Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE  
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel,   BELGIË  
 
Tel: +32 229 -91111. Fax: +32 229 -64301. E -mail: COMP -MERGER -REGISTRY@ec.europa.eu .  EUROPEAN COMMISSION  
Brussels,  31.03.2020  
C(2020 ) 2091 final  
PUBLIC VERSION  
 
To the notifying party   
Subject : Case M. 9626  – PKN  Orlen/Energa  
Commission decision pursuant to Article 6(1)(b) of Council Regulation 
No 139/20041 and Article 57 of the Agreement on the European Economic 
Area2 
Dear Sir or Madam,  
(1) On 26 February 2020, the Commission received the notification of a proposed 
concentration pursuant to Article 4 of the Merger Regulation  by which PKN Orlen 
S.A. (“Orlen”, Poland , also referred to as the “Notifying Party” ) acquires within the 
meaning of Article 3(1)(b) of the Merger Regulation control of the whole of Energa 
S.A. (“Energa”, Poland) . Orlen and Energa  are designated hereinafter as the 
“Parties” to the proposed transaction .3 The concentration is  accomplished by way of 
a public bid announced on 5 December 2019.  
                                                 
1  OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation ”). With effect from 1 December 2009,  the Treaty on the 
Functioning of the European Union ( “TFEU ”) has introduced certain changes, such as the replacement of  
“Community ” by “Union ” and “common market ” by “internal market ”. The terminology of the TFEU will 
be used throughout this decision.  
2  OJ L 1, 3.1.1994, p . 3 (the “EEA Agreement”).  
3  Publication in the Official Journal of the European Union No C72 , 5.3.2020 , p. 9. 
In the published version of this decision, 
some information has been omitted 
pursuant to Article 17(2) of Council 
Regulation (EC) No 139/2004 concerning 
non-disclosure of business secrets and 
other  confidential information. The 
omissions are shown thus […] . Where 
possible the information omitted has been 
replaced by ranges of figures or a general 
description.  
 
 
2 1. THE PARTIES  
(2) Orlen  is an oil and gas company active on the wholesale and retail markets for 
refined oil products in Poland, Austria, Czechia, Estonia, Latvi a, Lithuania, 
Germany and Slovakia. It is also active in the generation and wholesale supply of 
electricity in Poland.  
(3) Energa  is an energy company active in the generation and wholesale supply, 
distribution, and retail supply of electricity and other ener gy-related activities in 
Poland.  
(4) Energa  is currently majority -owned by the Polish State, which holds 51.52% of the 
share capital, representing 64.09% of the number of votes at the general meeting of 
shareholders. The Notifying Party claims that the Polish State Treasury has direct 
and sole cont rol over Energa.4 Even though  the State Treasury holds a stake of 
32,42% in Orlen ,5 for the reasons explained below, both Parties constitute different 
economic unit s having an independent power of decision . 
(5) The Notifying Party submits that Orlen and Energa  have separate management 
boards, which do not coordinate their commercial strategy and day -to-day business 
conduct.6 Moreover, the Parties are mainly active on different markets.  The 
Notifying Party further submits that there has not been, in the last 10 years, any one 
who has belonged to the management or supervisory boards of both Orlen and 
Energa at the same time.7 Finally, the Notifying Party submits that Orlen and Energa 
respect rules on access to sensitive information, and are bound by general provisi ons 
of law regarding the disclosure and protection of confidential information, including 
competition law.8  
(6) Moreover, both Parties are publicly listed companies and the Transaction is being 
carried out under Polish rules on public offerings. Orlen has lau nched a public 
takeover bid, to which Energa shareholders may choose to subscribe.  
(7) The Commission therefore considers that  Orlen and Energa form part of different 
economic units having an independent power of decision  and the Transaction lead s 
to a concen tration in the meaning of Article 3 of the Merger Regulation.  
2. THE OPERATION  AND THE CONCENTRATIO N 
(8) The concentration  involves the  acquisition of sole control (via an acquisition of 
majority of the shares representing the majority of the total number of vote s at the 
general meeting of shareholders, up to the maximum of all of the shares) of Energa 
directly by Orlen  (the “Transaction”) .  
                                                 
4  Form CO, paragraph 91.  
5  The State Treasury directly holds 27.52% of Orlen shares and a further 4.9% are indirectly held by the 
State Treasury through PERN Spółka Akcyjna ("PERN"),  which is 100% owned by the State Treasury . 
6  Form CO, paragraphs 83 -84. 
7  Form CO, paragraphs 85 -87. 
8  Form CO, paragraphs 88 -90. 
 
