Barely
a week since issuing objections to Google, the European Commission has sent a
Statement of Objections (SO) to Gazprom for alleged abuse of dominance in
Eastern Europe. The development indicates a new momentum in another high
profile case inherited by new Commissioner Vestager.
The
Commission alleges that provisions in Gazprom’s contracts hindered competition
in eight Eastern European countries: Bulgaria, Czech Republic, Estonia,
Hungary, Latvia, Poland and Slovakia. Its concerns relate to three areas,
namely that Gazprom (1) prevented resale in other EU territories (2) charged
excessive prices and (3) demanded unrelated commitments relating to gas
transport infrastructure.
The
case dates back to 2011 when Gazprom was among the companies that were subject
to a dawn. The inspections concerned its German (Gazprom Germania) and
Czech (Vemex) offices. In September 2012 the Commission announced formal
proceedings to investigate whether Gazprom may be abusing a dominant position
contrary to Article 102 TFEU. Having formally opened proceedings, the
Commission indicated that it would treat this investigation as a
priority. In October 2013, EU Commissioner Almunia indicated that the
Commission was preparing objections but there had been no visible sign of movement
since then.
Gazprom
refutes the EU’s case and has expressed its hope that the matter can be
resolved at an “intergovernmental level”. Gazprom has drawn attention to
its connection with the Russian state as a strategic state-owned entity
established outside the EU.
As
in the Google case Vestager has been at pains to emphasise that an infringement
decision is not an inevitability and that the case is not politically
motivated. She has faced criticism that the issuance of an SO is
premature at least while the prospect of commitments remains on the table.
At
a time when the EU relies on Russian imports of gas for about a third of its
needs the case is highly significant. The Commission’s competition law
interest in the energy sector is not new. What is interesting is the
shift eastwards in its focus. A particular theme in the last few years
has been the weighting of the Commission’s attention towards abuse of dominance
investigations in the energy sector in central and Eastern Europe. It has
launched high profile investigations against European energy incumbents in
Bulgaria, the Czech Republic and Romania, as well as against Russia’s Gazprom.
The
theory of harm relating to restrictions on resale is typical of other cases
that the Commission has raised in the energy sector. However, one
particular line of inquiry that will particularly test the boundaries of the
law is the allegation based on excess pricing due to contractual indexation of
gas prices to oil. Such cases are typically difficult to substantiate. In
the United Brands case (Case 27/76) the EU Court considered that charging a
price that was excessive because it had no reasonable relationship to the
economic value of the product supplied would be an abuse. This
formulation of what constitutes an excessive price for EU competition law
purposes picks up on the claims that the price bears no rational relationship
to the current gas market in European energy markets. Market
liberalisation and “gas-on-gas” competition where gas could be purchased at
wholesale hubs have put pressure on long-term contracts indexed to oil.
The case will test the limits of what constitutes an excessive price for EU
competition law purposes. It remains to be seen whether the Commission
will substantiate a case that the setting of the price of gas against the price
of another commodity (oil) is not economically rational and therefore abusive
(i.e., it bears no reasonable relationship with the economic value of the
product supplied (gas)).
In
accordance with the normal procedure Gazprom has 12 weeks to prepare a response
to the SO.
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