The Competition Commission has decided to launch an ex officio regulatory intervention in the construction sector. The trigger for the assessment of the opening of a regulatory investigation was, in addition to the concentration observed in certain markets of the sector due to the significant contraction of the construction industry, the phenomenon observed since 2020, which refers to the change in the structure of the sector due to the gradual entry of investment schemes, through the acquisition of simultaneous minority stakes, in large construction companies in the sector.

More specifically, as stated in a related announcement:

“By Articles 11 and 14 par. 2 (c) of Law 3959/2011, the Competition Commission (hereinafter referred to as the “Competition Commission”) may take ex officio regulatory intervention in sectors of the economy, if it is established after an investigation and public consultation that there are no conditions of effective competition under the conditions and procedure set out in the provision. The EA examines a specific sector of the Greek economy falling within its competence and if it (a) finds that there are no conditions of effective competition in that sector and (b) considers that the application of Articles 1, 2 and 5 to 10 of Law 3959/2011 is not sufficient to create conditions of effective competition, it may, by reasoned decision, take all necessary measures for the creation of conditions of effective competition in that sector of the economy. These conditions must be met cumulatively according to the grammatical wording and the interpretation of the law.

The SC decided by a majority, the following:
A) Impose on ELLAKTOR and GEK TERNA the obligation to notify/announce to the EA for a relevant economic analysis the acquisition of more than 5% of the share capital of a competing undertaking by the parties concerned in case in the oligopolistic market under consideration in the sub-sector of construction works and in the sub-sector of concessions the undertakings in which a common shareholder appears have a cumulative share of more than 50% in the above mentioned market. In the event of failure to notify/notify the EA of the above changes, a reasoned decision of the EA may impose the sanctions provided for in Article 11, para. 11 of Law 3959/2011 in case of culpable violation of the above notification obligation by the above-mentioned obligated parties.

B) Impose on ELLAKTOR and GEK TERNA the implementation of Chinese walls that will prevent the leakage of commercially sensitive information between the companies in the sub-sector of construction works and in the sub-sector of concessions in which a common shareholder with a share of more than 5% of the share capital (in each company) appears in these companies and the elaboration of a Code of Conduct for this purpose. In case of non-implementation of this obligation, the sanctions provided for in Article 11, par. 11 of Law 3959/2011 in case of culpable violation of the above notification obligation by the above-mentioned obligated parties.

C) Require REGGEBORGH, for as long as it controls de jure or de facto ELLAKTOR and at the same time holds more than 1% of the value of the shares of GEK TERNA or respectively (a) to sign a Shareholders’ Agreement, the content of which will be submitted for approval by the EA, with respect to the management of commercially sensitive information concerning competing companies in the relevant sector in which it has common ownership; and (b) to commit, subject to the same condition of common ownership and at the same time de jure or de facto control of another competing undertaking in the construction sub-sector and the concessions sub-sector, that representatives of REGGEBORGH will not participate as members of the management bodies of the undertaking in which they do not have de jure or de facto control (in this case, GEK TERNA), in any meeting, discussion or proceeding of such bodies or other corporate bodies in which confidential information/data relating to its commercial policy will be discussed or communicated, directly or indirectly (e.g. in the form of reports, corporate presentations, presentations, etc.)etc.), containing non-public information relating thereto, and not to become aware, in any way whatsoever, of the information concerned.”

Background

On 08.01.2021, the Plenum of the EA decided to initiate regulatory intervention in the construction sector under Article 11 of Law 3959/2011.

In particular, issues were identified that raise concerns as to the existence of effective competition conditions in this sector. The regulatory focus was on the sub-sector of public works construction companies due to their particular importance in the Greek economy and the competition issues they face. Among other things, the trigger for the assessment of the opening of a regulatory investigation in the construction companies sector was, apart from the concentration observed in certain markets of the sector due to the significant contraction of the construction industry, the phenomenon observed since 2020, which concerns the change in the structure of the sector due to the gradual entry of investment schemes, through the acquisition of simultaneous minority stakes, in large construction companies in the sector. This practice was mainly found in the two largest companies in the sector, which have seen a long-term increase in the proportion of an investment fund’s shareholding in their share capital. Given that these shareholdings do not in the first instance raise a question of assessment in the context of the national competition authority’s prudential merger control, they have been examined in the context of the Regulatory Notice, as they raise concerns about the possible effects on the competitive structure of the sector. Given the above, it was considered appropriate to examine all possible joint shareholdings in the companies in the sector, which, if they existed, could raise doubts as to whether the companies in question are in effective competition with each other.

On 7.4.2021 the EA’s First Opinions were published regarding the lack of effective competition in the construction sector. The identified problems in the Opinions were put to public consultation (First Public Consultation) to obtain the views of various market players and to be re-evaluated by the EA, which lasted from 08.04.2021 to 14.05.2021.

Following significant investigative measures (including on-site inspection), the EA published its Second Opinions on 10.8.2022, which were subjected to public consultation (second public consultation), which lasted after an extension of the deadline from 10.8.2022 to 14.10.2022.

Following the submission by the Rapporteur on 16.12.2022, the EA reached a Decision on 11.1.2023.

The EA unanimously decided not to exercise the EA’s Article 23 advisory competence at this time, as the legislative framework in question has recently been revised and therefore these changes have not been fully reflected in the public works tendering procedures.