5 Things to Know About the EU's Case Against Gazprom

Barely a week after escalating a politically charged case against Google Inc., European Union antitrust chief Margrethe Vestager is about to strike again–this time at Moscow. Ms. Vestager plans to file formal antitrust charges against Russian energy giant OAO Gazprom on Wednesday, a person familiar with the matter said, reviving a case that had been on ice since the annexation of Crimea a year ago. Here’s a short explainer of what’s at stake.

#1: What is the European Union's Complaint Against Gazprom?

Essentially, that the Russian energy giant uses its vast market power in Central and Eastern Europe to divide and rule. Gazprom is the main or sole gas supplier in much of the region, and local governments have accused the company of overcharging for gas and imposing unfair restrictions on its distribution, possibly for political reasons. When the EU opened a formal investigation in September 2012, it cited three concerns. First, the company allegedly hinders the free flow of gas between EU countries by restricting customers’ ability to sell it on to other states. Second, it may have prevented countries from diversifying their supplies. And third, it imposed unfair prices on its customers by linking the price of natural gas to oil prices.

#2: Why Has the Investigation Taken So Long?

In a word: Ukraine. Gazprom had shown a willingness to settle with the EU until early 2014, but the talks broke down after Russia annexed Crimea in March of last year. EU officials were apparently worried that, as the bloc imposed economic sanctions against Moscow because of the Ukraine situation, moving ahead with the antitrust case would be interpreted as a political move, as the Kremlin has charged. Mario Mariniello, a former EU antitrust official who now works for Brussels-based think tank Bruegel, said parts of the case may also have been “very difficult” to prove, particularly the allegation of unfair pricing.

#3: Why Is the EU Moving Ahead Now?

In part, because there’s a new sheriff in town. Margrethe Vestager, who took over as the bloc’s antitrust chief in November, hasn’t shied away from politically charged cases. Last week, she escalated a five-year-old case against Google, a case that had lain dormant for months under her predecessor, Joaquín Almunia. Ms. Vestager told The Wall Street Journal in February that there would never be a good time to act against Gazprom, and she could only try to enforce the law.

#4: What Is At Stake for Gazprom?

Formal charges are “clearly a very important and concrete step,” showing that the EU is moving toward a decision that Gazprom has violated EU law, Mr. Mariniello said. That could potentially mean a fine of up to 10% of its annual revenue, or billions of dollars, as well as forced changes to its business practices.

#5: What Happens Next?

The EU will send Gazprom a formal charge sheet explaining its concerns in detail, and will publicly announce which of its concerns it has decided to pursue. If the Google case is any guide, Ms. Vestager could narrow the investigation to focus on one concern. That would enable her to quickly make a strong focused case, while leaving open the possibility to expand it later. Gazprom would have about three months to respond to the charges, after which the EU will make a final decision. That could be appealed at the courts in Luxembourg, a process that typically lasts years.