 
3 (9) On 5 December 2019, Orlen made a tender offer for all issued shares in Energa, 
under Polish rules on public take overs.  The N otifying Party expects that the State 
Treasury, which is the majority shareholder in Energa , will subscribe for the sale of 
its shares under the tender offer, along with several  minority shareholders.  Orlen 
will therefore acquire sole control of Energa  regardless of the volume of 
subscriptions for shares made by the other shareholders of Energa pursuant to the 
tender offer. After the clearance of the tender offer Orlen will own shares 
representing at least 66% of the total number of votes at the general  meeting of 
shareholders of Energa.  
(10) Therefore, the Transaction constitutes a concentration pursuant to Article 3(1)(b) of 
the Merger Regulation.  
3. EU DIMENSION  
(11) The undertakings concerned have a combined aggregate world -wide turnover of 
more than EUR 5 000 m illion9. Each of them has a n EU-wide turnover in excess of 
EUR 250 million, but they do not achieve more than two -thirds of their aggregate 
EU-wide turnover within one and the same Member State. The notified operation 
therefore has an EU dimension.   
4. MARKET  DEFINITION  
(12) The Transaction would give rise to a  horizontally  affected market in balancing and 
ancillary services in Poland.  
(13) The Transaction would also give rise to a number of vertically affected markets 
between:   
(a) at the upstream level, a number of input s for which Orlen* has market shares 
in excess of 30%: (i) the wholesale supply of heavy fuel oil (“ HFO ”) for 
industrial processes in Poland ( [80-90]%), (ii) the wholesale supply of light 
heating oil (“ LHO ”) in Poland ( [70-80]%), and (iii) the supply of in dustrial 
lubricants in Poland ( [40-50]%); and  
(b) at the downstream level (i) the generation and wholesale supply of electricity 
in Poland (on which the Parties have a combined [5-10]% market share) and 
(ii) the generation, transmission, distribution and supp ly of heat (on which 
such  a district heating network constitutes a natural monopoly).   
4.1. Generation and wholesale supply of electricity  
(14) In previous decisions, the Commission has considered that electricity generation and 
wholesale supply constitutes a distinct product market from transmission and 
distribution and retail supply of electricity.10 
                                                 
9  Turnover calculated in accordance with Article 5 of the Merger Regulation . 
*  Should read “Orlen (combined with Grupa Lotos) ”. 
10  M.6984 – EPH/Stredoslovenska ; M.5978 – GDF Suez/International Power . 
 
 
4 (15) In one decision, the Commission considered a possible segmentation of the 
generation and wholesale supply market based on off -peak, peak and super -peak 
transactions, but ultimately left the precise market definition open.11 In one decision 
concerning the Polish market, the Commission judged such a distinction not to be 
relevant to the Polish market, on the basis that available capacity during peak and 
off-peak hours was similar.12 
(16) The Notifying Party  does not contest the above market definitions.  
(17) Therefore,  the Commission considers  the relevant product market to be generation 
and wholesale supply of electricity.  
(18) The Commission has previously considered the m arket for generation and wholesale 
supply of electricity to be national in scope.13 The Polish Competition Authority  has 
also concluded in its decisions that the market for generation and wholesale supply  
of electricity  is national in scope in Poland .14 
(19) The Notifying Party  does not contest the above market definitions.   
(20) The Commission therefore considers the relevant geographic market for generation 
and wholesale supply of electricity to be  national in scope . 
4.2. Balancing and ancillary services  
(21) Balancing and an cillary services can be defined as the services consisting in 
maintaining the voltage in the grid within a very narrow bandwidth.15 Transmission 
System Operators (“ TSO s”) purchase electricity, on a  balancing exchange or 
bilaterally, in order to cover deviat ions between production and consumption withi n 
their control areas.  In previous decisions, the Commission has treated balancing and 
ancillary services as a separate product market from that for the generation and 
wholesale supply of electricity.16 
(22) The Commi ssion has identified different categories of balancing and ancillary 
services, namely primary (frequency containment reserve), secondary (automatic 
frequency restoration reserve) and tertiary (manual frequency restoration reserve, 
fast active disturbance r eserve and peak load reserve), on the basis of the order of 
activation and the magnitude of frequency deviation. The Commission has however 
left open whether  the market for  these different categories of balancing and ancillary 
services could correspond to  distinct product markets.   
(23) The approach of the Polish Competition Authority has also been to define balancing 
and ancillary services as a distinct product market , which it examined as one overall 
market, while mentioning that a further distinction could b e drawn between 
                                                 
11  M.5467 – RWE/Essent . 
12  M.5979 – KGHM/Tauron Wytwarzanie , paragraphs 19 -20. 
13  M.5467 – RWE/ESSENT; M.5978 – GDF Suez/International Power.  
14  UOKiK decision of 6 September 2018 in case DKK -159/2018 – PGE/Polenergia , p. 7.  
15  M.7927, EPH/Enel/SE , paras. 24 -27. 
16  M.8660 Fortum/Uniper  ; M.5979 KGHM/Tauron Wytwarzanie  ; M.5827 - Gaz de France/Suez . 
 
