Polish competition law and legal control on the Polish market of concentration of enterprises in Poland, including TECH companies, by way of merger, acquisition of control, acquisition of an organized part of property and creation of a new entrepreneur

Control of concentration of entrepreneurs is a legal term for: merger, acquisition of control, acquisition of an organized part of property and creation of a new entrepreneur. Its task is to prevent excessive consolidation, which, if left uncontrolled, could lead to a significant restriction of competition on the market by acquiring or strengthening a dominant position.

The control of concentration of entrepreneurs, performed mainly by the President of the Polish Office of Competition and Consumer Protection, covers transactions that have or could have had a significant impact on the market in Poland. The task of the President of the Polish Office of Competition and Consumer Protection is, inter alia, issuing consents to carry out a specific concentration in order to prevent any restriction of competition on the market. The President of the Polish Office of Competition and Consumer Protection may also issue a decision prohibiting merger. However, it is worth noting that concentration can be allowed under certain conditions. An example of this is the resale of part of the property. The Polish Act on competition and consumer protection of February 16, 2007 also allows for the approval of a merger leading to a restriction of competition, in certain very strictly defined situations. It refers to such events as a result of which there will be economic development; technical progress or simply they will have a positive impact on the national economy.

In accordance with the above-mentioned Act, there may be cases in which there will be no need to notify the intent of the concentration to the Polish Office of Competition and Consumer Protection, because this action will have little impact on the market. It should also include cases where the turnover of the enterprise which is the object of the takeover on the territory of Poland in none of the two financial years preceding the notification was equal to or greater than the amount of EUR 10 million. If the entities belong to the same capital group, there is also no need to notify the concentration to the Polish Office of Competition and Consumer Protection.

If the concentration has been carried out, without prior consent from the Polish President of the Office of Competition and Consumer Protection, the President may take specific steps aimed at restoring the state of effective competition. This effect can be achieved by ordering the division of the entrepreneur / enterprises or ordering the resale of a part of the shares. The President of the Office may also impose a financial penalty of up to 10% of last year’s revenue of the said enterprise, to entities that took part in an unauthorized concentration.

What is concentration control about?

Pursuant to Article 13 of the above-mentioned Act, the obligation to notify the intention of concentration applies to situations that will result in:

• takeover by one or more entrepreneurs of participation rights; other securities; or direct / indirect control over one or more entrepreneurs,
• creation by several smaller entrepreneurs of one larger entity,
• merger of two or more independent entrepreneurs,
• acquisition by an entrepreneur of a part of the property of another entrepreneur, in whole or in part, if the turnover of this property in any of the two financial years preceding the notification exceeded the equivalent of EUR 10,000,000 in the territory of the Republic of Poland.

When is the entrepreneur / enterprise obliged to notify the President of the Polish Office of Competition and Consumer Protection of the intention of concentration?

All kinds of steps aimed at concentration of certain entrepreneurs are subject to the absolute obligation to notify, if the total global turnover of these entrepreneurs in the financial year preceding the year of notification exceeds EUR 1 billion or the total turnover in Poland in the financial year preceding the year of notification exceeds the equivalent of 50 million euro.

When is there no need for an entity to notify or carry out a concentration?

Referring to Article 14 of the above-mentioned of the Act, the entrepreneur does not have to notify the concentration if:

• the turnover of the entrepreneur over which control is to be taken, through the acquisition or taking up of shares or stocks, did not exceed on the territory of the Republic of Poland in any of the two financial years preceding the notification, the equivalent of EUR 10,000,000 of income;
• the turnover of any of the entrepreneurs (in the event of a merger of two or more independent entrepreneurs or the establishment of a joint entrepreneur by the entrepreneurs) has not exceeded in the territory of the Republic of Poland, in any of the two financial years preceding the notification, the equivalent of EUR 10,000,000;
• it consists in taking control over an entrepreneur or entrepreneurs belonging to one capital group and acquiring part of the property of the entrepreneur or entrepreneurs belonging to this capital group – if the turnover of the entrepreneur or entrepreneurs over which control is to take place and the turnover carried out by the acquired parts of property, not exceeded in total on the territory of the Republic of Poland in any of the two financial years preceding the notification of the equivalent of EUR 10,000,000
• it consists in the temporary purchase or takeover by a financial institution of stocks or shares for resale, if the subject of the institution’s business activity is investing in stocks or shares of other entrepreneurs on its own or someone else’s account, provided that the resale takes place before the end of the year from the date of acquisition or take-up, and that:
  • this institution does not exercise the rights attached to these shares, except for the right to dividend, or
  • it exercises these rights solely in order to prepare the resale of all or part of the enterprise, its property or these stocks or shares;
  • consisting in the temporary purchase or taking up by the entrepreneur of stocks or shares in order to secure debts, provided that he will not exercise the rights from these stocks or shares, with the exception of the right to sell them;
  • taking place in the course of bankruptcy proceedings, with the exception of cases where the intending to take over control or acquiring part of the property is a competitor or belongs to the capital group to which the competitors of the acquired undertaking belong or whose part of the property is acquired;
  • entrepreneurs belonging to the same capital group.

