LITHUANIAN COMPETITION COUNCIL FINES OAO GAZPROM FOR FAILING TO COMPLY WITH MERGER CONDITIONS

On 10 June, the Competition Council (KT) imposed a fine of 123,096,700 litas (approx. EUR 35,651,269) on OAO Gazprom for the failure to comply with merger conditions. In 2004, the KT allowed Gazprom to acquire AB Lietuvos dujos shares subject to condition that Gazprom would not hinder Lithuanian buyers from purchasing natural gas from other suppliers.

Having received a complaint from AB Lietuvos energijos gamyba the KT opened an investigation. AB Lietuvos energijos gamyba sought to implement natural gas swap agreement, according to which natural gas, acquired cheaper in Western Europe, would have been imported to Lithuania. In the course of investigation, the KT‘s experts established that Gazprom‘s refusal to negotiate with AB Lietuvos energijos gamyba such swap agreement for 2013 – 2015 had created obstacles for AB Lietuvos energijos gamyba to purchase natural gas from another provider and thus breached the merger condition.

The KT notes that the condition imposed on Gazprom was crucial for clearing the merger. The conditional clearance in no uncertain terms required Gazprom to refrain from creating barriers for Lithuanian buyers attempting to purchase natural gas from other suppliers. Gazprom‘s refusal to negotiate the natural gas swap agreement deprived AB Lietuvos energijos gamyba of a possibility to purchase cheaper natural gas used by the Lithuanian company for producing heat and electricity. This, in turn, could have negatively affected Lithuanian electricity and heat consumers, because more expensive natural gas purchased from Gazprom could have resulted in higher heat and electricity prices.

The KT reminds that firms seeking to clear their mergers have to comply with merger conditions, because breaches of such conditions usually have negative effect on competition and consumers.