 
5 operational reserve, primary and secondary regulation as well as automatic power 
and voltage regulation . 17 
(24) The Notifying Party  does not contest the above market definitions  though it has also 
provide d separate market shares for  balancing and for ancillary services .18 The 
Notifying Party was unable to provide market shares for further sub -segments of 
ancillary services on which the Parties’ activities overlap, namely operational 
reserve, p rimary and secondary regulation, and automatic power and voltage 
regulation .19 
(25) For the purposes of the present decision,  the precise product market definition can be 
left open as the Transaction does not  lead to serious doubts as to its compatibility 
with the internal market under any plausible market definit ion. 
(26) In previous decisions, the Commission has considered that the market for balancing 
and ancillary services is at most national in scope. B alancing and ancillary services 
can be provided only by the entities which are connected to the national power 
system, and can only be provided  to PSE, the sole TSO in Poland.  
(27) The Notifying Party  does not contest the above market definitions.   
(28) The Commission considers the relevant geographic market for the provision of 
balancing and ancillary services  to be national in scope . 
4.3. Generation, transmission, distribution and supply of heat on a district heating 
network  
(29) In previous decisions, t he Commission has concluded that district heating constitutes 
a separate product market, which includes the distribution of thermal en ergy in the 
form of steam and/or hot water from central or decentralised sources of production 
(heating plants) through a network to multiple buildings or sites for use of space or 
process heating.20 
(30) The Notifying Party  does not contest the above market def initions.   
(31) Therefore,  the Commission considers the relevant product market to be generation, 
transmission, distribution and supply of heat on a district heating network . 
(32) In previous decisions, the Commission has considered the geographic scope of the 
district heating market to be limited to the specific district heating network to which 
                                                 
17  Decision of 22 December 2006, (DOK -163/2006) PGE and others , decision of 13 January 2011 (DKK -
1/2011), PGE/ENERGA ; decision of 6 September 2018 (DKK -159/2018), PGE/Polenergia . 
18  The Parties estimate that their combined market shares in the possible markets for balancing services and 
ancillary services would be [20-30]% and [10-20]%, respectively. In the market comprising both 
balancing and ancillary services their combined market share would be [20-30]% according to the Parties 
and below  20% according to the TSO.  
19  The Notifying Party submits that it cannot provide reliable market share data relating to these possible 
sub-segments. It claims that in any event, the P arties’ shares in these markets do not exceed their share in 
the overall balancing and ancillary services market. The TSO submitted that the Parties' combined market 
shares in the possible sub -segments for primary and secondary regulation would be lower than 20%, and 
that these shares are representative of the Parties’ competit ive position on the ancillary services market.  
20  M.7745 – Fortum/Lietuvos Energija  ; M.4238 – E.ON/Prazka Plynarenska.  
 
 
6 the plant is linked, as different networks usually cover different geographical areas 
and are not connected to each other.21 
(33) The Notifying Party  does not contest the above ma rket definitions.   
(34) The Commission therefore considers the relevant g eographic market for generation, 
transmission, distribution and supply of heat on a district heating network to be  
limited to  each specific district heating network . 
4.4. Wholesale supply of H FO for industrial processes  
(35) HFO is a fuel product which results from the process of refining crude oil. Each 
refinery produces a fixed proportion of different fuel products (e.g. diesel, gasoline, 
HFO, LHO) out of a given volume of crude oil. HFO is a fuel with particularly high 
viscosity and density. It is used to generate motion and/or heat and is mainly used to 
fuel ships and power generation facilities and as feedstock for further processi ng. 
Because HFO is considered  a by -product of crude oil refining it is relatively 
inexpensive  and sold at negative margin compared to crude oil.  
(36) In previous decisions, the Commission has defined relevant product markets for the 
wholesale supply of fuels as separate from the retail supply of fuels.22 The 
Commission has further divided the market for  the wholesale supply of fuels by fuel 
type, i.e. (i) supply of gasoline, (ii) supply of diesel, (iii) supply of liquefied 
petroleum gas (LPG), (iv) supply of LHO  and (v) supply of HFO due to their 
different characteristics, use and purchasers .23 
(37) With respe ct to HFO, a distinction should be made between on the one hand, HFO 
used as a motor fuel for large marine engines, and one the other hand, HFO used as 
an energy source/fuel for inland industrial processes (e.g. power plants, horticulture, 
industrial laund ry, etc.).24  
(38) The Commission has previously  distinguished two different levels of wholesale 
distribution of refined fuel products: (i) ex -refinery sales (primary level of 
distribution) and (ii) non -retail sales (seco ndary level of distribution).25 It has 
previously doubted whether this distinction would also apply to wholesale sales of 
fuel in Poland, but decided to leave the precise market definition open.26 
(39) The Notifying Party  does not contest the above market definitions , though it did not 
identi fy a possible distinction between HFO for marine engines and HFO for 
industrial uses. The Notifying Party does not believe that any non -retail sales of 
HFO take place in Poland, and has therefore only provided data for sales made on an 
ex-refinery basis.  The Notifying Party also believes that the demand for HFO in 
Poland is solely from industrial customers.  
                                                 
