European Commission opens in-depth investigation into Kronospan Holdings/Pfleiderer Polska merger

The merging parties are competitors in the market of manufacturing wood-based panels that are used predominantly in furniture production. Pfleiderer – the target company – operates two production plants in Poland (Grajewo and Wieruszów). Kronospan companies own production plants in Szczecinek and Mielec. Other competitors in Poland operate single production plants and have different profiles and production capabilities.

Theories of harm

According to the press release, the Commission is particularly concerned about the risks of:

• non-coordinated effects of a twofold character:
  
  
  • due to the high market shares in particleboards, fibreboards, and components, the transaction may result in price increases to the detriment of construction and industry customers as well as end consumers;
    
    
  • potential input foreclosure in relation to particleboards, fibreboards, and components; and
    
    
• coordinated effects – the transaction could facilitate coordination between the remaining players.

Refusal of referral

Pursuant to Article 9 of the Merger Regulation, the Polish Competition Authority (“UOKiK”) requested that the Commission referred to it the assessment of the entirety of the proposed transaction. Previously, the Commission had been handling the case on its own, though “in close cooperation with the Polish competition authority”.

According to the press release, the Commission is investigating the transactions impact on markets in Poland and neighbouring regions. It should be noted that the relevant geographic markets in the industry were previously defined as the catchment areas around production plants. In Considering that a referral is admissible when the transaction has a purely domestic impact on a national market, the Commission had reason keep the case in Brussels.

Cartel in the background

The UOKiK’s desire to review the case was most likely motivated by its experience with antitrust enforcement in the sector. In 2012, the authority fined Kronopol sp. z o.o. (currently Swiss Krono sp. z o.o.) for vertical price-fixing (the infringement was confirmed by the courts). 

In addition, after a five-year investigation, in 2017 the UOKiK fined the Polish companies of Kronospan, Pfleiderer, and Swiss Krono for horizontal price-fixing and information exchange in breach of Article 101(1) TFEU and national competition laws. The cartel case is still pending before the Competition Court with the UOKiK defending its infringement decision after it was appealed by Kronospan and Pfleiderer.

For the Commission’s press release, please see here.

For more information, please contact Piotr Dynowski or Szymon Gołębiowski.