Polish merger control, in terms of substance and procedure, is becoming increasingly aligned to that of the EU, and the Polish competition authority, the President Office for Competition and Consumer Protection (OCCP), often draws benefits from the decisional practice of the European Commission and the EU courts. However, in spite of the above tendency, in some important aspects where Polish merger control rules continue to differ from those provided by EU law. Capturing those differences is particularly important considering the relatively low notification thresholds triggering the merger filing obligation in Poland.
In 2015 the amendments to the Polish Act on Competition and Consumer Protection (ACCP)2 came into force and introduced several important modification to the Polish merger control system, both in terms of procedure and substance. We have observed how the key amendments materialised in practice, including rationalisation of the notification obligations aimed at excluding concentrations without an actual impact on competition within Poland, the introduction of two-phase proceedings or a statement of objections. As explained in detail below, merger control in Poland experienced the OCCP issuing several statements of objections followed by the parties' withdrawal of the notification, most likely in anticipation of a prohibition decision. Another important development following introduction of the 2015 amendments was a significant shortening of the review period in simple cases. At the same time, although the OCCP cleared the vast majority of the cases in Phase I, an increasing number of complex merger cases was decided in Phase II. It was also interesting to note the impact of views presented by customers, competitors and suppliers, enquired after by the OCCP in relation to notified concentrations, on the final outcome of its decisions.
An analysis as to whether a prior merger clearance of the OCCP for a given transaction is necessary requires a short assessment and answers to the following questions:
- a whether a transaction amounts to a concentration, i.e., whether it constitutes:
• a merger of two or more independent undertakings;
• the acquisition by one or more undertakings, whether by purchase or subscription of shares or securities or through any other means, of direct or indirect control over one or more other undertakings;
• the creation of a joint venture;
• the acquisition of part of a business of another undertaking (i.e., an asset sale of part of a business);3
- b whether turnover thresholds are exceeded:
• the combined worldwide turnover of the undertakings involved in the concentration and their entire groups exceeds €1 billion for the year prior to notification; or
• the combined Polish turnover of the undertakings involved in the concentration and their entire groups exceeds €50 million for the year prior to notification;
- c whether notification exemption applies:
• de minimis exemption - no filing is triggered if the Polish turnover of the following does not exceed €10 million in any of the two financial years preceding the concentration:
• the target - in the case of the acquisition of control; or
• none of the undertakings participating in the concentration (their capital groups) - in the case of a merger or the creation of a joint venture; or
• the part of the business to be acquired.
In the case of an acquisition of control or an acquisition of part of the business between the same parties in a series of transactions executed over two years, the total turnover of the undertakings to be acquired and the acquired business is taken into account. The purpose of this provision is to prevent avoiding merger notification by slicing the transaction into parts each falling within the notification exemption.
In addition, specific types of transactions fall outside merger control review:
- a an acquisition or holding of securities by a financial institution with a view to reselling them, provided that the resale takes place within one year and the financial institution does not exercise the shareholder's rights;
- b an acquisition or holding of securities on a temporary basis, with a view to securing claims, provided that the undertaking does not exercise the shareholder's rights;
- c a concentration during bankruptcy proceedings, unless control is taken over or part of the business acquired by a competitor; or
- d intra-group concentrations.
ii Joint ventures
In Poland, in contrast to the EU Merger Regulation, a joint venture does not have to provide on a lasting basis all the functions of an autonomous economic entity for its creation to be caught by the merger notification obligation. Thus, if the relevant notification thresholds are met, all joint ventures are notifiable to the OCCP, irrespective of whether they are ‘fully functional' or not.
Furthermore, the ACCP does not require JV parents to exercise joint control over a joint venture being created. As a result, a joint venture is deemed to arise even if only one undertaking will exercise (sole) control while the remaining undertakings establishing the joint venture will have non-controlling stakes. Given that a joint venture can also be created on the basis of an existing company, this may lead to practical problems distinguishing between an acquisition of a minority shareholding in an existing company (which is not notifiable to the OCCP) and the acquisition of joint control, and the creation of a joint venture.4 This issue was noticed by the OCCP, which in its guidelines on the criteria and procedure for notifying the intention of concentration as updated in 2015 (the OCCP Procedural Guidelines)5 stated that a creation of a joint venture on the basis of an existing company takes place when the company, although existing, was not operational, or it is intended that post-acquisition an already operational company will substantially change or expand its business profile. Otherwise, the transaction should be viewed as an acquisition of joint control (which may be notifiable to the OCCP) or as an acquisition of a minority shareholding that does not constitute a concentration.