21  M.7745 – Fortum/Lietuvos Energija/JV ; M.4238 – E.ON/Prazka Plynarenska . 
22  M.4545 – Statoil/Hydro ; M.4348 – PKN Orlen/Mazeikiu.  
23  M.7318 – Rosneft/Morgan Stanley Global Oil Merchanting Unit ; M.6801 – Rosneft/TNK -BP; M.4348 – 
PKN Orlen/Mazeikiu ; M.6261 – North Sea Group/Argos Groep/JV . 
24  M.7603 – Statoil Fuel and Retail/Dansk Fuel , paragraphs 18 -19; M.5689 – Bominflot/SBI Holding , 
paragraphs 9 -13. 
25  M.7311 - MOL/Eni Ceska/Eni Romania/Eni Slovensko .  
26  M.4348 – PKN Orlen/Mazeikiu.  
 
 
7 (40) For the purposes of this decision,  the precise product market definition between  ex-
refinery and non -retail sales  can be left open , as the Transaction does not  lead to 
serious doubts as to its compatibility with the internal market under any plausible 
market definition .27  
(41) The Commission has previously concluded that a possible market for non -retail sales 
of HFO would be national in scope,28 and that a poss ible ex -refinery market for this 
product could be broader (Western Europe -wide, EU -wide or EEA -wide).29 
(42) The Notifying Party  does not contest the above market definitions.   
(43) For the purposes of this decision,  the precise geographic market definition  can be le ft 
open , as the Transaction does not  lead to serious doubts as to its compatibility with 
the internal market under any plausible market definition .30  
4.5. Wholesale supply of LHO  
(44) LHO is a low viscosity, liquid petroleum product which  can be used as fuel oil fo r 
furnaces or boilers in buildings is usually burned for the purpose of heating. As 
mentioned above in relation to HFO, the Commission has previously divided the 
market for the wholesale supply of fuels by fuel type, including LHO. It has also 
previously d istinguished between ex -refinery and non -retail sales of LHO.  
(45) On the non -retail level, previous decisions considered that LHO may consist of two 
segments: (i) heating oil light (“HOL”) and (ii) heating oil extra light (“HOEL”).31   
(46) The Notifying Party  does not contest the above market definitions.  Orlen only 
produces and sells HOEL, and it is not awar e of any sales of HOL in Poland . 
(47) For the purposes of this decision,  the precise market definition  can be left open , as 
the Transaction does not  lead to serious  doubts as to its compatibility with the 
internal market under any plausible market definition .32  
(48) The Commission has previously concluded that the possible geographic market for 
non-retail sales of fuel products would be national in scope while that for ex -refinery 
sales would be potentially EEA -wide.  
(49) The Notifying Party  does not contest the above market definitions.   
(50) For the purposes of this decision,  the precise  geographic market definition  can be left 
open , as the Transaction does not  lead to serious do ubts as to its compatibility with 
the internal market under any plausible market definition .33  
                                                 
27  Below, the Commission will examine the impact of the Transaction on the narrowest plausible market, 
that is the market for ex -refinery sales of HFO fo r industrial uses.  
28  M.4348 – PKN Orlen/Mazeikiu . 
29  M.7318 – Rosneft/Morgan Stanley Global Oil Merchanting Unit . 
30  Below, the Commission will examine the impact of the Transaction on the narrowest plausible market, i.e. 
on a national basis.  
31  M.1819 – Rheinbraun/OMG/Cokowi . 
32  Below, the Commission will examine the impact of the Transaction on the narrowest plausible market,  i.e. 
the market for the non-retail  supply of HOEL.  
 
