A prohibition of a takeover on the market of hazardous waste, a conditional consent in the food industry and proceedings against Carrefour for a delay in implementing a decision - these are recent merger-related actions by the President of UOKiK

In order to protect competition from negative consequences of mergers, the law requires companies to obtain the consent of the President of the Office of Competition and Consumer Protection before carrying out a merger. More specifically, the obligation refers to transactions which concern enterprises whose aggregate turnover in the preceding year exceeded EUR 1 billion worldwide or EUR 50 million in Poland.

UOKiK is entitled to examine the market consequences of envisaged mergers and acquisitions and even stop transactions which may permanently disturb competition. Having assessed a given transaction, the President of the Office may clear it, make it subject to additional requirements or prohibit it altogether.

The President of the Office has not given her consent for the takeover of Baterpol by Orzeł Biały. The acquirer belongs to a group controlled by AIG. Beterpol is controlled by Impexmetal, which is part of the Boryszew Group. The enterprises operate on the same market of processing hazardous waste from used up batteries that are utilized e.g. to start internal combustion engines and power electric installations. The enterprises are the only ones running this type of business in Poland.

In the course of its proceedings UOKiK found that as a result of the transaction actual competition on this market would cease to exist. At the same time, entities collecting and purchasing battery scrap would be deprived of any alternative as far as its sale is concerned. According to the Office, the economic power and market position of the merged entity would lead to elimination of competition. On the other hand, market access limitations such as technological and legal barriers or high fixed costs actually make the entrance of other competitors impossible.

Consequently, the President of UOKiK decided to prohibit Orzeł Biały from taking over Baterpol. UOKiK uses this power only occasionally. Since 2004, it has been the fourth decision of this type.

At some times, the Office clears certain transactions, however, only provided that specific requirements are met. This applies to cases where a transaction would lead to a substantial lessening of competition, however, it is possible to eliminate the danger by imposing specific obligations to be fulfilled by the enterprises involved. In such cases, the President of UOKiK issues a decision specifying the requirements which must be fulfilled in order for the transaction to take place. In 2004-2009 the President of the Office issued eight conditional consents. A recent decision concerning the takeover of Kotlin by Argos Nova is another example of this kind.

The acquirer is a producer of juices, fruit drinks, jams, sauces, soups, ready-made meals and ketchups sold under such brands as Fortuna, Dr Witt, Pysio, Garden or Łowicz. The target company Kotlin produces and sells vegetable and fruit preserves, particularly ketchups, tomato paste, vegetable preserves and jams. What is more, the company is the owner of Sorella and Giuseppe brands.

Agros Nova’s and Kotlin’a products are among the most popular in Poland. The analysis of the consequences of the planned takeover showed that it would lead to a substantial lessening of competition on the national market of jams.

While clearing the transaction, the President of UOKiK made it subject to fulfilling specific requirements by the acquirer. The first requirement is to sell by 31 August 2010 the production line for producing jams owned by Kotlin and to sell the rights to Sorella trademarks. The assets may be sold exclusively to an independent investor, who does not belong to the Agros Nova capital group and who has to be approved by the President of UOKiK.

By that time, the acquirer will have to maintain the sales of Sorella jams in Poland at least at the level of 70% of the average sales of this brand, as well as maintain average expenses for the promotion and advertising of the products at the 2007 and 2008 levels. All these requirements aim at preserving the recognition of the Sorella brand. Additionally, within the three years following the transaction, the company has to cease the sales of Kotlin jams. Agros Nova will also have to provide UOKiK with detailed information concerning the fulfilment of these requirements.

In the opinion the President of UOKiK, Carrefour, which in June 2007 got a conditional consent to take over Ahold, has not fulfilled the requirements specified in the decision. The acquirer had to sell 9 retail outlets by the end of 2008. According to the information provided by the company, two outlets were sold after December 31, 2008. In the course of the proceedings which have been launched, the company is supposed to provide detailed information on the fulfilment of the requirement. Failure to fulfil it may result in a maximum fine in the equivalent of EUR 10 thousand for each day of delay in implementing the decision.

Mergers and acquisitions are characteristic for periods of economic prosperity. In the times of economic crisis, enterprises concentrate more on protecting their position on the market. Data collected by the Office confirm this trend - since the beginning of 2009 companies have submitted 9 merger applications, while in the same period last year there were three times more applications.

Additional information:
Małgorzata Cieloch, Spokesperson for UOKiK
Pl. Powstańców Warszawy 1, 00-950 Warsaw, Poland
Tel. (+48 22) 827 28 92, 55 60 106, 55 60 430
faks (+48 22) 826 11 86
E-mail: [SCODE]bWNpZWxvY2hAdW9raWsuZ292LnBs[ECODE]