The Member of the Consortium Two One, Penta Investments: The way how the AMO came to a decision elicits concerns whether the Office remains a politically independent institution in the future

The private equity group Penta is not surprised by a negative decision by the Anti-Monopoly Office (the "AMO"). The private equity group Penta considers this decision to be another step of the series of steps taken by public institutions, the aim of which is to reverse fulfillment of a valid contract and avoid a privatization process.

"Not the decision itself, but the way how the AMO has reached the decision is a bad news for the development of entrepreneurial environment and for investors. It is a precedent eliciting concerns whether the Anti-Monopoly Office remains politically independent," said Jozef Oravkin, partner of the private equity group Penta.

"The AMO was not able to adopt the decision during five months. Now it made a decision within several days; moreover, the decision had been made in the manner that the National Property Fund (the NPF) and the Ministry of Transport, Posts, and Telecommunications (the MTPT) managed the deadline of 15 September to withdraw from the valid contract. The concordance of dates is indicative of a potential coordination of the Ministry and the AMO, which fact also elicits doubts about political independency of the Office. The AMO made a decision even despite the fact that we had been notifying the Office of new proofs and information resources, which had not been available before and which the Office had been obligated to investigate in details," added Mr. Oravkin.

From the aspect of content quality, Penta considers the AMO’s decision to be an example of dogmatism and opinion inflexibility. The decision does not reflect recent trends in consideration of concentrations in Europe, where the final effect on a consumer is being considered decisive.

"In cooperation with the worldwide renowned advisor in the field of competitive effects of concentrations, NERA Economic Consulting, we have unambiguously proved such the final effect. Although the Slovak law on protection of economic competition has not been fully adapted to those trends yet, we are convinced that the AMO could have decided in our favor fully in accordance with the currently applicable legal framework," said Marek Ondrejka, investment director of Penta Investments.

Penta will file an appeal against the trial level decision, thus only a final verdict by the AMO Council may become valid and effective.

"We are calling upon the NPF not to withdraw from the valid contract until the final decision by the AMO Council. At the same time, we are calling upon the Government of the SR not to impose pressure upon the NPF in this regard. We do not demand anything more than that the Government in relation to us respects the same what it did in case of the Košice airport, when the MTPT waited for the valid and effective day of the decision," said Jozef Oravkin.

Penta has identified at least 15 mistakes in procedures and processes taken by the AMO, of which the following are the most serious:

1. The Office has not considered relevant data doubting its allegation about the existence of effective competition between the Bratislava and Vienna airports at present.*
In its decision, the AMO points out the fact that there is a big part of Austrian passengers utilizing services of the BTS airport, i.e., a part of the Austrian passengers equally considers both airports (VIE and BTS) in selecting a departure. The AMO came to a conclusion that a portion of the Austrian passengers represents 20% of all passengers flying from the BTS airport. The Office followed only responses of a questionnaire addressed to air companies.
The AMO did neither analyze nor consider the data that would disprove this allegation and that are probably contained in a study prepared by Symbios. Even regardless of the fact that the material provided by the Bratislava airport to the AMO upon our request indicates that the portion of the Austrian passengers at BTS represents only 5%. On Friday, 8 September, we alerted the AMO to request the study prepared by Symbios. Without familiarizing with the study, the Office stated that the study would not change its opinion. This fact only confirms that the AMO subordinated the issuance of its decision to the deadlines of the NPF and the MTPT for termination of the valid contract.

2. The AMO acted in conflict with the main purpose of its acting in economy being predominantly acting in the manner to support a positive impact of a competition in the market on a final customer. Not a competition of airports but a competition of air companies is essential for a passenger. If the AMO wishes to protect interests of air companies and not passengers, it has reached it just by this decision. Unambiguous and provably positive effects on customers (passengers) are appearing in case of concentration of BTS and VIE, particularly, due to an increase in competition among air companies. A fast railway connection between the center of the city of Vienna and BTS would be constructed upon acquisition of BTS by the consortium Two One. This would result in reducing travel to a half, to approximately 45 min. (current bus connection offered by SkyEurope and Ryanair lasts 1 hour and a half). BTS will thus be made more available to Austrian clients, competition among air companies will increase, from which fact also Slovak customers will subsequently profit. The competition of air companies for a client is a basic precondition for a decrease in prices of air tickets, extension of destinations offered, and increase of flight frequencies. There is no competition to the fullest extent at present since the air companies are focusing either on the Bratislava or the Vienna market. None of the other investors is able to provide such a unique effect of concentration of two airports. The positive effect of the contraction on the final customer has also been confirmed by an analysis prepared by the reputed international company in the field of economic competition Nera Economic Consulting. However, the AMO has fully ignored those facts.

3. The AMO has incorrectly considered the state of affairs since it did not consider the fact that VIE is not acquiring full control but only joint and indirect control over BTS. VIE and Penta would exercise shareholder’s rights over BTS to the extent of a 66% share. The remaining scope of rights would belong to the state that will keep its strong position by the fact that many decisions to be made by company bodies will require the prior consent by the state. Such a development results from the Conception of privatization of airport companies of the SR, which states that: “....control mechanisms over further development of the two airports (means BTS and Košice) are required to be retained by the state. It mostly concerns a joint decision-making on majority of significant decisions by a general meeting. In addition to a supervision over investment policy, it concerns a control of compliance with the amount of airport fees or the specified fee policy according to the submitted business plan, by means of which the effectuation of one of the privatization targets: price availability of a transport service in the SR by air transportation is to be secured.…”. Despite the fact that we had notified the AMO of this fact, the Office was considering the concentration of the airports as if the Vienna airport was acquiring exclusivity in position for adopting unilateral decisions. In the course of considering the concentration, the AMO has not justified its intentionally one-sided attitude in at least one sentence.

4. The Office dogmatically observed the letter of law and ignored the sense of the law on protection of economic competition by refusing dealing with detailed conditions and commitments submitted by us in order to minimize potential competitive problem. The law states that conditions submitted by participants to the proceeding should secure that no dominant position, which would result in significant obstacles of effective competition in the market, is created or strengthened. The Office, however, designated our particular proposals by general statement as not acceptable because, in its opinion, our proposals resolve consequences of a problem and not a problem itself. The Office did so despite the fact that cases, in which just conditions of such a nature are accepted, in professional circles called behavioral, are common in the decision-making practice of the European Commission as well as other competitive authorities within EU.

"Another 12 mistakes, as well as the wording of the decision support procedural and professional faults by the Office that strengthen our conviction that the AMO had its credit of the respected and independent institution misused in favor of a political will of the Government, the target of which is to prevent a private investor joining the Bratislava airport," said Jozef Oravkin.

"Even though we understand that the AMO is a public authority and in terms of administrative it comes under the Government of the SR, it should firstly be an independent institution protecting interests of the citizens of the SR. In this case, the social consequences of its acting will be more serious because the Office probably hindered the development of presently provincial and undersized airport in Bratislava to the standard European transport nod, as well as further development of the air transportation," stated Marek Ondrejka.

Penta Investments expects that the AMO Council will adopt a politically unprejudiced and professionally qualified decision of the entire case.

About Penta

Penta is a Central European investment group established in 1994. It operates mainly in healthcare, financial services, manufacturing, retail, media and real estate development. Its portfolio companies provide jobs to more than 41,000 people and reported assets of EUR 12 billion in 2021. Penta operates in more than 10 European countries and has offices in Prague, Bratislava and Warsaw.

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