Case T‑585/20

Polwax S.A.

v

European Commission

Judgment of the General Court (Third Chamber, Extended Composition), 14 June 2023

(Competition – Concentrations – Upstream market for slack wax – Downstream market for paraffin waxes – Decision declaring the concentration compatible with the internal market and the EEA Agreement – Absence of commitment to supply slack wax – Vertical effects – Foreclosure of the input market)

1. Judicial proceedings – Measures of inquiry – Subject matter – Proof of the accuracy of the factual claims made by a party in support of its pleas – Request for re-examination of the assessments contained within the contested decision – Request going beyond the subject matter of the measures of inquiry

   (Rules of Procedure of the General Court, Art. 91)

   (see paragraphs 33-35)

2. Concentrations between undertakings – Examination by the Commission – Definition of relevant market – Criteria – Substitutability of products – Information needed for an assessment – Questioning the definition of relevant market – Burden of proof – Obligation of the applicant to provide compelling indications of inadequate substitutability of the products in question.

   (Council Regulation (EC) No 139/2004, Art. 2; Commission Notice 97/C 372/03, paragraphs 15 to 20)

   (see paragraphs 43-46, 56-71)

3. Concentrations between undertakings – Assessment of the compatibility with the internal market – Creation or reinforcement of a dominant position significantly hindering effective competition on the internal market – Assessment of the horizontal effects of concentration

   (Council Regulation (EC) No 139/2004, Art. 2; Commission Notice 2004/C 31/03, paragraphs 22 and 58 to 60)

   (see paragraphs 78-84)

4. Concentrations between undertakings – Assessment of the compatibility with the internal market – Creation or reinforcement of a dominant position significantly hindering effective competition on the internal market – Assessment of the vertical effects of concentration – Foreclosure of the input market – Criteria for assessment – Ability to substantially foreclose access to inputs – Incentive to engage in foreclosure of the input market – Significant detrimental effect of foreclosure on downstream competition – Cumulative conditions

   (Council Regulation (EC) No 139/2004, Art. 2; Commission Notice 2008/C 265/07, paragraphs 31 and 32)

   (see paragraphs 88-108)

5. Action for annulment – Pleas in law – Infringement of essential procedural requirements – Lack of or inadequate statement of reasons – To be considered of the General Court’s own motion – Raised late by the applicant – Irrelevant

   (Arts. 263 and 296 TFEU)

   (see paragraph 113)

6. Acts of the institutions – Statement of reasons – Obligation – Scope – Commission decision declaring a concentration compatible with the internal market

   (Art. 296 TFEU; Council Regulation (EC) No 139/2004)

   (see paragraphs 114-121)

Résumé

Polski Koncern Naftowy Orlen S.A. (‘Orlen’) and Grupa Lotos S.A. (‘Lotos’) are two vertically integrated undertakings that are mainly active in the refining and marketing of fuel and related products in Poland. Orlen is also active in those sectors in Czechia, Lithuania and Germany.

On 3 July 2019, Orlen notified the Commission of a proposed concentration consisting of the acquisition of sole control of Lotos. Taking the view that the transaction raised serious doubts as to its compatibility with the internal market, the Commission decided to open an in-depth investigation. Upon the conclusion of that investigation, the concentration was declared compatible with the internal market and with the Agreement on the European Economic Area (EEA), subject to Orlen’s compliance with certain commitments. ( 1 )

The Polish company, Polwax SA, which produces and markets paraffin waxes and paraffin products, brought an action before the General Court for annulment of that decision. However, that action was dismissed by the Third Chamber, Extended Composition, of the General Court.

Findings of the General Court

As a preliminary point, the General Court rejects Polwax’s request that an expert’s report be ordered concerning the effects of the concentration on competition.

While it is true that the General Court may adopt a measure of inquiry at any stage in the proceedings, the fact remains that a request to that effect must be rejected where it goes beyond the subject matter of the measures of inquiry referred to in Article 91 of the Rules of Procedure of the General Court, which consists of allowing the accuracy of the factual claims made by a party in support of its pleas in law to be proved. However, given that the purpose of the expert’s report requested by Polwax was, in reality, to re-examine the assessments contained in the Commission’s decision as to the compatibility of the proposed concentration with Regulation No 139/2004, ( 2 ) the General Court would have exceeded its jurisdiction by adopting such a measure.

On the substance, Polwax claimed in particular that the Commission had relied on an incorrect definition of the relevant markets for the purposes of its assessment of the concentration under Article 2 of Regulation No 139/2004.

