Dr WOJCIECH SZYMCZAK Office of Competition and Consumer Protection Department of Market Analyses
Concentration control in Polish competition ii law The Act on competition and consumer protection of 16 Fb February 2007 (Chapter III: Concentrations of Enterprises, Articles 13 23) Obligatory reporting of aconcentration: 1) if it involves enterprises whose aggregate world wide turnover exceeds the equivalent of EUR 1 billion in the financial year preceding the year of notification or 2) whose aggregate turnover in the territory of Poland exceeds the equivalent of EUR 50 million in the financial year preceding the notification. 2009 06 16 2
Recent concentration control activity by the President of the OCCP 2005 329 39 consents, incl. 2 conditional consents 2006 266 consents, incl. 1 conditional consent, and 1 prohibition 2007 263 consents, incl. 2 conditional consents 2008 177 consents, incl. 2 conditional consents 2009 06 16 3
Major interventions by the President of the OCCP concerning concentration control in recent years April 2006 concentration of Cari Agri International / Jabłonna prohibition October 2006 concentration of PCC / Zakłady Azotowe in Tarnów and Kędzierzyn Koźle conditional consent June 2007 concentration of Carrefour / Ahold conditional consent June 2007 concentration of CRH Deutschland / E. Schwenk conditional consent June 2008 concentration of ITI (Multikino) / Silver Screen conditional consent September 2008 concentration of JMD (Biedronka) / Tangelman (Plus) conditional consent March 2009 concentration of Agros Nova / Kotlin conditional consent March 2009 concentration of Orzeł Biały/ Baterpol prohibition 2009 06 16 4
Importance of the retail and service markets for the economy and consumers Local dimension i of retailingand services Concentrations have direct impact on consumers Traditional forms of trading are pushed out of the market by more modern ones, mainly, by retail and service chains Significant impact on local communities, also because of the changes on the labour market Impact on other markets where suppliers of the retail chains operate Fast changes on the market and problems with determining relevant markets accurately 2009 06 16 5
Development of the retail market in Poland after 1989 Collapse of centralised forms of retailing functioning in centrally planned economy Explosion of entrepreneurship fast emergence of a great number of outlets operating on a small scale Growing interest in the Polish market from foreign invertors specialising in the retail market 2009 06 16 6
Growing concentration of modern forms of retailing in Poland d(1) 1990 s numerous retail chain operators with substantial potential il appear on the Polish market, such as 1991 Intermarche; 1994 Tesco, Metro (Real), Eldorado; 1995 Ahold (Hypernova), Leclerc, Netto, Rewe (Minimal), Tengelman (Plus); 1996 Auchan, Carrefour, Spar, Casino (Geant); 1997 JMD (Biedronka), Polomarket End of 1990 s/early 2000 s new brands are introduced (e.g. Albert, Carrefour Express, Lidl), expansion of the chain, strenghtening of market positions After 2000 the beginning of the concentration process, weaker players that did not accomplish their intended objectives withdrew from the market 2009 06 16 7
Growing concentration of modern forms of retailing in Poland (2) Major concentrations since 2000: 2000 Carrefour takes over 24 Globi stores 2001 Auchantakes over 11 Billa supermarkets 2002 Tesco takes over 13 HIT hypermarkets; Ahold takes over 5 Jumbo hypermarkets 2003 JMD takes over 16 Rema 1000 strores, Carrefour takes over 2 Hypernova stores 2005 Carrefour takes over furhter 11 Hypernova stores; Tesco takes over 9 Julius Meinl stores 2006 Real takes over 19 Geant hypermarkets, Tesco takes over the Leader Price chain, 2007 Carrefour takes over 183 Albert supermarkets and further 15 Hypernova hypermarkets 2008 JMD(Biedronka supermarket chain) takes over Plus Discount (Tengelman) 2009 06 16 8
Growing concentration of modern forms of retailing in Poland (3) In 2009, out of approx. 20 operators of large format stores that were in business in the 1990 s s, there remained 7 major players : Jeronimo Martins Distribution (Biedronka) approx. 22% Carrefour approx. 19% Tesco approx. 16% Metro (Real) approx. 15% Auchan approx. 12% Schwarz (Kaufland, Lidl) approx. 11% Leclerc approx. 5% and businesses operating under franchise agreements (incl. Intermarche, Lewiatan) 2009 06 16 9
