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:
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:
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:
The aggravating circumstances include:
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.