A year ago the watchdog raised concerns in relation to Distrigas' use of long-term gas supply contracts which it believed were having the effect of foreclosing the market for other gas suppliers. Since gas customers normally only have one supplier at a time, competition in the market only takes place at the point when a contract expires and the customer needs to enter into a new contract. Long-term contracts thus prevent a regular opportunity for other companies to compete.
The commitments offered by Distrigas set limits to the duration of its supply contracts. Through the market testing of the suggested new terms the European Commission is now seeking feedback from interested parties as to whether they are sufficient to alleviate the foreclosure effects.
The offering of commitments by a company under investigation can be a double-edged sword, as far as the undertaking is concerned: If commitments are accepted by the watchdog no action will be taken against the company, however, were the company to subsequently breach the commitments given, the European Commission has the right to impose a fine of up to 10 per cent of the company's annual turnover, without it ever having to prove the existence of an infringement.