M&A vs concentration control by the President of the OCCP

Damian Dobosz
30 May 2022

A share deal or an asset deal is mostly associated with negotiations, a due diligence report, an SPA, and a report on the new shareholder to the National Court Register. This, however, is not all that is needed to close the deal.

Every M&A should be preceded by an Antitrust Due Diligence investigation. This allows you to check if e.g. the President of the Office for Competition and Consumer Protection (OCCP, or UOKiK in Polish) has to be notified of the purchase of shares in a limited liability company as an intended concentration.

When to notify concentration

Notification of concentrations in Poland is governed by the Competition and Consumer Protection Act.
The statute requires notifying the President of the OCCP of the intended concentration in one of two situations:

• the combined global sales of enterprises participating in the concentration in the financial year preceding the year of notification exceeds the equivalent of 1 billion euro;
• the combined sales within Poland of the enterprises participating in the concentration in the financial year preceding the year of notification exceeds the equivalent of 50 million euro.

Intended concentration should be notified in the following cases (among others):

• purchase of shares;
• sale of enterprise or its organised part;
• joint venture

The statute lists certain exceptions from the mandatory notification of concentration. For instance, if the target's turnover did not exceed 10 million euro in Poland in any of the two years preceding the notification, there is no need to report concentration. The statute describes exactly how to calculate turnover of the concentrating enterprises.

How to prepare the notification of concentration

Preparation of the notification of concentration is a complex process requiring a team of expert lawyers, often backed by market analysts.

Details of how to prepare the notification of concentration are laid down in the Competition and Consumer Protection Act and the regulation of the Council of Ministers on notifying intended concentration of enterprises.

Key in the whole process is to properly determine the transaction scale and identify the affected markets. These details are needed to fill in the WID form.

The President of the OCCP will require, among other things:

• basic information on the enterprises directly participating in the concentration;
• detailed description of the intended concentration including the reasons and objectives of the concentration as well as estimated impact of the concentration on competitors and consumers, and how the concentration will affect the relevant market, production costs, product prices and the economies of scale;
• turnover of enterprises participating in the concentration plus the relevant documentation;
• information about ownership structure within the corporate groups;
• the required concentration documentation (e.g. PSPA, financial statements).

The most difficult part is to determine the product markets and geographical markets on which enterprises involved in the concentration operate. Then, to describe the shared markets or justify that no markets are shared between the enterprises. Depending on the arrangements, the notification of intended concentration may need to be accompanied by: a list of competitors of the participating enterprises, identification of markets on which vertical relations exist and estimated market shares. A notification of concentration may be even more complicated if it turns out that the concentration has horizontal or vertical impact.

The fee for the notification of intended concentration is currently 15 thousand zloty.

Reporting an intended concentration may prove really complicated. The documentation often includes thousands of pages to be submitted to the President of the OCCP. The notification procedure itself requires close cooperation among the participating enterprises, their legal teams and often times also market analysts.

Antitrust procedure for concentration approval

The President of the OCCP approves concentration if it does not significantly restrict competition. Following the antitrust procedure, he may also impose obligations on the concentrating enterprises (e.g. to shed control over a certain share package). The antitrust procedure concerning concentration should be closed within one month (but may be extended by 4 months). The whole procedure should be monitored by a well-versed team of lawyers who stays in touch with the President of the OCCP to provide any additional explanations necessary to issue the decision.

Sanctions for failure to report concentration

A failure to report concentration may lead to a fine of up to 10% of turnover. The President of the OCCP may also fine the managers up to 50 times the average remuneration (about 300 thousand zloty).

Moreover, a failure to report concentration may lead to a decision ordering:

• demerger of the merged enterprise;
• sale of all or some of the enterprise’s assets;
• sale of shares that given control over the enterprise or enterprises;
• dissolution of the company which is jointly controlled by the enterprises.

How to get ready for an M&A deal from the competition law perspective

The key is to pick an experienced team of experts who will support the enterprise at every stage of checking if the concentration has to be reported and in preparing the notification of intended concentration.

In preparation of the M&A deal, they should:

1. Check if the intended concentration needs to be reported in the course of Antitrust Due Diligence (the results may really surprise).
2. If it comes out positive, work with a team of lawyers to determine what documentation has to be compiled to report the intended concentration.
3. Gather basic information to report the intended concentration.
4. Determine the product markets and geographical markets on which enterprises involved in the concentration operate.
5. Check if there are shared markets and, if applicable, compile a list of competitors and estimate market shares or explain why there are no shared markets.
6. Check if there are vertical or horizontal relationships, and if yes – add the information to the notification of intended concentration.
7. Gather the necessary documents and prepare the final notification of intended concentration.
8. Submit the notification of intended concentration to the President of the OCCP and monitor the antitrust proceedings staying in touch with the authorities.

If you have any questions about notification of concentration, you are welcome to contact Rödl & Partner experts.

Legal basis:
1. Competition and Consumer Protection Act of 16 February 2007.
2. Regulation of the Council of Ministers of 23 December 2014 on notifications of intended concentrations of enterprises.