 
8 4.6. Supply of industrial lubricants in Poland  
(51) In previous decisions, t he Commission has concluded that lubricants constitute a 
separate market different from base oi ls and chemical additives.34  
(52) The Commission has also defined separate markets for lubricants based on their 
application, i.e. (i) automotive lubricants, (ii) industrial lubricants, (iii) marine 
lubricants and (iv) aviation lubricants.35 The Parties are only active in industrial 
lubricants.  
(53) Previous decisions have  also considered a possible further distinction based on the 
base stock employed, i.e. between (i) mineral and (ii) synthetic lubricants , leaving 
the market definition open .36 
(54) The Notifying Party  submits that there is no need for the purposes of the present 
decision to distinguish between mineral and synthetic lubricants,  as, among other 
reasons, the Notifying Party submits that it only sells mineral lubricants.  
(55) For the purposes o f this decision,  the Commission considers that the precise product 
market definition  can be left open , as the Transaction does not  lead to serious doubts 
as to its compatibility with the internal market under any plausible market 
definition .37  
(56) The Commission has previously considered the geographic scope of the market for 
industrial lubricants to be at least national and possibly EEA -wide in scope, although 
it has ultimately left the exact geographic market definition open.38 
(57) The Notifying Party  does not contest the above market definitions.   
(58) For the purposes of this decision,  the Commission considers that the precise 
geographic market definition between EEA -wide or national  can be left open , as the 
Transaction does not  lead to serious doubts as to it s compatibility with the internal 
market under any plausible market definition .39 
5. COMPETITIVE ASSESSMEN T 
5.1. Horizontal effects - balancing and ancillary services  
(59) The Transaction gives rise to a horizontally affected market due to the Parties’ 
activities in the supply of balancing and ancillary services in Poland.  
                                                                                                                                                      
33  Below; the Commission will examine the impact of the Transaction on the narr owest plausible market, i.e. 
on a national basis.  
34  M.8261 – Lanxess/Chemtura . 
35  M.1383 – Exxon/Mobil.  
36  M.8261 – Lanxess/Chemtura ; M.5927 – BASF/Cognis . 
37  Below, the Commission will examine the impact of the Transaction on the narrowest plausible market,  i.e.  
the market for mineral industrial lubricants.  
38  M.8261 – Lanxess/Chemtura . 
39  Below,  the Commission will examine the impact of the Transaction on the narrowest plausible market, i.e. 
on a national basis.  
 
 
9 (60) In Poland, the rules governing: 1) the balancing mechanism, 2) the provision of 
ancillary services and 3) sales of energy for balancing purposes, are determined by 
the national TSO – Polskie Sieci Elektroenergetyczne (“PSE”) –  in the national 
transmission network code. This provides instructions for network participants 
specifying the conditions for the use, operation, operation and planning of network 
development as well as the principles of system balancing and management and 
system restrictions. 
(61) PSE is the sole buyer of balancing and ancillary services in Poland. In order to sell 
electricity on the wholesale or retail markets, the Parties need to conclude 
transmission contracts with PSE which entitle PSE to physical supply or collection 
of energy by the balancing mechanism participants. Ancillary services are contracted 
by PSE by means of public tenders, where providers are remunerated separately for 
activation of the services and for energy exchanged. 
(62) The Parties provide their combined market share on this market based on their 
volumes of sales of balancing services. The Parties estimate that they had a 
combined market share of [20-30 ]% (with an increment of [0-5]%) in 2018, the last 
year for which data was available.   
(63) Given the nature of ancillary services, the Parties are not able to provide reliable data 
in this regard. However, the Notifying Party submits that their shares in possible 
markets for these services would not exceed their shares on an overall balancing and 
ancillary services market. Moreover, the Notifying Party understands that following 
the introduction of a new capacity mechanism in Poland, ancillary services will be 
replaced by the new capacity mechanism. Based on contracted capacity under 
auctions for the new capacity mechanism, the Notifying Party estimates that the 
Parties’ combined shares will amount to 7.66% in 2021, 7.67% in 2022, a nd 11.44% 
in 2023.40 
(64) In response to the Commission’s market investigation, PSE expressed the view that 
an assessment of the Parties’ potential market power should be based on the 
technical capabilities of their centrally dispatched generating units, compared to the 
total technical capabilities of all centrally dispatched generating units in Poland. On 
this basis, PSE estimated the Parties’ combined market share to be significantly 
lower than 20%, regardless of the precise product market definition. PSE did not 
believe that the Transaction would have a significant impact on effective 
competition.  
(65) Transactions such as the present one, where the market share of the undertakings 
concerned does not exceed 25%, may generally be presumed to be compatible with 
the internal market. 41  The fact that the terms on which prices and volumes are set in 
this market are largely determined by a single buyer, PSE, in line with the national 
transmission network code, is a further indication that the Transaction is unlikely to 
lead to the creation of market power.  
                                                 
40  Therefore, even on a narrower plausible market definition for ancillary services, there would be no 
affected market. 
41  C f. Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of 
concentrations between undertakings , OJ [2004] C 31, pages 5 -18, pa ragraph 18.  
 
