On 22 December 2016 the five judge panel of the Supreme Administrative Court of Lithuania (hereinafter – the SACL) upheld the findings of the Competition Council of the Republic of Lithuania (hereinafter – the Competition Council) of 10 June 2014 concerning non–compliance with a merger condition and imposition of a fine of 35 651 268.54 euro on the open joint-stock company Gazprom (hereinafter – OJSC Gazprom).
The five judge panel considered whether OJSC Gazprom infringed the condition of the 18 March 2004 Competition Council decision No. 1S-38 which allowed OJSC Gazprom to merge acquiring 34 percent of the limited company Lietuvos dujos shares as well as joined control of the said company.
The additional condition required OJSC Gazprom to allow Lithuanian buyers to acquire natural gas from alternative suppliers. Thus, the Supreme Administrative Court of Lithuania evaluated if OJSC Gazprom violated this condition of the 2004 merger clearance decision by refusing to negotiate a natural gas exchange contract for the years 2013–2015 with the limited company Lietuvos energijos gamyba and subsequently creating obstacles for the company to acquire natural gas from a supplier other than OJSC Gazprom.
The Competition Council had attached the condition to the 2004 merger clearance decision for a number of reasons. Firstly, the limited company Lietuvos dujos had a dominant position in the natural gas transmission and distribution markets. The company’s gas networks were not linked to the European Union gas network and the natural gas supply system, and OJSC Gazprom was the only possible natural gas supplier in Lithuania which, at the time, had no alternative competitors. Additionally, the possibility to export natural gas from Russia also depended on the capacity of OJSC Gazprom transmission pipelines, their technical feasibility, and other conditions.
After its investigation the Competition Council found that the limited company Lietuvos energijos gamyba sought to conclude a natural gas exchange transaction which would have allowed it to buy cheaper natural gas in Western Europe. The Competition Council decided that by refusing to engage in the gas exchange transaction negotiations with the limited company Lietuvos energijos gamyba, OJSC Gazprom infringed the merger condition, and such actions of OJSC Gazprom created obstacles for the limited company Lietuvos energijos gamyba to conclude a natural gas sales agreement with an alternative natural gas supplier.
The five judge panel of the Supreme Administrative Court of Lithuania agreed with the findings of the Competition Council. The panel noted that the court of the first instance had decided correctly that, according to the merger condition, OJSC Gazprom was not only supposed to refrain from certain actions but also had the obligation to take all necessary measures that were required to comply with the merger condition. The panel decided that such interpretation is not to be regarded as a broad one as it is compatible with the background and objectives of the merger condition, which is to provide the Lithuanian natural gas consumers the opportunity to buy natural gas from alternative suppliers.
The applicant’s arguments regarding the possible non-imposition of the fine or imposition of a symbolic fine in this case were regarded as unfounded by the five judge panel of the Supreme Administrative Court of Lithuania. The Court noted that the merger condition was clear and comprehensible to OJSC Gazprom and it never addressed the Competition Council asking it to clarify the merger condition in question.
Having evaluated the evidence in this administrative case, the five judge panel decided that by imposing the fine on OJSC Gazprom, the Competition Council took the nature of the offense, its severity and duration into account. Consequently, the panel stated that the Competition Council was entitled to increase the fine imposed on OJSC Gazprom by 100 percent as that ensured the deterrent effect of the fine in the context of the large turnover of the applicant. After evaluating the evidence in the case and the appeal submitted by OJSC Gazprom, the Court ruled that there were no legal grounds to reduce or amend the fine imposed by the Competition Council.
On the basis of the above, the five judge panel of the Supreme Administrative Court of Lithuania dismissed the appeal of OJSC Gazprom and upheld the fine of 35 651 268,54 euro imposed by the Competition Council.
For more information see the website of the Supreme Administrative Court of Lithuania www.lvat.lt Case No. eA-2330-520/2016. Please indicate the source when using this content.