A notification obligation may also arise if an existing joint venture, which could have been previously cleared by the OCCP, is to substantially change or expand its scope of operations.
iii Domestic effect
Foreign-to-foreign transactions meeting the Polish jurisdictional thresholds are subject to notification to the OCCP unless they have no (even potential) effect in Poland. According to the OCCP Procedural Guidelines, a concentration has an effect in Poland if at least one of the capital groups taking part in the concentration achieves turnover on the territory of Poland.
II YEAR IN REVIEW
No fines were imposed by the OCCP in 2016. At the same time, a few judgments of the Competition courts are worth mentioning as they provide useful guidelines in respect of merger control rules in Poland as they interpret the scope of the jurisdictional test under the ACCP as well as the third parties' duty to cooperate with the OCCP on market surveys conducted as a part of merger control proceedings.
The first case related to the 2014 decision of the OCCP imposing a fine on BP Europe for closing before clearance.6 BP Europe was fined for failing to notify its intention to acquire assets comprising one petrol station together with a restaurant and a shop located on the same property. In this case, BP Europe in fact notified the transaction prior to its implementation, but the OCCP decided that the acquisition of assets took place six months before the notification was made, namely when BP Europe concluded a tenancy agreement with the owner of the petrol station. In the OCCP's view, by concluding a tenancy agreement, BP Europe effectively acquired control over said petrol station.
As a general rule under the ACCP, an acquisition of part of some assets constitutes a form of concentration different from an acquisition of control over an undertaking. And there was a controversy between BP Europe and the OCCP related to the issue of whether the acquisition of part of some assets should be considered as including the acquisition of the contractual rights. The court of competition and consumer protection (CCCP) agreed with the position of the OCCP that the acquisition of the contractual rights (here from the tenancy) represents the acquisition of part of some assets.7 This judgment is not final and awaits a second instance ruling from the Appeal Court, however, the approach adopted by the OCCP in its initial decision seems to remain in force as it is presented in the OCCP's official statement at its website.8
The next case concerned the duty of the market participants to provide the OCCP with market data required for assessment of a notified concentration. In May 2016, the Appeal Court9 handed down a final judgment10 on a fine imposed by the OCCP in 2013 on DeLonghi Polska Sp z o.o. for failing to respond to the OCCP's questionnaire sent out within the market survey conducted during merger control proceedings in the BSH/Zelmer case.11 DeLonghi was one of the merging parties' competitors. The Appeal Court upheld the OCCP's decision, but lowered the fine from €50,000 to €30,000. This was an exemplary case confirming the determination of the OCCP to make the merger control proceedings as effective as possible and to deter market participants from ignoring the requests for information issued in the context of such proceedings.
ii Phase II cases
In 2016 the OCCP opened 10 Phase II proceedings. In the majority of cases, the reason for this was the need to conduct a market survey to define the relevant market. In cases reviewed in Phase II the OCCP in 2016 in two cases issued a conditional decision, one concentrations was cleared unconditionally and in three cases the notifying parties withdrew their notifications. In 2016 the OCCP issued six statements of objections. The OCCP did not block any concentration in 2016.
The above statistics confirm the relatively high number of complex cases dealt with by the OCCP in 2016.
iii Conditional decisions
The decisional practice of the OCCP in 2016 in cases with competition concerns confirms the approach of the OCCP to remedies observed since 2014.12 The OCCP continues to rely on conditions in the form of a carve-out (e.g., the exclusion from the scope of the transaction, before its completion, of part of a business to be acquired). Such a remedy was accepted in one out of two conditional decisions adopted by the OCCP. In a case consisting of the acquisition by Eurocash of PDA's alcoholic beverages warehouses,13 the OCCP approved the transaction on condition that one of the warehouse to be acquired were excluded from the transaction. During the proceedings, the OCCP rejected a quasi-structural remedy offered by Eurocash consisting in discontinuance of spirits exceeding 18 per cent alcohol content's sale in that warehouse, a relevant market for which the OCCP identified competition concerns. The OCCP ordered the notifying party to exclude from the transaction this warehouse even though it was also active on the relevant markets where no competition concerns were identified. In the second conditional decision adopted in 2016 concerning an acquisition of Eko Holding by Eurocash14, the OCCP accepted a remedy consisting in a divestiture of Eko Holding's shops on the relevant markets where competition concerns were identified.
