On 16 March 2022, the President of the Office of Competition and Consumer Protection (UOKiK) cleared the merger between our client, PKN ORLEN S.A., and Polskie Górnictwo Naftowe i Gazownictwo S.A. The decision contains a commitment requiring the companies to spin off a natural gas storage facilities operator. This is yet another success of our Competition Law Team led by Prof. Maciej Mataczyński, who has represented PKN ORLEN S.A. both before the European Commission and the Polish anti-monopoly authority. Congratulations!
‘This is a landmark transaction, not only because of the leading position that both companies enjoy in the Polish market, but also their high relevance to the Polish energy sector in the context of energy transition,’ explains Prof. Maciej Mataczyński, Managing Partner at our Firm and Head of our Merger Department. ‘Once again, we were able to leverage the unique expertise of our SMM Legal team to successfully support our Client’s strategic project.’
Competition Law Team
Our expert team has worked on the project since 2020, playing a leading role among legal and economic advisors working for both parties.
The work of specialists involved in the case was directly managed by Miłosz Malaga, PhD, our expert lawyer engaged in our earlier concentration projects. To bring the case to successful conclusion, our lawyers completed a number of tasks:
- drafted a request to the European Commission to refer the case to the UOKiK President,
- supported PKN ORLEN S.A. in dealings with the European Commission,
- prepared a transaction notification to the UOKiK President,
- supported the client during the proceedings before the UOKiK, drafting detailed responses to the UOKiK President’s inquiries,
- during the procedure before the anti-monopoly authority, we developed proposals of remedies to address any issues regarding state energy security and the security of gas supply, without putting at risk client’s interests or competition in the market as such.
Our specialist lawyers, Anna Mathews, Dagmara Dragan and Wojciech Rzepiński contributed their unique knowledge and competence in the field of energy law, competition law and gas market-specific regulations. On top of that, our competition law expert, Piotr Andrzejewski, provided his expertise in this field. And finally, we should also mention Julia Pampuchowicz, yet another lawyer intensively working on the project.
Concentration approval outline
We started working on the case in 2020. The first pivotal moment was the announcement of the letter of intent between the State Treasury and PKN ORLEN S.A. on consolidation with PGNiG S.A.
Given the strategic relevance of the transaction to the Polish gas market, our SMM Legal team, managed by Prof. Maciej Mataczyński, advised our client on drafting the transaction notification to the European Commission. In parallel, on 19 February 2021, the Commission was requested to refer the case to the UOKiK President.
The Commission was persuaded by the arguments presented in the request and within one month, on 25 March 2021, it issued a decision referring the case to the President of UOKiK in Poland for examination.
‘It was a momentous success, as the Commission’s earlier practice had been to refer only minor cases to national anti-monopoly authorities,’ explains Miłosz Malaga.
The next step involved providing PKN ORLEN with assistance on its concentration notification submission to UOKiK. The anti-monopoly procedure was initiated by the authority in May 2021.
‘The dimension of both businesses, their position in the Polish gas market, the density of mutual vertical relationships made it not only the biggest, but also the complex concentration to be ever examined by the Polish Office of Competition and Consumer Protection’, explains Prof. Maciej Mataczyński.
‘To correctly determine the impact of the planned transaction on competition, the anti-monopoly authority not only examined the argumentation presented in the notification, but also launched an extensive research of the market to be affected by the merger,’ adds Miłosz Malaga.
The degree of difficulty that this process entailed was reflected in the extension of the deadline for the completion of the procedure (transition to the second phase), ordered by the UOKiK President on 24 May 2021.
Throughout this period, our lawyers provided our Client with full support in communications with the authority. Participants of the market research carried out by the UOKiK President raised their doubts as to the impact of the merger on the Polish gas market, especially as the merged company would both own and operate natural gas storage facilities.
To address these concerns, participants of the procedure proposed relevant commitments. Our SMM Legal team work on the development of this proposal.
The suggested solution involves a divestment from Gas Storage Poland, a company that will become independent of the merged business but will continue to operate gas storage facilities. The storage facilities themselves, however, will still be owned by PGNiG. The buyer of Gas Storage Poland will need to be approved by the UOKiK President as well. The divestment will take place within 12 months from the merger of PKN ORLEN and PGNiG.
‘The proposed solution provides a measured response appropriately balancing the expectations of the market participants and the UOKiK President on the one side and the perspective of PKN ORLEN S.A. and PGNiG S.A. on the other, ensuring security in terms of gas supply and availability in Poland’, concludes Prof. Maciej Mataczyński.
In its decision, the UOKiK President concluded that the commitments proposed by the participants appropriately address the concerns raised during the procedure and ensure that the transaction would not affect any of the relevant markets in a negative way. UOKiK President’s concentration approval is thus conditional. Now the parties will work on the merger itself. Once the transaction goes through, the parties will have 12 months to implement the remedy involving the divestment from Gas Storage Poland.