How is consent for concentration issued?

The approval of a concentration is granted in two stages. The first stage relates to cases that are not overly complex, do not show a risk of a significant restriction of competition on the market and do not require market research. In such situations, this stage ends within 1 month from the date of submitting the application to the Polish Office of Competition and Consumer Protection.

On the other hand, if we are dealing with a complicated situation that raises great concerns as to the restriction of market competition and definitely requires market research, then the President of the Office of Competition and Consumer Protection issues a special decision to extend the procedure for another 4 months with justification. This is the second stage of the procedure. It is also worth adding that the above-mentioned decision may not be appealed against.

However, it often happens that there are some gaps in the information provided by entrepreneurs. In such a case, the notifiers will be requested by the Polish Office of Competition and Consumer Protection to remedy these deficiencies or to supplement the information, if necessary. Then, the statutory deadline for issuing a decision, both in the first and second stage of the notification procedure, is extended by the time that the Office waits for responses to additional questions.

The decision to prohibit concentration is issued by the President of the Polish Office of Competition and Consumer Protection only when the said action significantly restricts market competition, which in particular takes place in the event of the emergence or strengthening of a dominant position on the market. On the other hand, if the concentration raises significant reservations regarding the provisions on competition protection, the President of the Office may indicate the conditions that must be met by the participants in the transaction in order to obtain consent to the concentration.

Financial penalties for failure to notify the intention of concentration

There are three situations that result in the imposition of a penalty. The first such case concerns the implementation, even inadvertently, of a concentration without obtaining the consent of the President of the Polish Office of Competition and Consumer Protection. The second case of imposing a penalty relates to a failure to report, even if only unintentionally, the intention to concentrate. The third situation, resulting in consequences in the form of imposing a financial penalty, is a delay in the implementation of decisions, decisions of the President of the Office of Competition and Consumer Protection or court judgments in cases related to competition-restricting practices, practices violating collective consumer interests, prohibited provisions of standard contracts and concentrations.

In the first situation, the fine is imposed on the entrepreneur and may not exceed 10% of the turnover achieved in the financial year preceding the year in which the fine was imposed.

In the second case, a natural person performing a managerial function or being part of the entrepreneur’s management body may be punished, and the amount of the penalty may not exceed 50 times the average salary.

However, in the third case, the fine is imposed from the date indicated in the decision and is the equivalent of up to EUR 10,000 for each day of delay.

Mitigating and aggravating circumstances

The mitigating circumstances in the event of a failure to notify the intention to carry out a concentration include in particular:

• informing the President of the Polish Office of Competition and Consumer Protection about the concentration;
• cooperation with the President of the Polish Office of Competition and Consumer Protection in the course of the proceedings, and in particular contributing to the quick and efficient conduct of the proceedings.

The aggravating circumstances include:

• having previously committed a similar breach,
• willfulness of the infringement.

Examples

One of the examples of a decision to consent to a concentration taking place on the Polish market is the frequent creation of a joint entity between an experienced software company and a foreign investor who wants to use new software created in the course of cooperation in Poland as part of such a concentration. For instance, an example concerns a concentration between a company operating on the market of selling products in the field of access infrastructure technology, data exchange systems and telemetry and a foreign entrepreneur that is an international provider of telecommunications services, including access to television content, broadband Internet access, fixed-line telephony and mobile services.

Sources:

https://www.uokik.gov.pl/aktualnosci.php?news_id=14551

https://www.uokik.gov.pl/kontrola_koncentracji.php

https://sip.lex.pl/akty-prawne/dzu-dziennik-ustaw/ochrona-konkurencji-i-konsumentow-17337528