On 14 July 2020, the European Commission cleared the merger between PKN Orlen, the largest oil refiner in Poland, with its smaller counterpart Lotos, to create an integrated oil and gas supplier with a market capitalization of around $14bn. The approval is conditional on a range of commitments including divesting a 30% stake in Lotos’s refinery in Gdansk, divestment and contractual opening of much of the country’s fuel distribution infrastructure, and divestment of retail stations.
Compass Lexecon advised PKN Orlen throughout the process, from pre-notification over two years ago, and through Phase I and Phase II assessments, including participating in the Phase II Hearing. Our economic analysis focused on demonstrating the role of imports in constraining domestic suppliers in wholesale fuels, as well as detailed area-by-area analysis of local competitive effects in retail: applying multiple rules to geocoded data assessing competitive effects using overlaps, market shares, monitoring data and other criteria, then optimizing to find the minimum divestment required to satisfy the Commission that all local competition concerns had been solved. We also supported the client and the four law firms advising them in all quantitative submissions and responses to the Commission, across the many products supplied by the merging parties in Poland and neighboring countries, using techniques including bidding data analysis, price correlation analysis, and critical loss analysis.
The Compass Lexecon team was led by John Davies, with Martina Caldana as project manager. The core team was Marta Adembri, Verdi Choo and Alessia Paulicelli, along with many others from Compass Lexecon’s London, Paris and Brussels offices who worked on the case over two years of intensive work. PKN Orlen’s legal advisors were Euclid Law, Geradin Partners, Gide Loyrette Nouel and SMM Legal.