Rise in the no. of super and hypermarkets in Poland din 2000 20072007 4000 3500 3000 2347 2716 3003 3506 2500 1602 2000 1500 Hipermarkety 1000 Supermarkety 500 0 99 338 2000 2004 2005 374 410 2006 396 2007 2009 06 16 10
The relevant market in the competition law Competition and Consumer Protection Act, Article 4(9) A product market the market of goods which, due to their purpose, price and nature, including quality, are considered as substitutes by their purchasers A geographic market the area on which competition conditions are similar due to the kind and nature of goods, barriers of entry, consumer preferences, considerable differences in prices and transport costs 2009 06 16 11
Relevant product market (1) Initially, the Polish competition authority used a wide definition of a product market market of daily consumer goods Since 2006, two markets have been distinguished market of traditional corner shops and market of modern forms of retailing, so called, HSD (hypermarket, supermarket, discount stores) While assessing a concentration, initally all outlets over 350 sq. m. are considered as belonging to the HSD market The above definition is consistent with the decisions by the European Commission (e.g. Comp/M.3905 Tesco/Carrefour Czech Republic & Slovakia; Comp/M.2161 Ahold/Superdiplo) and other member states, e.g. the UK 2009 06 16 12
Relevant product market(2) The reasons why the competition authority decided to distinguish HSD as a separate market: area range of products offered possibility to buy products from different groups under one roof larger choice of products, including own brands economic power of the operators resulting from owning a network of outlets across the country possibility to sell at lower prices strong negotiating position vis à vis suppliers (according to 2006 GFK Polonia survey, the price difference was 15%) possibility to offer sophisticated sale promotion solutions to consumers possiblity to exert strong impact by means of marketing kti tools logistic solutions that facilitate big shopping use of similar solutions in other EU countries 2009 06 16 13
Relevant product market (3) Discussion whether supermarkets and discount stores belong to the same market as hypermarkets (the Biedronka Plus concentration) The substitution chain effect Corner shops Discount stores and supermarkets Hypermarkets 2009 06 16 14
Relevant product market (4) The reasons why discount stores and supermarkets cannot be included in the same market as traditional corner shops: they definitely possess more features attributable to hypermarkets (except the area) limited possibilities of direct competition between HSD and corner stores different shopping habits of Poles as compared to other western countries and the consequent slight differences in the characteristics i of hypermarkets (located closer to town centres, organised transportation, etc.) specific role of supermarkets and discount stores outside large urban agglomerations one way competition hypothesis 2009 06 16 15
Relevant geographic market (1) Local markets determined as the area in the vicinity of given stores Two stage methodology for determining the relevant market stage 1 determination of the market as the area in the vicinity of an outlet where the outlet can be reached within a specific driving time (depending on the assumptions from 5 to 30 mins) stage 2 verification of stage 1 outcomes based on local conditions 2009 06 16 16
Relevant geographic market (2) As for retailing, the relevant market is the area where the outlet can easily be reached by customers (Comp/M.2161 Ahold/Superdiplo) The radius applied depends on the conditions of a given country or region in its latest decisions, the Polish competition authority applied a radius of 20 30 min driving time Due to the overlapping of different areas determined with the use of the methodology, in some locations, e.g. in urban agglomerations, the markets are expanded The determination of specific markets can also be influenced by: population density, area urbanisation, transport routes, location of facilities significant for the population, etc. 2009 06 16 17
Verification of the applied methodology for determining i the relevant market The evolution in determining relevant markets results from dynamic changes taking place on the market and in social life Comprehensive retail market research to verify the assumptions adopted analysis of the scope of businesses operation daily consumer goods, DIY, home appliances analysis of consumer preferences (outlet type, distanced to travel) 2009 06 16 18
wojciech.szymczak@uokik.gov.pl 2009 06 16 19