 
10 (66) Therefore, the Commission concludes that  the Transaction does not raise serious 
doubts as to its compatibility with the internal market in relation to the market for 
balancing and ancillary services in Poland  and its possible sub -segment s. 
5.2. Vertical effects  
(67) According to the Non -Horizontal Merger Guidelines, input foreclosure occurs when 
actual or potential rivals' access to supplies or markets is hampered, thereby reducing 
those companies' ability and/or incentive to compete. Such foreclos ure may 
discourage entry or expansion of rivals or encourage their exit.42  
(68) In addition, the Non -Horizontal Guidelines identify customer foreclosure as 
occurring where the merger is likely to foreclose upstream rivals by restricting their 
access to a suffic ient customer base.43 
(69) In order for foreclosure to be a concern, three conditions need to be met post -merger: 
(i) the merged entity needs to have the ability to foreclose its rivals; (ii) the merged 
entity needs to have the incentive to foreclose its rivals;  and (iii) the foreclosure 
strategy needs to have a negative impact on effective competition leading to an 
increase in downstream prices charged to consumers. In practice, these factors are 
often examined together since they are closely intertwined.  
(70) The Tr ansaction gives rise to  a vertical relationship between the Parties’ activities . 
At the downstream level, the Parties are active in the generation and wholesale 
supply of electricity in Poland (on which the Parties have a combined [5-10]% 
market share) and  the generation, transmission, distribution and supply of heat (on 
which district heating networks constitute a natural monopoly). At the upstream 
level, the Parties also provide a number of inputs for these downstream processes, 
and have market shares in excess of 30% on the following markets:  
(a) the wholesale supply of Heavy Fuel Oil (HFO) for industrial processes in 
Poland ( [80-90]% market share),44  
(b) the wholesale supply of Light Heating Oil (LHO) in Poland ( [70-80]% 
market share),45 and  
(c) the supply of indust rial lubricants in Poland ( below [40-50]% market 
share).46 
                                                 
42  See Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control 
of concentrations between undertakings , OJ [2008] C 265, pages 6 -25 (“Non-Horizontal Merger 
Guidelines ”), paragraphs 29 -30. 
43  See Non-Horizont al Merger Guidelines, paragraph  30. 
44  As mentioned in section 4.4 above, the Notifying Party only provides market shares for ex -refinery sales 
of HFO, as it does not make non -retail sales of HFO in Poland.  
45  As mentioned in section 4.5 above,  the Notifying Party only provides market shares for non -retail sales of 
HOEL.  
46  As mentioned in section 4. 6 above, the Notifying Party only provides market shares for sales of mineral 
lubricants, as it does not sell synthetic lubricants.  
 
 
11 5.2.1.  Vertical relationship regarding HFO as an input for the generation of electricity and 
heat 
The Notifying Party’s views  
(71) The Notifying Party submits that the Transaction does not raise any competition  
concerns, and that there is no risk of input and/or customer foreclosure.  
(72) Energa produces electricity at its power plants located in Poland, and it is also active 
in the market for generation of heat. The fuels used for both these activities are 
primarily  hard coal and hydropower (ca. 90% of fuel used) and Energa does not 
operate any HFO -fuelled power plant.  Energa does however use HFO for firing up 
the boilers utilised by Energa Elektrownie Ostrołęka in its coal -fired plant. This 
activity takes place appr oximately  […] times per year.  
(73) The Notifying Party explains that Energa could theoretically replace HFO as an 
input for its boilers in its Ostrołęka power plant. It would be technically possible to 
modify current installations to use  LHO as an input, inste ad of HFO. However, 
Energa assesses that such a modification is currently not financially reasonable, as it 
would require an investment of approximately EUR […]. There are currently no 
such ongoing investments  in Energa’s power plants . 
(74) The Notifying Party submits that Energa’s demand for HFO is too low for there to 
be a risk of customer foreclosure. Energa’s purchases of HFO account for 
approximately [0-5]% of Polish demand. Moreover, prior to the Transaction, Energa 
sourced [a great pro portion] of its HFO needs from Orlen. Therefore, the Transaction 
would not deprive competitors of a significant customer, and they would continue to 
have access to sufficient alternative customers.  
(75) The Notifying Party further argues that there is no risk o f input foreclosure. The 
Notifying Party argues that HFO is not an important input for the downstream 
electricity and heat generation activities. Energa’s limited reliance on HFO for these 
activities is illustrative. HFO accounts for approximately [0-5]% of the costs of 
Energa’s power and heat generation activities (and [0-5]% of energy generated). 
Energa’s consumption of HFO amounted to […] t in 2018, or [0-5]% of total Polish 
demand.  
The Commission’s assessment  
(76) No respondent to the market investigation e xpressed concerns that the Transaction 
could result in in input or customer foreclosure  on these markets . 
(77) There does not appear to be a risk of customer foreclosure. In particular, t he 
Commission considers that the merged entity would not have the ability to foreclose 
its competitors in the market for supply of HFO.  Energa buys only very limited 
volumes ( [0-5]% of total Polish demand). Moreover, Energa currently sources [a 
great proportion] of its HFO needs from Orlen , and so the Transaction will not 
change  the situation for competing suppliers of HFO . 
(78) Nor does there appear to be a risk of input foreclosure. Orlen would not have the 
ability to foreclose downstream competitors.  Input foreclosure may raise competition 
 