III THE MERGER CONTROL REGIME
i Responsibility for filing
Once the jurisdictional test is met, the notification to the OCCP and subsequent obtaining the OCCP's clearance for the transaction is mandatory and the latter must be obtained prior to closing. A notification can be filed as early as the actual intention of the parties to concentrate can be shown. Filing can be made based on a conditional agreement, but also based on a memorandum of understanding, letter of intent, heads of terms or a similar document sufficiently expressing the intention of the parties to the transaction. In turn, press releases or a statement of one party are not sufficient.15 Pre-notification consultations with the OCCP are possible in problematic cases, albeit rare.
Which party is responsible for filing depends on the type of concentration:16 in the case of a merger or the creation of a joint venture, all parties to the transaction must notify; and if the concentration constitutes an acquisition of control or an acquisition of part of a business, the acquiring undertaking is responsible for filing.
In the event of the acquisition of joint control, all undertakings acquiring such control must notify (but not the undertaking already exercising joint control or changing its control from sole to joint control). The notification can be made jointly or separately by each of the undertakings acquiring joint control.
ii Review period
In line with the EU merger control rules, the amendment to the ACCP introduced two-phase proceedings.17
The Phase I review period is one calendar month. Phase II lasts an additional four calendar months. The OCCP may decide on Phase II by way of a procedural, non-appealable decision that requires justification. Such decision may be issued in the event of:
- a particularly complex matters;
- b matters where there is a reasonable likelihood that the concentration will result in a significant impediment to competition; or
- c matters requiring a market survey.
In light the above, unlike at the EU level, the OCCP may instigate Phase II even without specifying any competition concerns potentially raised by a concentration.
Any additional questions from the authority18 stop the clock until answers are given by the notifying parties. Thus, the actual review period (both in Phase I and Phase II) may last longer than the statutory periods.19 In fact, in particularly problematic cases the proceeding may last six to nine months.
iii Suspension obligation
The parties are prohibited from closing a notifiable transaction without the OCCP's clearance. A breach of this suspension obligation or a failure to notify at all may result in fines imposed on undertakings obliged to notify a transaction20 amounting to up to 10 per cent of their worldwide turnover. In practice, the fines imposed by the OCCP are lower than the maximum amount permitted by law, and to date have typically ranged from €2,000 to €20,000. There is no sanction of invalidity; however, if an implemented concentration results in a significant restriction of competition, the OCCP may, in addition to fines, impose remedial measures (e.g., divestment).
There is an exemption from the suspension obligation that relates to a public offer for the acquisition or exchange of shares notified to the OCCP, provided that the acquirer does not exercise the voting rights attached to those shares, or exercises those rights only with a view to maintaining the full value of its capital investment or to avoid serious harm to the undertakings involved in the concentration.
iv Third-party rights
Third parties (e.g., competitors, customers and suppliers of the parties to the concentration) do not have a right to formally intervene or participate in the merger control proceedings (e.g., they do not have access to a case file or the right to lodge an appeal from the clearance decision). However, they may submit unsolicited comments in relation to an intended concentration or have the opportunity to present their observations on the occasion of a market survey conducted by the OCCP in the course of the merger proceeding.
v Substantive assessment
The substantive test applied by the OCCP is whether the intended concentration would lead to a significant impediment to competition,21 in particular by creating or strengthening a dominant position on the market. There is a rebuttable presumption that an undertaking enjoys a dominant position if it has a share exceeding 40 per cent of the market. In principle, in relation to horizontal mergers, the OCCP does not identify a significant impediment to competition below a 40 per cent market share threshold.22 In its guidelines on assessing notified concentrations,23 the OCCP distinguishes between horizontal, vertical and conglomerate effects and, in relation to all three categories of effects, the OCCP may take into account both unilateral and coordinated effects.
vi Resolution of competition concerns
In matters where there is a reasonable likelihood that the concentration will result in a significant impediment to competition, the OCCP presents a statement of objections together with its justification. The OCCP may also propose conditions upon which it will clear the concentration. The conditions may also be proposed by the notifying party or parties. The OCCP gives preference to structural remedies, while behavioural ones play a secondary role.
During the subsequent 14 calendar days an undertaking may submit its position in relation to the statement of objections or conditions proposed by the OCCP. Upon an application of the notifying party or parties, the 14-day period may be extended by the OCCP by no more than an additional 14 days.
