MERGERS: AMO SR approved the merger of undertakings Východoslovenská energetika Holding, a.s., and ČEZ Slovensko, s.r.o.

On 23 November 2017 the Antimonopoly Office of the Slovak Republic, the Division of Concentrations, (hereafter "the Office") approved the merger grounded in the acquisition of indirect exclusive control of the undertaking Východoslovenská energetika Holding, a.s., Mlynská 31, 042 91 Košice (hereafter "VSEH") over part of the undertaking ČEZ Slovensko, s.r.o., Mlynské nivy 48, 821 09 Bratislava (hereafter "ČEZ").
 
The company VSEH is owned by the Slovak Republic and the RWE Group, while it is indirectly exclusively controlled by RWE AG. The RWE Group operates in Slovakia in the field of energy, mainly through the VSE Group, which includes the company VSEH, its parent and subsidiary companies (hereafter "the group of aquirer"). The group consists of electricity companies which in a limited scope are active on the electricity generation and wholesale supply market - VSE Ekoenergia, s.r.o., and Bioplyn Rozhanovce, s.r.o., in the field of electricity distribution - Východoslovenská distribučná, a. s., (hereafter "VSD"), in the supply of electricity - Východoslovenská energetika, a. s., (hereafter "VSE") and natural gas - innogy Slovensko, s.r.o. At the same time, VSEH provides shared services in human resources, consulting, financial services, IT services and so on for its subsidiary companies.
 
The acquired part of the undertaking ČEZ that is called "Domácnosti" (hereafter "ČEZ Domácnosti") exercises exclusively activity in the retail supply of electricity and gas to households in Slovakia.
 
In relation to the competitive assessment of the merger, the Office found that there comes to horizontal overlap between the activities of the merging parties and their economic groups as well as to non-horizontal interconnection. Considering the activities of the merging parties, the Office focused mainly on the assessment of

 
The Office separately assessed the field of electricity and of gas supply, while in the case of this merger it was unnecessary to focus more closely on conglomerate effects.
 
The Office assessed vertical consequences of the merger in the above-mentioned contexts, namely from the view of possible restriction of access to customers and restriction of access to inputs.  It did not find the merger´s negative impacts resulting from these vertical relationships.
  
In relation to assessing the horizontal overlap in the field of gas supply to households in the Slovak Republic, the Office found that regarding the increase of the VSE Group's shareholding resulting from the acquisition of ČEZ Domácnosti and also regarding the status and character of competitors in this field, the group of aquirer will be further exposed to competition in the relevant market.
 
With regard to horizontal overlap in the field of electricity supply to households, the Office assessed two alternatives. It considered the effects of merger in the case of defining spatial relevant market as the entire territory of the Slovak Republic and also in the case of its local defining by the areas of "traditional" operating of individual energy companies. Within this, it focused mainly on the region of Eastern Slovakia, i. e. the area of "traditional" activity of the group of aquirer (hereafter "Eastern Slovakia"). In the case of defining national market, similar assumptions are applied as in the case of gas supplies. With regard to the local alternative of market, there is the group of acquirer, through VSE, that is clearly the most significant player in the area of its "traditional" area. On the other hand, the share of ČEZ Domácnosti in Eastern Slovakia is minimal and the Office also took into consideration the ratio between the annual loss of VSE customers and the degree of growth rate due to the acquisition of ČEZ Domácnosti. It also took into consideration the facts that pointed to other competitors than ČEZ Domácnosti, to which the customers in this region were comming and who were considered for being strategic competitors. For these reasons, the Office came to a conclusion that the horizontal overlap would not result in reducing effective competition in any of the spatial alternatives of the market, with the geographical definition of the market not having to be closed.
 
After assessing the documentation and information submitted, the Office came to conclusion that the merger assessed would not significantly impede effective competition on relevant markets, particularly as a result of the creation or strengthening of dominant position.
 
The decision came into force on 23 November 2017.