Bundeskartellamt plans to clear Gazprom's acquisition of minority interest in VNG

The Bundeskartellamt intends to clear Gazprom's acquisition of a minority interest in VNG, the largest gas supplier in east Germany. Yesterday a draft decision was sent to the parties to the concentration, Gazprom, VNG and Wintershall, as well as six third parties to give them the opportunity to comment and a time limit was set for submission of their comments by 25 January 2012. The deadline for examination of the project by the authority ends on 31 January 2012.

Gazprom plans to increase its participation in VNG to 10.52%. With the current holding of 15.79% in VNG by the BASF subsidiary Wintershall, the Bundeskartellamt is of the view that the project will enable Gazprom and Winterhall to jointly exert a competitively significant influence on VNG. Both shareholders cooperate closely in several joint ventures such as, e.g., Wingas.

Andreas Mundt, President of the Bundeskartellamt, stated: "For the first time we have closely examined the import level in the gas market, where the companies Gazprom, Gasterra and Statoil together hold a market share of more than 70 per cent. Although the question of dominance was irrelevant for our decision in this particular case and will therefore not be further assessed by us at this stage, we have gained important insight for the evaluation of any future merger plans in this market".

For the time being the Bundeskartellamt assumes a national German market for the production of natural gas and its import to Germany. In this market the Russian state-owned company Gazprom has a share of one third and the Dutch state-owned company Gasterra and the Norwegian state-owned company Statoil each a 20 per cent share.

Whether Gazprom is consequently dominant in the market was not a decisive factor in the proceedings because its minority share in VNG does not strengthen Gazprom's market position in a way which would be negative for competition.

In assessing the gas markets under competition law, different market levels are taken into consideration. Downstream of the import level are the markets for the supply of regional distributors by long-distance wholesale transmission companies and the supply of large industrial customers by long-distance wholesale transmission companies. The Bundeskartellamt sees a positive development of competition in these two downstream markets. It has therefore abandoned its previous geographic market definition which was limited to the respective supply area and now defines the markets as national. According to the Bundeskartellamt's preliminary assessment, neither VNG nor Wintershall can be regarded as dominant on either of these national markets.