successive court defeats on mergers, E.U. regulators revised their merger rules and added a team of specialized competition economists to the scores of lawyers who study mergers and takeovers.

Neelie Kroes, E.U. competition commissioner, has made a study of the energy market a priority.