A statement of objections allows an undertaking to become acquainted with the OCCP's view of the case in question, and therefore make it possible to propose modifications to the planned concentration so as to ensure its compatibility with competition law. When proposed solutions are not satisfactory to the OCCP, a notifying party can withdraw the notification. In recent practice, statements of objections resulted in such withdrawals to avoid the issuance of a prohibitive decision.
A lack of response from the notifying party or parties to the conditions proposed by the OCCP or the refusal of their acceptance, as well as the OCCP's refusal to accept the conditions proposed by the undertaking, results in the issuance of a prohibitive decision.
vii Appeals and judicial review
A decision of the OCCP is appealable to the court of competition and consumer protection24 (via the OCCP) within one month from the date of that decision having been served. The appeal may be filed by the party or parties to the concentration, the public prosecutor or the Ombudsman.
Where the OCCP considers an appeal justified, it may revoke or change the decision in its entirety or in any part without sending the case files to the court, and it will immediately notify the party concerned by sending a new decision that may be appealed by that party.
The court of competition and consumer protection issues a new ruling concerning the concentration and is not bound by the OCCP's findings made during the administrative proceedings. Judgments of the court of competition and consumer protection are appealable to the Appeal Court, which verdicts are final.
Final rulings of the Appeal Court may be subject of cassation appeal to the Supreme Court.
IV OTHER STRATEGIC CONSIDERATIONS
i Joint ventures
As explained, the approach to joint ventures in the Polish merger control regime happens to create an obligation to notify a transaction that is actually not capable of impacting competition in Poland in a way that would justify intervention from the competition authority. As an example, the creation of a joint venture established and active in another part of the world by large capital groups may technically require notification to the OCCP. This is due to the broad notion of ‘joint venture' (which includes both full function and non-full function joint ventures), the wide scope of the ‘domestic effect' test in Poland and the relatively low turnover thresholds. The 2015 amendments to ACCP, particularly the introduction of the de minimis exemption for concentrations in the form of a joint venture,25 did not provide much support in this respect.
This issue is particularly important given that the definition of a joint venture is not related to the notion of joint control. For this reason, sometimes even the acquisition of a minority stake might lead to a notifiable concentration. Unfortunately, the OCCP is not willing to change its approach and interprets the ACCP provisions in this respect in a strict manner.
The 2015 amendments to the ACCP in relation to introducing two-phase merger control proceedings were designed specifically to allow the OCCP to better allocate its resources and focus on cases with competition concerns. The OCCP's practice in 2016 confirmed that the review period for simple, non-problematic concentrations reviewed in Phase I remains relatively short, lasting approximately five weeks on average. At the same time, proceedings in cases with competition concerns in which the OCCP issues statements of objections remain long, lasting seven to 10 months. This is partially due to the absence of pre-notification in Poland.
In the merger control processes, the OCCP continues to heavily rely on third parties' views on a transaction under review. In complex cases, competitors, customers and suppliers are approached by the OCCP and their views, including justified criticism, if expressed, affect the OCCP's perception of the market definition and the notified transaction's impact on competition.
iii Substantive assessment
Although the greater involvement of the OCCP's internal economists in merger control cases is observed, this does not result in an effects-based analysis of complex cases. Definition of the relevant market is the necessary and most important step in the analysis, and the market shares remain decisive in the assessment of the concentrations' impact on competition.
In the latest conditional decision issued in December 2016 in Eurocash/Eko Holding case, the OCCP ordered a simple divestiture remedy instead of a carve-out one for the first time since 2014. However, it is expected that the OCCP will significantly modify its general preference towards the latter.
V OUTLOOK & CONCLUSIONS
The 2015 amendments to the ACCP continue to prove its positive effects in a form of shorter merger control review for simple cases. Nevertheless, the proceedings concerning more complex transactions still remain lengthy. The improved regime has not resulted in changes to the substantive assessment of concentrations, which still focuses on market shares analysis instead of effects-based analysis. At the same time, the OCCP's practice with regard to merger remedies continues to be visibly conservative.
The 2015 amendments to the ACCP do not address all of the issues, and therefore do not give sufficient comfort of legal certainty to the parties. For example, Poland might still be one of those jurisdictions in which the obligation to notify a transaction is required, even though no impact on competition in the Polish market is involved.
Małgorzata Szwaj is a partner and head of the competition and antitrust group in Poland and the CEE region. She specialises in Polish and European competition law and has experience in Polish and EU merger control, restrictive agreements, cartels, abuses of dominant position, state aid and other areas of European law, including free movement of goods and services. She regularly represents clients before the OCCP, the Polish competition courts and the European Commission. She advises on the largest and most significant merger control proceedings involving companies active in Poland. The particular sectors in which Mrs Szwaj excels include telecommunications, infrastructure, retail, chemicals, pharmaceuticals, energy and media.
