Legal Eye: Trust-busters

Policing capitalistic excesses

The Act on Competition and Consumer Protection was enacted in 1990, following fast on the heels of Poland's transition to a free-market economy.

Fast-forwarding to 2006, antimonopoly authorities everywhere must now maintain a delicate balance of allowing business to flourish, but policing abuses of market power. The antimonopoly office is charged with restraining those companies that are dominant in a particular market from abusing their influence and preventing mergers of companies that could lead to the creation of a one-tonne gorilla.

Dominance is 40%

To determine whether a company is dominant, the Office must assess whether a company has a position allowing it "to prevent the efficient competition on the relevant market thus enabling it to act in a significant degree independently from competitors, contracting parties and consumers."  The Act creates a presumption that this happens when a company has more than a 40-percent market share. Being dominant is not forbidden; abusing a dominant position is.

This makes the Office's task difficult, and its decisions sometimes controversial.  A share in the relevant market is not necessarily the same as the market-share statistics that a company's marketing department or sales force may cite. Rather, in a merger review, the Office should look at the existing and potential market, consider the market for any substitute products and geographic scope and then attempt to determine the foreseeable market trends and changes over the next few years. 

Enforcement

As one of its major enforcement weapons, the Office must grant its consent to proposed larger mergers of companies. "Larger" mergers mean, with a few exceptions, that the annual turnover of both companies exceeds EUR 50 (zł.190) million. In this case, one or both of the merging entities must file a pre-merger notification containing extensive information about their current activities and potential effects of the deal.

If a company does not file a required pre-merger notification or provide all necessary information, the Office may impose significant fines on the company and its management.  If the Office does not consent, the merger may not be finalized.  If the Office grants conditional consent to a merger, but the companies fail to take the steps requested by the Office, the Office may step in and divide the newly merged company.

I would like to thank Dorothy Hansberry-Bieguńska, a partner with Wardyński & Partners, in helping to prepare this article.

Judith Gliniecki is the managing partner of Rymar and Partners