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Proposed changes in merger control regulations

On 15 May 2012, the Polish competition authority published a white paper proposing amendments to the Act on Competition and Consumer Protection of 16 February 2007.

From the perspective of transactional practice, the proposed changes in merger review—the first in this area since the Act entered into force over five years ago—are clearly significant. The proposed changes affect both the procedural and the substantive provisions of the Act. We discuss the key proposals in more detail below.

Two-stage procedure

The most important procedural proposal is to introduce a two-stage procedure in merger review cases.

Under the proposal, the first stage of the proceeding in concentration cases would last up to one month, without any option for extension (as under current law, the time required to supplement the notification or for the competition authority to respond to inquiries would not count toward the period for consideration). The president of the Office of Competition and Consumer Protection (UOKiK) would be required to issue a decision within the one-month period and conclude the proceeding in the case of concentrations that did not raise doubts under the Act (i.e. straightforward cases without any significant impact on competition on the market).

Complicated concentrations with a significant impact on relevant markets would undergo a further procedure in the second stage of the concentration proceeding. In such cases, before the end of the first stage of the proceeding, the president of UOKiK would issue an (unappealable) order extending the proceeding by a further 4 months.

According to the UOKiK proposal, undertakings involved in complicated merger cases could thus expect a decision by the president of UOKiK on the concentration within 5 months after commencement of the merger review proceeding.

Under the current regulations, cases involving concentrations of undertakings are considered in a single-stage proceeding, which is uniform across all concentrations (regardless of the form of the concentration, the degree of complexity, or the effect on competition). The statutory deadline for issuance of a decision on a notification of an intended concentration is now 2 months from the commencement of the proceeding by the president of UOKiK—potentially subject to multiple extensions of the statutory deadline.

The proposed changes in the duration of the concentration proceedings are patterned on the approach adopted in the EU Merger Regulation (139/2004), which provides for a two-stage proceeding, with a simplified procedure for cases that do not appear to pose any threat to competition.

UOKiK has also proposed to introduce the institution of reservations with respect to a planned concentration. In cases raising doubts, reservations would be presented to the undertakings during the course of the proceeding so that they have an opportunity to address them prior to issuance of a decision in the case (and also potentially modify the planned transaction in order to eliminate any anti-competitive effects).

UOKiK’s proposal of these changes should be viewed favourably. The duration of merger review cases would generally be reduced. Based on our own experience, the average duration of the proceedings in simple cases is currently about 5–6 weeks, while more complicated cases may now last about 9 months (as in the recent UPC/Aster proceeding—Decision No. DKK-101/2011 of 5 September 2011). Assertion of reservations with respect to a concentration at an early enough stage in the proceeding would enable undertakings to conduct a formal dialogue with UOKiK and potentially develop solutions that could allow the concentration to ultimately obtain approval. Apparently, presentation of reservations would be tied to issuance of an order extending the merger review proceeding and opening up the second phase.

Expansion of the de minimis notification exclusion

The UOKiK proposal would also modify the rules for determining when there is an obligation to notify the competition authority of an intended concentration.

Even if the turnover of the participants exceeds the principal statutory thresholds (i.e. EUR 1bn worldwide or EUR 50m in Poland), that does not always mean that the concentration must be notified to UOKiK. A concentration is excluded from review if it falls within any of the five exclusions set forth in Art. 14 of the Act.

The exclusion that would be expanded under the proposal is the de minimis exclusion for concentrations in which the turnover of the target is relatively small. Under current law, this exclusion applies only to concentrations involving acquisition of control, when the turnover of the target undertaking in Poland did not exceed the equivalent of EUR 10m in either of the two financial years preceding the notification—Art. 14(1). An analogous exclusion applies in cases involving acquisition of a portion of the assets of another undertaking, when the turnover generated in Poland by the acquired assets did not exceed the equivalent of EUR 10m in either of the two preceding years (in this case, the de minimis threshold is one of the grounds for determining whether the given transaction is deemed to be a concentration, under Art. 13(2)(4).

The white paper calls for expansion of the de minimis exclusion to cover concentrations involving creation of a joint undertaking as well as mergers of undertakings when the revenue generated in Poland by the participants in the concentration is low enough. (Apparently, the EUR 10m threshold would apply here as well.)

If such an amendment were adopted, the principle of de minimis exclusion from the notification obligation would be applied equally across all types of concentrations.

The Transactions Portal will update readers on the further course of work on the proposed amendments to merger review regulations in Poland.

Andrzej Madała, Competition Law Practice, Wardyński & Partners