Mrs Szwaj is a graduate of the faculty of law at Warsaw University and Queen Mary and Westfield College, London. She is highly acclaimed for her command of a wide range of competition matters and is a recognised leader in her field in both Polish and foreign law firm rankings (Chambers Europe, Legal 500 EMEA, Polityka Insight and Rzeczpospolita).
Mrs Szwaj is a qualified Polish lawyer and member of the Warsaw Bar.
Wojciech Podlasin is an associate in Linklaters' Warsaw competition and antitrust group. He specialises in antitrust, merger control and state aid cases and gained extensive practical experience as a member of Linklaters' Warsaw and Beijing competition teams.
Mr Podlasin read law at the University of Warsaw and the London School of Economics, and finance at the Warsaw School of Economics. He is the co-author of a leading commentary to the Polish competition act in the part concerning merger control.
Mr Podlasin is a qualified Polish lawyer and member of the Warsaw Bar.
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Tel: +48 22 526 50 00
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1 Małgorzata Szwaj is a partner and Wojciech Podlasin is an associate at Linklaters Warsaw.
2 The text of the ACCP as well as the secondary legislation and merger control guidelines issued by the OCCP are available in Polish on the authority's website (see https://uokik.gov.pl/prawo.php).
3 Differently from the EU Merger Regulation, under the ACCP an acquisition of part of a business constitutes a form of concentration separate from the acquisition of control over an undertaking.
4 A distinction between an acquisition of joint control and an establishment of a joint venture may be relevant given different undertakings whose Polish turnover is taken into account for the purposes of an assessment of the de minimis exemption.
5 Polish version available at the OCCP's website (see: https://uokik.gov.pl/wyjasnienia_i_wytyczne.php).
6 Decision of the OCCP No. DKK - 173/2014 of 31 December 2014.
7 Case No. XVII AmA 14/15 of 7 March 2016.
8 See the OCCP's statement concerning the interpretation of Article 13(2)(4) of the ACCP available in Polish at: www.uokik.gov.pl/interpretacja_przepisow.php#faq2523.
9 The Appeal Court is a second instance court hearing competition cases.
10 Case No. VI ACa 630/15 of 17 May 2016.
11 The fining decision of the OCCP No. DKK - 115/2013 of 9 September 2013.
12 In the 2014 case on the market for wholesale trade, the acquirer accepted a condition consisting of the exclusion of one of the wholesale depots from the scope of the transaction before its completion (decision of the OCCP No. DKK - 121/2014 of 18 September 2014). In the 2015 case on one of the local markets for concrete, the OCCP accepted a condition pertaining to excluding one of the concrete plants from the transaction before its completion (decision of the OCCP No. DKK-176/2015 of 13 October 2015.
13 Decision of the OCCP No. DKK-191/2016 of 23 December 2016.
14 Decision of the OCCP No. DKK-180/2016 of 14 December 2016.
15 Because the OCCP mandatorily publishes in a public information bulletin information that a filing was made, information about the transaction becomes publicly available. In certain situations (e.g., public tenders), this may have an impact on the decision of when to file.
16 If the concentration is conducted by a parent undertaking through at least two of its subsidiaries, the parent undertaking is responsible for filing the notification. Similarly, the parent undertaking may file if the concentration is conducted by a ‘corporate vehicle'.
17 Prior to the amendment to the ACCP the statutory review period was two calendar months.
18 The OCCP is permitted to make additional information requests even if the notification is formally complete, and it often benefits from this right.
19 In 2016, the average review period in Phase I was 38 days, i.e., the level comparable to 2015, while almost twofold shorter than in 2014 i.e. before the 2015 amendments to the ACCP.
20 Fines are not imposed on vendors.
21 The equivalent of the ‘significant impediment to effective competition' test applied at the EU level.
22 There was one exception where the OCCP prohibited a horizontal merger even though the combined market share of the undertakings concerned was below the 40 per cent threshold (Decision DKK-12/11, Empik/Merlin).
23 Polish version available at OCCP's website (see: https://uokik.gov.pl/wyjasnienia_i_wytyczne.php).
24 Regional court in Warsaw.
25 Namely the exclusion from the notification obligation of transactions where none of the capital groups involved in the creation of the joint venture held more than €10 million in Poland in any of the two financial years preceding the concentration.