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Bogdanka insists that the President of the Office of Competition and Consumer Protection initiated proceedings related to the application of prohibited business practices by Kompania Węglowa

LW BOGDANKA S.A. moved to the President of the Office of Competition and Consumer Protection for the initiation of proceedings related to the Kompania Węglowa S.A.’s application of prohibited business practices limiting competition.

In the opinion of the Company, the activity of Kompania Węglowa S.A., involving the sale of coal below costs of extraction, violates the regulations related to competition protection, as well as can be qualified as acts of unfair competition.


Zbigniew Stopa, President of the Management Board of LW BOGDANKA S.A.:
“Operations conducted by Kompania Węglowa S.A. are aimed directly at LW Bogdanka S.A.’s customers who, as it results from, among other factors, data presented by the Industrial Development Agency, are offered significantly lower prices than other customers of Kompania Węglowa S.A. The difference is neither related with the coal quality, nor with other contractual terms and conditions of supplies. In our opinion, these activities are aimed at excluding or limiting the operations of LW Bogdanka S.A. on the market. The situation forced us to limit our production which results e.g. in the necessity to reduce employment - despite the fact that we are the most cost-effective mine in Poland. The current situation on the coal market, devastating for players operating in compliance with market conditions, may have disastrous consequences for the entire industry. This is why we moved to the President of the Office of Competition and Consumer Protection to initiate proceedings related to prohibited practice that limit competition used, according to us, by Kompania Węglowa S.A.”
“It is worth mentioning that the sale of coal below the costs of production conducted by Kompania Węglowa S.A. is possible only due to the fact that the company waits for the ‘subsidy to coal prices’ which should be thus treated as state aid. Also the deferral of tax arrears or outstanding social security (ZUS) contributions is considered the state aid, as well as other forms of unsanctioned aid from the state, unless such aid does not meet specified criteria. The support provided to Kompania Węglowa S.A. would have to be considered acceptable by the European Commission, however according to us – from the point of view of the EU regulations – it is difficult to find justification to such conclusion,”
added Zbigniew Stopa.

Both Kompania Węglowa S.A. and LW Bogdanka sell a significant majority of their produced fine coal on the Polish market. In the case of fine coal, import and export are of minor significance. In 2014, the import of fine coal amounted to approx. 4.5 million tonnes, whereas export – to approx. 5.8 million tonnes. It is related to the high share of transportation costs as compared to the price of fine coal – they exceed 30% of price in rail transport on distances longer than 500 km (deliveries to Port Północny, Gdańsk, in order to perform export by sea or deliveries by rail to other European markets e.g. to Germany), as well as to high norms of calorific value on the international market (net calorific value of fine coal on international markets exceeds 25 GJ/Mg).

Moreover, there is no substitutability between fine coal and other types of coal which is due to technological issues, in particular burning parameters of boilers in the commercial power industry, being the recipient of fine coal, which prevent the direct use of other types of coal (medium, fine and lump types of coal are of minor significance to the commercial power industry and require expensive processing to the form of fine coal). Also differences in the prices of fine coal and other types of coal, exceeding 40% in 2013-2014, are decisive in the case of lack of substitutability.

As a consequence, one should assume that the relevant market, both in terms of geography and product, to be considered in the analysis by the Office of Competition and Consumer Protection, is the Polish market of fine coals, on which Kompania Węglowa is the leader. According to LW Bogdanka S.A., it means that activity conducted by Kompania Węglowa S.A. violates Article 9 of the Competition and Consumer Protection Act of 16 February 2007.