As regards the relevant markets, the Commission found that Lotos and Orlen both produce slack wax, which is primarily used as a raw material for paraffin waxes. Having regard to the fact that Lotos sells slack wax while Orlen uses it for its own production of paraffin waxes, the Commission held that the product markets affected by the concentration comprised an upstream market consisting of the supply of slack wax in Poland and a downstream market consisting of the supply of paraffin waxes in the EEA.

In that regard, Polwax appeared to criticise the Commission for not having taken account of the existence of three different markets for ‘light-grade’ slack wax, ‘medium-grade’ slack wax and ‘heavy-grade’ slack wax. Nevertheless, such an objection must, in any event, be dismissed as unfounded.

In the light of the method set out in the Commission Notice on the definition of relevant market, ( 3 ) it was for Polwax to adduce, in support of such an objection, compelling indications showing that the various types of slack wax were not sufficiently substitutable on the demand and supply side for them to belong to the same market. As regards the interchangeability of the different types of slack wax from the point of view of demand, Polwax merely put forward simple assertions. What is more, the question of possible supply side substitutability had not even been addressed by Polwax.

In support of its action, Polwax also claimed that the Commission had erred in its assessment of the effects of the concentration on the relevant markets under Article 2(1)(b) of Council Regulation (EC) No 139/2004. In that regard, Polwax challenged, first, the failure to examine the horizontal effects of the concentration on the slack wax market and, second, the merits of the examination of the vertical effects of the concentration on the paraffin waxes market.

First, the General Court rejects the objection alleging failure to examine the horizontal effects of the concentration on the slack wax market. After noting that horizontal mergers may significantly impede effective competition on the market as a result of the creation or strengthening of a dominant position, the General Court emphasises that the concentration at issue could not have resulted in a reduction in supply on the slack wax market, since it is not disputed that Orlen did not market the slack wax that it produced. From that point of view, the concentration could not lead to the elimination of an important competitive constraint on that market or the creation of increased market power for the undertakings present on that market, nor would it be likely to facilitate coordination on the market.

Moreover, the Commission cannot be criticised for having failed to examine the possibility that the concentration would produce anti-competitive effects as a result of the combination of an undertaking already present on the market, Lotos, and a potential competitor, Orlen. In order for the concentration to have significant horizontal effects, it would have been necessary for the possibility of Orlen entering the slack wax market on the supply side to constitute, prior to that concentration, a significant constraint on the suppliers currently present on that market. However, the existence of such a constraint was excluded since Orlen was a purchaser on that market.

Secondly, the General Court also rejects the complaint alleging an incorrect examination of the vertical effects of the concentration on the paraffin waxes market.

In that regard, Polwax disputed in particular the Commission’s finding that, following the acquisition of Lotos, Orlen would not have the ability to pursue a strategy of foreclosing access to slack wax on the paraffin waxes market.

On that point, the General Court notes that, when assessing the likelihood of an anti-competitive input market foreclosure scenario, the Commission examines, first, whether the merged entity would, post-merger, have the ability to significantly foreclose access to inputs; second, whether it would have the incentive to do so; and, third, whether a market foreclosure strategy would have a significant negative impact on downstream competition. As those three conditions are cumulative, the absence of any one of them is sufficient to rule out the risk of input foreclosure.

More specifically, as regards the first condition, the Commission concluded that Orlen has no ability to foreclose access to slack wax, since, post-merger, more than 60 to 70% of the market would remain available as a source of supply of slack wax.

In that regard, the General Court finds that the Commission was correct to include slack wax imported into Poland in its definition of the slack wax market. Consequently, the Commission was also correct to find that a substantial proportion of the supply of slack wax on the market would be unaffected by the concentration. The existence of imports of slack wax into Poland also made it unlikely that, post-merger, Orlen would have the ability to foreclose access to the slack wax market. In any event, Polwax remained able to switch to alternative sources of supply, without Orlen being able to have a negative influence on the overall availability of inputs to the downstream market in terms of price or quality.

On that basis, the Commission was right to find that the first of the conditions to be cumulatively met in order for input market foreclosure to be present was not satisfied in the case at hand.

Since the other objections raised by Polwax have also proven to be unfounded, the General Court dismisses the action in its entirety.

( 1 ) Commission Decision of 14 July 2020 (case M.9014), adopted on the basis of Article 8(2) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1).

( 2 ) Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1).

( 3 ) Commission Notice on the definition of relevant market for the purposes of [EU] competition law (OJ 1997 C 372, p. 5).