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Bulgaria’s Regulator Blocks CEZ and Nova TV Deals

July 19, 201817:13
Bulgaria's anti-monopoly body has blocked two multimillion deals, saying the buyers might achieve market dominance through a concentration of ownership in both cases.
The Czech energy company CEZ is one of the three players in the Bulgarian energy market. Picture: Filip Singer, EPA.

In separate decisions published on Thursday, Bulgaria’s anti-monopoly body, the Commission on Protection of Competition, CPC, has prohibited the signing of two of the largest recent deals in the country.

One was the sale of the Bulgarian assets of the Czech energy giant CEZ to a Bulgarian family-owned company, Inercom.

The other was the sale of one of Bulgaria’s two largest media conglomerates, Nova Broadcasting Group, owner of Nova TV, to PPF Bidco of Czech businessman Petr Kellner.

In both cases, the CPC said the deals might result in an unhealthy “concentration” of ownership that could harm their respective markets  – energy, media and advertising – and their customers.

Bulgarian competition law says undue concentration of ownership can lead to prohibition of deals if the results are likely to lead to “the creation or strengthening of a dominant position, as a result of which effective competition in the relevant market would be significantly impeded”.

The CPC decision about Nova Broadcasting says the body “noted that the acquired company has leading positions in the media services market, which raises the question of the effect of the deal on the said market”.

According to the CPC, the number of media outlets owned both by Kellner’s conglomerate and Nova Broadcasting Group would give them a competitive advantage on the media services market – which might further encourage the new conglomerate to increase prices, change the terms of existing contracts or restrict access to the market by new players.

Nova TV controls around 30 to 40 per cent of the TV market in Bulgaria, according to the conclusions of the anti-monopoly organ.

“Taking into account the above-mentioned details … there are reasons to believe that the deal would lead to boosting market dominance, which would impede market competition,” CPC concluded.

“This would, in turn, affect not only the market, but also the end users – the TV audience, taking account of media’s public importance,” it added.

The decision comes after Sweden-based entertainment conglomerate Modern Times Group, MTG, announced in February that it would sell 95 per cent of the shares in Nova Broadcasting to the firm owned by Kellner for 185 million euros.

In February also, the Czech energy firm CEZ agreed to sell all its Bulgarian assets to a Bulgarian company, Inercom, which maintains three solar power stations in the country.

Owned by Ginka Varbakova and registered in Pazardzhik, Inercom offered 320 million euros for CEZ’s assets in Bulgaria, which include its energy distribution business, trade business and some small renewable energy parks.

The family-owned business recorded a total turnover of 50 million levs, or 25 million euros, for 2017.

The deal attracted controversy because, on the eve of its announcement, the Energy Minister, Temenuzhka Petkova, submitted her resignation in order to “erase all doubts” surrounding the deal, as she allegedly has ties to the Varbakovi family.

The resignation offer was later withdrawn, and the government then proposed various schemes to resolve the issue – from the de facto nationalization of CEZ’s business, to allowing the deal to be finalised.

Following the ruling of the anti-monopoly commission on Thursday, the fate of this deal is again under question.

According to the competition body, this deal would also amount to undue concentration, as the purchasing and purchased companies “would have stable financial resource and experience in the energy sector, which creates preconditions for the creation or strengthening of a dominant market state for the united group.”

Both PPF and Inercom have 14 days to appeal the decision before the Supreme Administrative Court.

Inercom and MTG both expressed surprise at the decision of the anti-monopoly body in statements sent to the media. PFF and CEZ have still not commented as yet.

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