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An unprecedented ruling by Poland’s competition authority concerning acquisitions by two regional newspapers has roiled the M&A scene, prompting a haze of confusion over when buyers need to notify regulators on asset sales. The case, in which the regulator fined the newspapers for failing to notify it, illustrates one of the many pitfalls that arise in adapting European Union competition law locally among 25 member states. Poland is Central Europe’s most active M&A market, with an estimated $6.2 billion of deals in 2004. In this case, attorneys speculate the problem may have stemmed from a misinterpretation of the word “undertaking” when translating merger law into Polish. “All this has brought uncertainty into the advisers’ field,” said Alina Szarlak, an attorney at White & Case in Warsaw. “Up to now when one enterprise bought a couple of assets from another, we didn’t bother with notification. Now we may end up notifying everything unless we are very sure the threshold is not met.” At issue are two 2004 rulings by the Office for Competition and Consumer Protection that fined regional paper chains Polskapresse Sp. z o.o. and Oficyna Wydawnicza Glos Wielkopolski Sp. z o.o., or OWW, �50,000 ($64,000) each for failing to notify the office about the separate acquisitions of two newspapers that gave them dominant positions in southwestern and central Poland, respectively. For the first time in its brief history, the independent agency also ordered OWW, owned by Netherlands-based Centrex Press NV and the Polish unit of Germany’s Verlagsgruppe Passau GmbH, to sell parts of their businesses in those regions. The ruling was appealed by OWW, which argued that it had bought only parts of the assets of the seller, a unit of Norwegian conglomerate Orkla ASA, and therefore it was not required to notify the competition office. On March 22, an appeals court agreed in the OWW case that the transaction did not lead to a takeover, handing OWW a victory. But the court appeared to adopt the changed definition of asset sales in the original ruling. That’s what’s been worrying the lawyers. The rulings appear to change the definition of assets in determining how to calculate sales. Annual combined sales below �50 million worldwide or below �10 million in Poland are not subject to the notification rule. The rulings also affect when an asset acquisition is considered a concentration of companies, requiring merger control. “It has a huge impact because asset deals are quite frequent,” said Agnieszka Stefanowicz-Baranska of law firm Salans D. Oleszczuk Kancelaria Prawnicza Sp. k. in Warsaw. “Since the beginning of the year, I’ve had at least three asset deals where I had lengthy discussions with the client about what we are going to do.” To make matters worse, the text of neither decision has been published. The competition authority rarely releases its decisions in full, instead providing only one-paragraph summaries of its conclusions. Lawyers say they need to know the arguments that lead to its rulings. “We can only speculate on [the regulator's] line of argumentation and the court’s specific grounds for its rebuttal from the scarce statements made by officials to the press,” Stefanowicz-Baranska said. The competition regulator stands by its overturned decision. “The decision deals with the fact that [OWW] did not buy part of the enterprise, nor part of the property of the rival, but the whole enterprise in the understanding of the civil code,” agency spokesman Dariusz Lomowski said. “In the opinion of the office, the sophisticated structure of the transaction was an inefficient attempt to evade Polish law.” Somewhat peevishly, Lomowski said the agency is waiting for the appeals court to publish its ruling before it decides whether to appeal it to a higher court. “Ironically, the main lesson from the entire case is that it is absolutely essential that [the regulator] publishes full, nonconfidential versions of its decisions — and as soon as possible after they are adopted,” Stefanowicz-Baranska said Copyright �2005 TDD, LLC. All rights reserved.

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