European Commission hasn’t sought Estonia’s opinion in Gazprom antitrust case
In the settlement case between the European Commission and state-owned Russian gas giant Gazprom the commission hadn’t sought Estonia’s opinion, the Competition Authority as well as the Ministry of Economic Affairs and Communications confirmed on Tuesday.
The European Directorate General for Competition was dealing with the matter exclusively, and they didn’t share their information with member states’ authorities, director of the Estonian Competition Authority Märt Ots told ERR on Tuesday. “Unfortunately we don’t know at all what kind of negotiations are taking place, and what proposals Gazprom has made, this all depends entirely on the commission,” Ots said.
After a legal battle that had lasted five years, the European Commission and Gazprom agreed in October 2016 to settle for a series of legally binding pledges instead of a fine. In essence, Gazprom promises to change its behavior in the market, and in turn the commission drops its probe and lets the company avoid a potentially very large antitrust fine.
The Eastern European members of the union have been following developments in the case very closely, as to them, the question is whether or not the EU’s antitrust institutions are effective against Gazprom’s use of its pricing policy and supply as a political tool.
Gazprom CEO Alexander Medvedev and EU competition commissioner Margrethe Vestager have met in the matter, and both have expressed their preference of a settlement over a fine.
The most sensitive issue in the case is Gazprom’s policy to link gas prices to the world oil price in several agreements, which puts the buyers at a disadvantage. The accusation is that the company has been abusing its dominant market position to force national utility companies to make concessions.
Polish PGNiG announced already last year that they would take legal steps against the commission if it would allow Gazprom to get away without a fine. Gazprom’s proposed solution, according to people involved in the negotiations, is to adapt its pricing model step by step. This will make way for the next stage, where the European Commission will hear different stakeholders before coming to its final decision.
According to Ots, the commission has two options, either to demand a fine, or to let the company get its affairs in order and in the future adhere to regulations. The situation of the three Baltic states was decidedly better today than a few years ago, but the commission could only let the case rest once Gazprom had made the necessary arrangements and wouldn’t break EU competition rules anymore, Ots said.
If Gazprom was allowed to get away without paying a fine, that would not be fair, Ots added.
“We’ve expressed our opinion, and the Ministry of Economic Affairs has also said that as we’re looking at such an extensive breach, and as such significant market force was used, it would seem a bit strange if such matters would remain unpunished. Because if we look at other similar cases, there have been fines,” Ots said.
Just simply closing the case and not demanding a fine, that was a questionable course of action, he added.
Deputy secretary general for energy and construction at the Ministry of Economic Affairs and Communications, Ando Leppiman, said that also they had not been kept up to date on Gazprom’s proposals.
“Naturally they consult and inform us in these matters, but at the moment we aren’t hearing anything,” Leppiman said.
He added that Estonia’s position had been mostly the same, namely that once breaches of EU rules occurred, then there should be sanctions as well. However, Leppiman didn’t want to speculate what kind of decision Brussels would make in the end.
The Financial Times reported at the end of last year that Gazprom had made proposals to the European Commission to solve a five-year legal battle, end the investigation against the company, and avoid having to pay a fine. The commission confirmed to have received such proposals, and said that they were being weighed carefully.
The investigation began in 2011, when EU competition authorities conducted unannounced raids of 20 offices in ten EU countries. Gazprom is accused of demanding contractual conditions that hamper cross-border gas sales, adding demands to local utilities to contracts to contribute to investments in infrastructure used by the company, and having manipulated prices in its agreements with Bulgaria, Estonia, Latvia, Lithuania, and Poland.