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The European Commission (EC) has concluded its case against Gazprom for abuse of its dominant position in the Central and Eastern European gas market, following more than three years of negotiating potential commitments.

 

Gazprom was being investigated for its pursuit of a global strategy to divide up gas markets along the borders of eight Member States (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia). The strategy could have allowed Gazprom to adopt an abusive pricing policy in five of those Member States (Bulgaria, Estonia, Latvia, Lithuania and Poland).

 

The investigation into Gazprom began seven years ago. In 2011, the EC carried out raids and, in 2012, it opened a formal investigation. In 2015, after receiving the statement of objections, Gazprom proposed a series of commitments to address the EC’s queries. The parties had been in negotiations since then. Finally, in March 2017, the EC submitted the commitment to market testing, and received more than 40 responses from various interested parties, including governments, national competition authorities, businesses, industry associations and academics.

Under the commitments made, which are binding for eight years, Gazprom must ensure the free flow of gas in the eastern and central regions of the EU. If the company breaches any of these obligations, the EC can impose a fine of up to 10% of its global turnover without having to show that there has been an infringement of competition rules.

 

Gazprom has committed to removing contractual restraints that disincentivize or ban the crossborder resale of gas in the Central and Eastern European markets, as well as taking measures to facilitate integration.

 

For example, the company will remove all prohibitions and disincentives to export, as well as clauses that require the purchased gas to be used in a specific geographic area. In addition, the Russian giant will address the lack of an interconnection in the region and will enable Gazprom customers to seek out new business opportunities in those geographic areas.

As part of the commitments made, Gazprom will also take measures to guarantee competitive prices in these markets. It will use competitive benchmarks used in Western Europe in its price review clauses, as well as the possibility for its customers to request more frequent and efficient price reviews.

Lastly, Gazprom is prohibited from using advantages in access and control of gas infrastructures obtained through its dominant position in the market. Gazprom is not allowed to seek damages from its Bulgarian partners for the end of the South Stream project. This was a project for the construction of a gas pipeline from Russia, through the Black Sea to Southeastern Europe, which was abandoned due to high cost and economic uncertainty.

For the Competition Commissioner, Margrethe Vestager, the commitments made are “tailor-made rulebook” that force Gazprom to take action to integrate the gas markets in the region and, thus, help to create a true internal energy market in Europe. According to Ms. Vestager, as opposed to a fine for abuse of dominant position, the commitments are a better way to (i) remove the barriers to competition, and (ii) enable customers to enjoy competitive pricing and the free flow of gas in the region.

The solution reached in this matter contrasts with the €2.42 billion fine imposed on Google last summer for its abuse of dominant position in its online comparative shopping service, and the €997 million fine that the EC imposed on Qualcomm at the beginning of the year for demanding Apple’s exclusivity in the 4G mobile chips market (LTE).

Click here to read the EC’s press release.

 

By: María López Ridruejo 

This post is also available in: Español

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