#Gazprom: Is Vestager letting Russia off the hook?

In September 2011, the European Commission raided Gazprom and filed antitrust charges against the company in April 2015. Throwing the book at the Russian giant, the Commission denounced them for illegal partitioning of EU markets, denying third-party access to gas pipelines and unlawful pricing, all aimed at strangling central and eastern European countries, writes Peter Wilding.

This accusation rarely ends well for companies targeted by the Competition Directorate-General. Google was fined €2.42 billion and, in 2016, Apple was ordered to repay Ireland €13 billion in back taxes. But these companies did not seek to compromise with the Commission through the legal procedure allowing firms under investigation to offer legally binding “commitments”. In order to avoid taking the blame this year Gazprom offered to settle.

Competition Commissioner Margrethe Vestager said of the commitments: "They address our competition concerns and provide a forward looking solution in line with EU rules."

According to Dr. Alan Riley, Chairman of Fair Energy, Gazprom’s offer raises serious questions about whether Gazprom’s commitments are worth the paper they are written on. Enforcement regimes appear flimsy regarding circumvention, monitoring and the limited period (of only eight years) these conditions will apply to Gazprom.

However, what Dr. Riley finds deeply concerning is the issue of so-called “destination clauses” in Gazprom’s offer. A destination clause is a device in a long-term gas supply contract that prohibits the customer from reselling gas to third parties. But these clauses are the worst form of anti-competitive practice. Is it right that Gazprom should evade liability for practices that, in cases such as United Brands and TetraPak II, led to serious fines?  Destination clauses imposed by dominant companies are seen as particularly serious because they undermine the functioning of the single market.

It is not as if Gazprom doesn’t have form in the matter of destination clauses. In 2003 Gazprom agreed to remove such devices from contracts with Western European energy companies. The fact that they have reappeared in contracts with other companies does not suggest Gazprom has learned its lesson. The Commission’s own fining guidelines urge additional penalties for repeat antitrust practitioners. It is difficult to see how a fine should be avoided where evidence of a serious antitrust offense exists, and where the company in question previously entered into an informal settlement with the commission to terminate the same type of offence.

Dr Riley believes that the Commission could be accused of being all bark and no bite. And worse still being far from an impartial enforcer of EU competition law. Google and Apple will be looking at Ms Vestager’s treatment of Gazprom’s repeat offending with great interest.

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