The Polish competition authority – the Office of Competition and Consumer Protection (UOKiK) – announced last week that it had launched proceedings against Gazprom and other companies engaged in the planned construction of the Nord Stream 2 pipeline. The competition watchdog alleges that the Russian giant and its venture partners continue to co-finance the project in breach of the Polish competition rules despite withdrawal of the previously submitted merger notification.
Back in late 2015 Gazprom, together with five European companies, applied for a clearance for their joint venture. They wanted to set up a common company for the development of the new pipeline, which would enable supply of natural gas to the European market via the Baltic Sea. From the very outset the project attracted significant interest and became the topic of a heated political debate on the European stage and beyond. While conducting the review of the notification, the Polish competition watchdog expressed its concern that the transaction would pose a risk to competition in Poland as it would further enhance the bargaining power of Gazprom in relation to Polish purchasers. The application was subsequently withdrawn. The would-be parties to the consortium must have realized that their chances of obtaining a consent decision were rather slim considering the preliminary remarks of the UOKiK.
In 2017 the UOKiK became increasingly suspicious about the conduct of the companies involved in the Nord Stream 2 project and initiated explanatory proceedings, which led the authority to believe that the undertakings have been indeed continuously engaged in the pursuit of their original goal. According to an official press release, just a few days ago the UOKiK launched an antitrust proceedings against Gazprom and its five partners alleging that they had implemented the merger without the required consent of the competition authority. The Office of Competition and Consumer Protection assumes that the previously notified joint venture and subsequent agreements regarding the financing of the contentious project had one common aim. As a consequence, the conduct of the companies involved shall, in the view of the UOKiK, be considered a circumvention of applicable provisions of the Polish Competition Act.
Under the Polish Act on the Protection of Competition and Consumers certain concentrations require for their implementation a prior notification and consent of the UOKiK. Failure to fulfil these requirements may result in severe fines of up to 10% of the total turnover of the undertakings concerned in the preceding business year. What is more, if a concentration were found to have been implemented without the required clearance and if there were no alternative way to restore competition, the authority could inter alia order the joint undertaking to be dismantled or request divestment of certain assests or stocks of the companies concerned. Importantly, the list of potential measures the UOKiK has at its disposal is not exhaustive. It remains however unclear, if in the current case the UOKiK would manage to pursue the enforcement of the imposed sanctions. Admittedly, it could distrain property located in Poland belonging to the companies involved but it seems that their predominant assets would remain beyond the grasp of the Polish authorities.
Considering that the political debate over the threats and benefits of the Nord Stream 2 pipeline to European energy security has recently resumed with new vigor, the issue should be seen as more than just another gun-jumping case. Political entanglement of competition policy could hardly be more palpable.