 
12 problems only if it concerns an important input for the downstream product.47 This is 
the case, for example, when the input concerned represents a significant cost factor 
relative to the price of the downstream product. Irrespective of its cost, an input may 
also be sufficiently important for other  reasons. For instance, the input may be a 
critical component without which the downstream product could not be 
manufactured or effectively sold on the market, or it may represent a significant 
source of product differentiation for the downstream product. It may also be that the 
cost of switching to alternative inputs is relatively high . 
(79) HFO is not an important  input for the downstream electricity and heat generation 
businesses.  It does not represent a significant cost factor in electricity and heat 
generat ion. Nor would the cost of switching away from it be so high as to make HFO 
a critical component : although Energa estimates the cost as being  currently  
unreasonable, competitors would be likely to take a different view were the price of 
HFO to increase suc h as to put them at a disadvantage in the downstream markets . 
Therefore, Orlen would not have the ability to foreclose competition on the 
downstream markets by withholding supplies of HFO. Moreover, post -transaction, 
other sources of HFO would remain avail able in the Polish market.  
(80) Any attempt at input foreclosure by the Parties would be unlikely to lead to 
increased prices in the downstream markets. Companies acting in the downstream 
markets  account for a small proportion of overall demand for HFO for indu strial 
uses and could continue to source from other providers. Moreover, HFO accounts for 
a very small proportion of costs in the downstream market, and can be replaced by 
other fuels following limited investments.  Therefore, any attempt at foreclosure by 
the Parties would not have an impact on competition.   
(81) Therefore, the Commission considers that the Transaction will not result in input or 
customer foreclosure with regards to supplies of HFO for industrial uses . 
5.2.2.  Vertical relationship regarding LHO as an i nput for the generation of electricity and 
heat 
The Notifying Party’s views  
(82) The Notifying Party submits that the Transaction does not raise any competition 
concerns, and that there is no risk of input and/or customer foreclosure.  
(83) The Notifying Party submit s that Energa’s demand for LHO is too low for there to 
be a risk of customer foreclosure. In 2018, Energa sourced […] t of LHO, accounting 
for approximately [0-5]% of total demand in Poland. Therefore, the Transaction 
would not deprive competitors of a sig nificant customer, and they would continue to 
have access to sufficient alternative customers.  
(84) The Notifying Party submits that there is no risk of input foreclosure, as LHO is not 
an important input for electricity and heat generation. Similarly to HFO, L HO is not 
regarded by Energa as a primary fuel used in generation of energy or heat. LHO is 
used by Energa in its power plants to start the boilers. After these boilers are 
launched and they have met their optimal conditions, LHO is no longer used, and the  
                                                 
47  Guidelines on  the assessment of non-horizontal mergers under the Council Regulation on the control of 
concentrations between undertakings , OJ [2008] C 265, pages 6 -25, paragraph 34.  
 
 
13 burners which feed LHO to these boilers are turned off. After the start -up only the 
primary fuel is put into the boiler.  
(85) With regard to heat generation, LHO is used only by back -up heat generating boilers 
in its Ostrołęka plant. These boilers are used by  Energa in case of downtime of all 
blocks used in Ostrołęka plant  
(86) Although it would be difficult for Energa to substitute LHO for other fuels, the 
Notifying Party submits that it is an insignificant input in Energa’s plants. LHO 
accounts for approximately [0-5]% of the costs of Energa’s power and heat 
generation activities. It accounts for approximately [0-5]% of heat generated by 
Energa.  
(87) The Notifying Party believes that Energa’s competitors in electricity and heating 
markets  could continue to source LHO from other sources, and that their combined 
demand  does not account for a significant part of LHO sales in Poland.  
The Commission’s assessment  
(88) No respondent to the market investigation expressed concerns that the Transaction 
could result in in input or cus tomer foreclosure  on these markets . 
(89) There does not appear to be a risk of customer foreclosure. In particular, the 
Commission considers that the merged entity would not have the ability to foreclose 
its competitors in the market for supply of LHO. Energa  buys only very limited 
volumes of LHO ([0-5]% of total Polish demand). Post Transaction, competing 
suppliers of LHO in Poland will still have access to sufficient alternative customers 
to remain competitive.  
(90) Nor does there appear to be a risk of input for eclosure. LHO is not an important  
input  (as defined at paragraph (78) above)  for the downstream electricity and heat 
generation businesses.  It does not represent a si gnificant cost factor in electricity and 
heat generation. Therefore, Orlen  would not have the ability to foreclose competition 
on the downstream markets by withholding supplies of LHO, or worsening the terms 
on which it is supplied. Moreover, post -transaction, other sources of LHO would 
remain available in the Polish market.  
(91) Any attempt at input foreclosure by the Parties would be unlikely to lead to 
increased prices in the downstream markets. Companies acting in the downstream 
markets account for a small proportion of overall demand for LHO and could 
continue to source from othe r providers. Moreover, LHO accounts for a very small 
proportion of costs in the downstream market.  Therefore, any attempt at foreclosure 
by the Parties would not have an impact on competition.  
(92) Therefore, the Commission considers that the Transaction will n ot result  in input or 
customer foreclosure with regards to supplies of LHO . 
  
