The European Commission has opened an in-depth investigation to
assess whether the proposed acquisition of the Greek gas transmission
system operator DESFA by the State Oil Company of Azerbaijan Republic
(SOCAR), is in line with the EU Merger Regulation. SOCAR's activities
include the production of natural gas and the upstream wholesale sale of
gas in Greece in the context of the Southern Gas Corridor (see also IP/13/623).
DESFA owns and operates Greek's sole high-pressure gas transmission and
Greece's only LNG terminal and mainly transports gas through its
network. The Commission has concerns that the transaction may reduce
competition on the upstream wholesale supply market for natural gas in
Greece because it could allow the merged entity to hinder SOCAR's
competitors in accessing the Greek gas transmission network. The
Commission aims to ensure that the sale of DESFA, part of the Greek
government privatisation programme with a view to modernise and
liberalise the energy markets, does not result in competitive harm and
ultimately higher gas prices for consumers in Greece. The opening of an
in-depth inquiry does not prejudge the outcome of the investigation. The
Commission now has 90 working days, until 23 March 2015, to take a
decision.
The Commission's initial market investigation indicated
that the merged entity may have the ability and the incentive to hinder
competing upstream gas suppliers from accessing the Greek transmission
system, in order to reduce competition on the upstream wholesale gas
market in Greece. The merged entity could restrict its competitors'
access to the Greek gas transmission network by strategically limiting
investments in future expansions of the import capacity including an
expansion of the LNG Terminal and an interconnection between TAP and
DESFA's network. In addition, the merged entity could restrict inflows
of gas into Greece by managing the gas transmission network in a
discriminatory way favouring SOCAR's supplies over its competitors. The
preliminary investigation also suggested that SOCAR may have the
incentive to shut out competitors from access to the network, because it
would be profitable for SOCAR. Moreover, the Greek regulatory framework
would be unlikely to deter the merged entity from doing so. This could
reduce the number of current and potential suppliers and the amount of
natural gas in Greece and lead to higher gas prices for clients.
The
Commission will now investigate the proposed transaction in-depth in
order to determine whether or not these initial concerns are confirmed.
The transaction was notified to the Commission on 1 October 2014.
Companies and products...
SOCAR
is wholly-owned by the Republic of Azerbaijan and is involved in
exploring oil and gas fields, producing, processing, and transporting
oil, gas, and gas condensate, marketing petroleum and petrochemical
products in domestic and international markets, and supplying natural
gas to industrial and residential customers in Azerbaijan.
DESFA
was established in 2007 with the objective of operating, maintaining,
managing, exploiting and developing the Hellenic gas transmission
system. The activities of the company are overseen by a special law and
subject to government supervision.
Merger control rules and procedures
The
Commission has the duty to assess mergers and acquisitions
involvingcompanies with a turnover above certain thresholds (see Article
1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The
vast majority of notified mergers do not pose competition problems and
are cleared after a routine review. From the moment a transaction is
notified, the Commission generally has a total of 25 working days to
decide whether to grant approval (Phase I) or to start an in-depth
investigation (Phase II).
In addition to the current transaction,
there are two other on-going phase II merger investigations. The first
is the planned acquisition of a controlling stake in De Vijver Media by
Liberty Global, with a decision deadline on 5 March 2015 (see IP/14/1029). The second one relates to Zimmer's planned acquisition of Biomet, with a decision deadline on 11 March 2015 (see IP/14/1091).
More information will be available on the competition website, in the Commission's public case register under the case number M.7095.
