The Competition Council authorised the acquisition of joint control by the applicant over Slovnaft with Slovintegra and Slovbena (S&S). The MOL Group focuses its main activity:

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    on exploration and production of crude oil, natural gas and gas products,

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    refining, transportation and storage of crude oil and transportation, storage and wholesale and retail marketing of crude oil products,

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    importation, transportation, storage and wholesale trading of natural gas and gas products.

The Planned Transaction

The Slovnaft Group`s core activity is crude oil refining, wholesale and retail marketing of crude oil products.

On 31 March 2000 MOL signed an agreement to become the strategic investor in Slovnaft, According to the agreement MOL will acquire an initial equity stake of up to 36.2%. This will be realised through an increase in Slovnaft`s equity and the purchase of existing shares.

The Market

After the completion of the transaction MOL will become the largest single shareholder of Slovnaft. Following eight full financial quarters from subscription, MOL will have the option to purchase further shares in Slovnaft so that it gains ownership of at least 50% plus one vote of the share capital of Slovnaft. Following MOL`s move to majority S&S are expected to retain a significant minority shareholding position in Slovnaft and will have appropriate rights to ensure their interests as shareholders through representation on the Board of Directors of Slovnaft. Under the terms of the acquisition agreement, for the initial eight full financial quarters, MOL will delegate 4 of the 8 members of the Slovnaft Board of Directors.

According to the agreement until S&S have more than 25% of Slovnaft`s shares, they will have a right of veto regarding essential business decisions.

The Competition Council defined the market of crude oil products as the product market and Hungary as the geographical market. OMV was determined as the only competitor beside MOL and Slovnaft on the market, although the long term possibility of other potential competitors (Croatian, Romanian oil companies) was not excluded.

In the application MOL handled the concentration as acquisition of joint control.

Arguments of the Party

According to MOL the concentration affects the long term regional competition in a favourable way by improving its own market position vis-á-vis the multinational oil companies. The acquisition has no anticompetitive affects on the product market. OMV`s presence ensures already the competition, while the possibility of other regional competitors creates a regional market on which MOL and Slovnaft has only 20% market share.

The Decision of the Competition Council

The Competition Council examined first the nature of the concentration. The essential part of the joint control is the need that the managing parties agree on essential decisions concerning the activity of the controlled undertaking. The joint control can be the result of the de facto situation of the parties or an agreement. In the case of Slovnaft, during the initial eight full financial quarters, due to the structure of the Board of Directors and the ratio of the shares the joint control is founded on the de facto situation of the parties. After this period MOL will have more than 50% of the shares, however due to the agreement S&S will have a right of veto, which creates a joint control based on an agreement.

The Competition Council examined also whether the concentration will restrict competition.

The relevant market is the wholesale market of crude oil products. Slovnaft has no significant influence on the pricing policy of MOL, although it has a market share of 6-7%.

The Competition Council considered that under the present circumstances the concentration will strengthen MOL`s market position, however it won`t have an influence on its pricing policy. It was also taken into consideration that within a few years other regional competitors will appear on the market, so the dominant position of MOL will lessen.

An other aspect taken into account by the Competition Council was that MOL acquired only joint control over Slovnaft, which enables the maintenance of some competition between the undertakings.

September 1, 2000. Budapest

Dr. Bodócsi András sk.
Fógel Jánosné dr. sk.
Dr. Sólyom Eszter sk.
Véghelyi Ágnes