When should an envisaged transaction be notified to UOKiK? When should the matter be handled by the European Commission? How does a consolidation on the market influence consumers’ situation? The Office is pointing out the changes in the regulations regarding concentration control

Protecting the market against domination by few dominating actors, preventing deformations of the economic life structure and stimulating growth, competition policy restores balance in the economy at the same time safeguarding the interests of consumers.

One of the central points of anti-monopoly legislation is control of concentration, because as a result of it disruption, and in some extreme cases, even total elimination of competition may occur. The provisions of law define in detail the competences of anti-monopoly authorities in this area, since their administrative decisions should not interfere with entrepreneurs’ organizational and legal form, nor their scope of activity in case of lack of sufficient proof.

The anti-monopoly authoriry’s role is to analyse in detail the envisaged transactions, because the point is not to prevent concentration itself, but an excess of consolidation. Not every merger or creation of a common business entity leads to a disruption in competition - most transactions are neutral from this point of view. Concentration is a natural way for enterprises to develop in a free market economy. Better organized companies often take over weaker ones. Sometimes there are mergers whose effects are beneficial for the market. The most frequent results of such processes are: recapitalization, gaining access to the know-how, more effective marketing. These changes often lead to an increase of the availability of the product offer, improvement of the products’ quality and variety. A merger may also mean lowering the prices due to the scale effect, which makes it possible for the entrepreneurs to reduce costs.

In 2006 the Office of Competition and Consumer Protection dealt with 310 concentration control cases, granting its clearance 215 times. In one case it was necessary to impose additional obligations on the entrepreneur, in one case the transaction was banned. UOKiK issued 4 decisions imposing fines for the failure to report the transaction. Most of the examined cases related to the food, chemical, cosmetic and fuel industries.

The processes of concentration can also bring negative effects. It happens so when in the result of a merger the entrepreneur obtains or enhances its dominant position on the market. The anti-monopoly authority can then give a conditional clearance or ban such a transaction if it is not possible to prevent the restriction of competition in any other way. We dealt with a case of the former kind on 30 September 2005, when the President of UOKiK ruled that Carey Agri (a leading distributor of alcohols belonging to CEDC) shall be allowed to take control over Polmos Białystok (one of the three largest producers of high-proof drinks in Poland) on condition that in the next three years it gives up its exclusive right to distribute vodkas of their own production (the most popular ones, offered under the brands of Bols, Soplica, Absolwent and Żubrówka) for the benefit of independent entrepreneurs.

The latter situation occurred on 4 May 2006, when the President of UOKiK forbad Carey Agri to take over Polmos Lublin (which controls the largest Polish producer of quality vodka and the owner of the Żołądkowa Gorzka brand). An analysis of the concentration’s effects conducted by the Office revealed that the transaction would result in a significant restriction of competition in the sale of quality vodka and the wholesale distribution of high-proof alcohols. A clearance would lead to the buyer enterprise becoming the owner of five of the ten most popular brands of vodka in Poland.

The examples described above concern transactions that were analysed by the President of UOKiK. Starting from the end of April, when the new Act on competition and consumer protection of 16 February 2007 comes into effect, not all concentrations which have so far required to be notified will need the Office’s clearance. The turnover thresholds indicating when a merger or acquisition must be cleared were raised in the new regulations. According to the new act, only transactions whose participants had a total turnover of more than 1 billion euros in the world or 50 million euros in Poland in the preceding year shall require notification. Therefore, only the largest concentrations, that can have a real influence on the competition on the market, will be subject to UOKiK’s control.

It is also worth remembering that the Polish anti-monopoly authority can impose a fine up to 10 per cent of the entrepreneur’s income merely for an unintentional concentration without the Offices prior clearance. In certain cases the authority can also order a division or sale of the company’s assets or shares.

Since Poland’s accession to the EU, the largest transactions that can have influence on the Community’s internal market must obtain the clearance from the European Commission. What is important, the turnover is the only determinant of the Community dimension of concentration. Therefore, the market share of the involved entrepreneurs, or their geographical area of activity are not taken into account (the detailed information can be found in the Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings). The entities planning an concentration should therefore first establish whether on account of their turnover the transaction should be notified to the Commission, or to the national anti-monopoly authority.

On account of the rule that a concentration may be examined by one authority only (one stop shop), it is possible to transfer a case. The participants of a concentration can ask the European Commission to transfer a community transaction for a decision, in full or in part, to an authority of a member state. The only condition is that it consents to accept the case.

At the same time, if a specific non-community transaction would be subjet to control in three member states, the entrepreneurs can ask the Commission to take their case over. Such possibility is motivated by practical considerations.

National authorities on their part can take over individual cases which should be decided only on the basis of community law. The consent in this respect is given by the EU body, which takes into consideration specific economic criteria, checks the existence of a separate market and the influence of a particular transaction on competition. In specific cases the Commission is obliged to transfer a case or its part.

It is also possible that the Commission, upon the motion of a member state, checks a particular transaction, which is not of community character, but can have influence on the trade between member states and on the state of the competition.

As an example, in August 2000 the Commission transferred to the United Kingdom the concentration of Interbrew and Bass (beer production market) and in April 2002 upon the motion of anti-monopoly authorities from several member states (Germany, France, Spain, Italy, United Kingdom and Greece) the EU body made a decision in the case of General Electrics and Unison (specialist engines production market).

So far the Office of Competition and Consumer Protection addressed the European Union in three cases. They concerned the creation of a common entity by Burda and Hachette Filipacchi (magazine market), the takeover of Linde by BOC (technical gases market) and of Aholda by Carrefour (food retail). The first two cases have not been transferred to UOKiK, the decision concerning the last one has not yet been made.

Additional information:
Małgorzata Cieloch, Spokesperson for UOKiK
Pl. Powstańców Warszawy 1, 00-950 Warszawa
Tel. 22 827 28 92, 55 60 106, 55 60 314
faks 22 826 11 86

E-mail mcieloch@uokik.gov.pl