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Lawyers Mixed on Outcome of Polish Watchdogs Referral Request for Scripps-Discovery Merger

Antitrust sources are divided on whether the European Commission will grant the request of Poland’s Office of Competition and Consumer Protection (UOKiK) to review Discovery Communications’ planned takeover of Scripps Networks.

On January 4, the Polish antitrust regulator asked the EC for a referral of the case under article 9 of the EU merger regulations. Under article 9, referrals by the EC to a member state at that state’s request can be granted when a merger threatens to significantly affect competition within a member state area constituting distinct relevant market, or when a merger affects competition in a distinct member state market that does not represent a substantial part of the common market.

An EC spokesperson told CTFN: “We can confirm that we have received a referral request and are assessing it.”

A source close to the EC said that under EU rules, the watchdog has until February 6 to decide whether to clear the transaction with or without conditions (in which case the referral request would be rejected) or to open an in-depth investigation (in which case, the EC would not need to reply to the referral request at that stage).

A spokesperson for the Polish regulator said: “I can confirm that UOKiK has made a request for a referral of the Scripps/Discovery merger. Decision on the referral of this case will be made by the EC. Recently, we have made a request for a referral of the Pini Polonia case. So, it is a normal procedure. During the last ten years, the EC received 35 requests for referral from Member States.”

Last week, as anticipated by CTFN, Poland’s National Broadcasting Council (KRRiT) cancelled a PLN 1,479,000 (US$422,000) fine imposed in December on Scripps-owned broadcaster TVN for its coverage of anti-government protests outside the Polish parliament in December 2016. Poland, where Scripps owns TVN, TVN24, TVN Style, TTV, TVN Turbo, and TVN24 Biznes i Swiat, accounts for 13% of the company’s annual revenue.

VIEWS FROM BRUSSELS

A Brussels-based competition lawyer told CTFN: “In a normal setting, the commission could grant a referral if they believe that the member state which applied for it is the best placed to assess the transaction. However, in this case, unofficially, they would also take into account the country’s political situation.”

A former head of unit within the EC’s Directorate-General for Competition pointed to provision 21(4) of the EU merger regulations, which states that member states can also intervene to take appropriate measures to protect legitimate interests other than competition, including plurality of the media.

A third EU antitrust attorney pointed to the Ziggo-Liberty Global case, where the commission rejected the Dutch regulator’s request to review the merger, arguing that it was better placed to assess it.  This attorney told CTFN: “I am sure that the delicate political situation in Poland will be taken into account, but it will not be just because of that that they will reject the referral.”

A Brussels-based senior associate within an EU antitrust practice told CTFN: “A referral can be granted if the European Commission thinks that the national regulator is the best placed to assess the case. The Commission sees the case from a more pan-European point of view, whereas the national regulator sees it from a national point of view. And that may cause conflicts.”

He noted that the fact that Poland accounts for a significant portion of Scripps’ annual takeover is not a sufficient reason for the EC to grant the request, as the E-Plus-Telefonica case, where the German regulator’s referral request was denied, shows. The lawyer pointed out that DG COMP has nothing to do with the article 7 proceedings filed by the EC on December 20 against Poland for breach of EU law concerning the Law on the Ordinary Courts, and DG COMP’s decision on the referral will only be based on competition grounds.

VIEWS FROM POLAND

A Warsaw-based antitrust lawyer told CTFN that he was surprised to hear about the referral given that virtually all referrals in the past were driven by the merging companies. “To my knowledge for many, many years there have not been any referral requests from the Polish regulator”.,” he said.

The source said that the move could be driven by a new internal policy of the regulator and the current government, as part of the authority becoming more proactive in screening international transactions.

However, he pointed out that, should the EC grant the referral request, the transaction should be reviewed on its own merits and the Polish regulator could only block the combination if it significantly affects competition. “One should not assume that a referral would mean that the transaction will be blocked,” he pointed out.

The lawyer said that given that some information on the case was already submitted to the EC, it should not take long for the EU watchdog to decide on the referral. As he explained, if the transaction is not problematic, UOKiK can usually clear a deal in four to five weeks. However, in complex cases, the review can last five to six months.

According to JarosÅ‚aw SroczyÅ„ski, founding partner of Krakow-based regulatory law firm Markiewicz & SroczyÅ„ski, the Polish regulator’s official rationale for the referral was that the merger has a “substantive connection” to the Polish markets and produces effects that could be material in a member state.

However, he believes that the main reason was of a political nature, as the Polish government wants to exert more control on the media sector. He noted that the Polish competition authority is “very much dependent on the government,” as the president of the regulator can be appointed directly by the prime minister. “The president (of the competition authority) is at the mercy of the government for politically-motivated issues,” SroczyÅ„ski said.

Current UOKiK president Marek NiechciaÅ‚ was appointed in May 2016 by the ruling party. Therefore, the lawyer noted, his position can be easily taken away from him and, as a result, he will not be “very courageous” by taking a stance that goes against the government’s agenda.

SroczyÅ„ski, who has over 25 years’ experience in Polish and EU competition law, is skeptical that the EC would grant the referral in view of the political implications that this may have. “I would be a bit surprised that the European Commission would allow so easily the case to be taken over given that it is politically motivated,” he said, adding that a referral may lead to a review on grounds other than those related to competition law, which should be the only grounds for the assessment of the case.

“I cannot imagine any way in which TVN could be considered dominant in Poland. To me, that would be absolutely artificial,” he said.

Sroczyński said that some nationalist media might take this opportunity to push the government to block the merger, or that the government might just want to have a playground to test the market and see how similar cases could be dealt with in Poland.

Commenting on the foreign media ownership restrictions which the government is reportedly looking to introduce, the lawyer said: “I have been a competition lawyer for 30 years and I can remember two or three occasions when past governments have tried to push forward laws that would have limited private media ownership and cross-media ownership, but for the first time, this attempt has a direct foreign media inclination,” he said.

SroczyÅ„ski believes that the media reforms will be shelved “for a while,” given that the newly-appointed Prime Minister Mateusz Morawiecki has been trying to adopt a more flexible and conciliatory approach and re-establish ties with its European counterparts.

The lawyer said that, according to Polish media, the article 7 proceedings initiated by the EC against Poland will be suspended, and this u-turn has been portrayed as a personal success of the new prime minister.

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Valeria Camerino

Valeria Camerino

Valeria Camerino began reporting for CTFN in September 2015 and has covered various regulatory agencies such as the European Commission, CADE, the Competition Commission of South Africa, and others. Prior to joining CTFN, Valeria was a Senior Reporter at London-based TelecomFinance, where she wrote about telecom M&A, financing, and regulation across Southern Europe and Latin America, providing proprietary intelligence and analysis on the latest industry developments. Before that, she worked as Middle East correspondent at Mergermarket, where she covered corporate M&A. Valeria has held editorial positions for Dubai-based Climate Control Middle East, MEGAWHAT, and Security Advisor Middle East. She holds a B.A. in Languages and Public Relations from Leeds Beckett University and an M.A. in International Journalism from University of Central Lancashire.

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