On 25 October 2024, the Polish Competition Authority Urząd Ochrony Konkurencji i Konsumentów (UOKiK) updated its merger notification guidance[1] to provide long-awaited clarification on the local effects test and de facto exempted from the notification obligation extraterritorial JVs with no Polish operations and no vertical links with companies operating in Poland. 

Polish merger control thresholds have traditionally been notorious for catching a particularly large number of joint venture transactions (JVs), including extraterritorial JVs with no Polish nexus. JV transactions required UOKiK’s approval where the parties generated either combined worldwide turnover of more than EUR 1bn or combined Polish turnover of more than EUR 50mln, where any of the parties achieved a Polish turnover of more than EUR 10mln in either of the two years preceding the transaction[2]. 

Potential impact on the Polish market, or lack thereof, was not a relevant factor in determining whether the transaction had to be notified. As a result, the notification requirement extended to extraterritorial JVs with no operations in Poland, as long as any of the notifying parties (or their broader groups) generated sufficient sales in the Polish market. UOKiK’s decision database includes numerous examples of purely extraterritorial transactions, such as a JV created by Asian snack producers to pursue activities exclusively in the United States or a JV created to distribute products of German and Chinese automotive part producers in China and Vietnam. 

The new guidance exempts extraterritorial JVs with no Polish nexus from the notification obligation

UOKiK’s new guidance clarifies that in the case of JVs, for the local effects test to be met, regardless of the JV shareholders’ turnover, the JV must be active in the market that covers the territory of Poland or needs to have vertical links with companies active in Poland[3]. The guidance specifies that local effects will not be present where a JV operates on markets defined as local and not covering the territory of Poland, such as e.g. the generation and marketing of electricity in another Member State.[4]

What to expect from the recent update?

• Fewer notifications expected. While UOKiK does not specifically publish the number of notified extraterritorial JVs, a quick search through the case database suggests that at least several dozen have been notified to UOKiK per year, which likely amounts to over 10% of all mergers notified. The clarification is therefore a very welcome development as it will reduce the regulatory burden on groups involved in extraterritorial JV projects that also carry out unrelated activities in Poland.
• New challenge in the jurisdictional threshold assessment. Up until now, the jurisdictional thresholds set out in the Polish Competition and Consumer Protection Act were based on objective and relatively straightforward criteria to establish turnover values. Yet, to apply the new local effects test, counsel will be required to establish the relevant geographic market definition and assess whether it covers the territory of Poland. Given fines of up to 10% of the global turnover can be imposed by UOKiK for a failure to notify, the decision not to submit a notification will require a careful consideration of the market definition and a thorough risk assessment to be completed.
• Assessment of (potential) vertical links. The guidance is not very clear as to the scope of vertical links that are sufficient to meet the local effects test and, in particular, does not specify whether the notification requirement can be triggered by potential or even hypothetical links. Again, given the severity of fines for failing to notify, any analysis in this respect should be conducted very thoroughly.     
   

[1] The updated guidance is only available in Polish; see Wyjaśnienia w sprawie kryteriów I procedury zgłaszania zamiaru konkurencji Prezesowi UOKiK available at: https://uokik.gov.pl/Download/943. 

[2] In the year preceding the transaction.

[3] Guidelines, p. 5.

[4] Guidelines, p. 5.