 
 
14 5.2.3.  Vertical relationship regarding industrial lubricants as an input for the generation 
of electricity and heat  
The Notifying Party’s views  
(93) The Notifying Party submits that the Tran saction does not raise any competition 
concerns, and that there is no risk of input and/or customer foreclosure.  
(94) The Notifying Party submits that there is no risk of input foreclosure, as industrial 
lubricants are not an important input for electricity and  heat generation. Energa uses 
industrial lubricants only to a limited extent in its electricity and heat generation 
activities. Energa uses industrial lubricants for the same purposes as any other 
industrial or production plants. They are used for such pur poses as isolation, cooling, 
caulking, lubricating etc. Industrial lubricants serve to ensure the proper functioning 
of different types of installations or devices in accordance with their application and 
producers’ recommendations.  
(95) The Notifying Party cl aims that their role in activities related to generation of heat 
and generation of electricity is purely supportive.  Industrial lubricants account for 
approximately [0-5]% of the costs of Energa’s power and heat generation activities.  
(96) The Notifying Party submits that Energa’s demand for industrial lubricants is too 
low for there to be a risk of customer foreclosure. In 2018, Energa sourced […] t of 
industrial lubricants, accounting for approximately [0-5]% of total demand in 
Poland. Therefore, the Transact ion would not deprive competitors of a significant 
customer, and they would continue to have access to sufficient alternative customers.  
The Commission’s assessment  
(97) No respondent to the market investigation expressed concerns that the Transaction 
could res ult in in input or customer foreclosure  on these markets . 
(98) There does not appear to be a risk of customer foreclosure. In particular, the 
Commission considers that the merged entity would not have the ability to foreclose 
its competitors in the market for s upply of industrial lubricants . Energa buys only 
very limited volumes of industrial lubricants ( [0-5]% of total Polish demand). Post 
Transaction, competing suppliers of industrial lubricants in Poland will still have 
access to sufficient alternative custom ers to remain competitive.  
(99) Nor does there appear to be a risk of input foreclosure. Industrial lubricants are not 
an important  input  (as defined in paragraph (78) above) for the downstream 
electricity and heat generation businesses. It does not represent a significant cost 
factor in electricity and heat generation. Therefore, Orlen would not have the ability 
to foreclose competition on the downstream markets by withho lding supplies of 
industrial lubricants, or worsening the terms on which they are supplied. Moreover, 
post-transaction, other sources of industrial lubricants would remain available in the 
Polish market.  
(100)  Any attempt at input foreclosure by the Parties woul d be unlikely to lead to 
increased prices in the downstream markets. Companies acting in the downstream 
markets account for a small proportion of overall demand for industrial lubricants 
and could continue to source from other providers. Moreover, industri al lubricants 
 
 
15 account for a very small proportion of costs in the downstream market.  Therefore, 
any attempt at foreclosure by the Parties would not have an impact on competition .  
(101)  Therefore, the Commission considers that  regardless of the precise product market 
definition,  the Transaction will not result in input or customer foreclosure with 
regards to supplies of industrial lubricants.  
5.2.4.  Conclusion on vertical effects  
(102)  Based on the above, the Commission concludes  that the proposed transaction does 
not give r ise to serious doubts as to its compatibility with  the internal market  on 
these vertically affected markets .  
6. CONCLUSION  
(103)  For the above reasons, the European Commission has decided not to oppose the 
notified operation and to declare it compatible with the internal  market and with the 
EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the 
Merger Regulation and Article 57 of the EEA Agreement .  
For the Commission  
 
 
(Signed)  
Margrethe VESTAGER  
Executive Vice-President