Communication
The aim of the protection of market competition is primarily to create benefits for consumers and equal conditions for all entrepreneurs on the market, who, acting in accordance with the existing rules and competing on the market with the quality, price and innovation of their products and services, contribute to the overall development of the economy.
Acquisition of direct controlling interest over Sunčani Hvar and Sunčani Hvar Nekretnine by Eagle Hills deemed conditionally compatible
On 22 January 2025 the Croatian Competition Agency (CCA) conditionally approved the concentration in the form of acquisition of direct controlling interest over the undertakings Sunčani Hvar and Sunčani Hvar Nekretnine by the undertaking Eagle Hills. In its decision on conditional approval of the concentration concerned the CCA also accepted the proposed commitments, ordered their implementation and defined the monitoring of the implementation of the remedies concerned.
Based on the data contained in the notification of the concentration, the statements of the notifying party, the defined structure of the relevant market that involved both the actual competitors (incumbents) and the potential competitors, the general market share indicators in the relevant market, the data received from the undertakings included in the survey, the post-merger market share of the parties to the concentration, the expected effects of the concentration in the form of benefits for the consumers, as well as other evidence based data, following the legal and economic study in the case concerned, and taking into consideration all factual, legal and economic circumstances, the CCA found that this concrete concentration was assessed as conditionally compatible subject to remedies within the meaning of Article 22 item 2 of the Competition Act.
Taking into account the structure of the relevant market with regard to existing and potential competitors, general market share indicators, information and documentation obtained from the undertakings, the CCA found that this concentration can only be allowed subject to remedies that would eliminate anticompetitive effects of the concentration in the hospitality sector market including accommodation and catering in hotels in the territory of Split-Dalmatia County.
Consequently, the CCA accepted the commitments undertaken by the notifying party Eagle Hills with the view to eliminating negative effects of the concentration concerned by reporting in a transparent manner about the compliance of its business activities within competition rules.
The following commitments have been undertaken by the notifying party:
- Investment in the Target Company (primarily Sunčani Hvar) amounting to at least [20-30] million euro. This investment particularly relates to:
(i) Hotel Sirena and
(ii) Hotel Amfora.
The investment is not limited to these hotels and may also include other existing hotels and/or existing or new accommodation units of the Target Company.
Deadline for implementation: Five (5) years from the date of receipt of the CCA decision on conditional approval of the concentration concerned.
The notifying party believes that the efficiency gains of the proposed investment measure, particularly regarding the renovation and refurbishment of the accommodation capacities of Hotel Sirena and Hotel Amfora, would outweigh the potentially negative effects on competition:
– Hotel Sirena: The investment will improve and contribute to the diversification of hotel offerings in the bay where Hotel Sirena is located, which is 2 km from Hvar town and has not been extensively utilized for tourism.
– Increase in hotel supply on Hvar Island overall, especially outside the town centre of Hvar.
– Structural investments by the Acquiring Undertaking in the Target Company over a specific period can effectively eliminate potential anticompetitive effects by increasing the competitiveness of the Target Company.
– Positive effects on the local community such as the renovation of the promenade and beach access lighting, installation of a new Wi-Fi network across the bay, improvement of sewage systems to enhance environmental protection and sea cleanliness, introduction of new amenities such as a beach café, a children’s play area, and new public toilets on the beach.
– Overall ESG (Environmental, Social, and Governance) effects: enhancing environmental and ecological sustainability by introducing a new drainage system, installation of more environmentally friendly LED lighting, roof thermal insulation and thermal insulation of water installations, reduction in electricity consumption and optimization of thermal energy usage.
- Maintaining Existing Contracts with Croatian Suppliers
Sunčani Hvar and Sunčani Hvar Nekretnine, as undertakings under the control of Eagle Hills, must keep in effect all contracts concluded with existing suppliers of various products and services that have their registered office in the Republic of Croatia before the date of the receipt of the CCA decision on conditional approval. The commercial terms (including the payment terms and conditions) must remain substantially the same or more favourable than those agreed upon in the currently valid contracts with these suppliers.
Deadline for implementation: One (1) year from the date of the receipt of the CCA decision on conditional approval of the concentration concerned.
The notifying party believes that maintaining in effect all contracts with the existing Croatian suppliers, including those based on Hvar Island, will shorten the distribution chain, reduce the transport and distribution costs and maintain product specialization. At the same time, this would prevent the existing suppliers from being replaced by alternative suppliers engaged by Eagle Hills in other locations within the relevant geographic market. Maintaining in force the contracts with the existing suppliers in the stated period would minimize potential market failures, entry barriers and disruptions and imbalances in bargaining power. By preserving the market stability, accessibility and efficiency while supporting a competitive environment that ensures a level-playing field for all undertakings, this provision would provide long-term economic benefits and contribute to consumer welfare.
- Increased Contract Value with Local Hvar Suppliers
The undertakings under the control of Eagle Hills – Sunčani Hvar and Sunčani Hvar Nekretnine, commit to increase the value of contracts concluded with suppliers of goods and services with their seat on Hvar Island (without excluding other suppliers from the broader relevant market and the Croatian market in general) by [0-10] % compared to the annual contract value signed with Hvar-based suppliers in 2024.
The total annual value of contracts signed with suppliers based on Hvar Island as of 30 November 2024, was [***] million euro, representing [20-30] % of the total annual value of all contracts signed with the Target Company’s suppliers (a detailed table of suppliers has been attached to the case documentation).
Deadline for implementation: One (1) year from the date of the receipt of the CCA decision on conditional approval of the concentration concerned.
The notifying party believes that developing and increasing the annual value of existing supplier contracts for Hvar-based suppliers would strengthen the local supplier ecosystem, including improving their bargaining position. In addition, the developing and increasing the annual value of existing supplier contracts for Hvar-based suppliers and the suppliers with their seat in the Republic of Croatia would at the same time increase competitiveness of the local suppliers’ market. It would shorten the distribution chain, reduce the transportation and distribution costs and maintain product specialization.
Finally, a more diverse, high-quality local supply chain, would make the market more resilient, efficient, and aligned with long-term economic and competitive principles.
Monitoring and Compliance
Upon the proposal of the notifying party the CCA has appointed PricewaterhouseCoopers as the monitoring trustee, who is required to submit an initial report to the CCA on the implementation of the measures within six (6) months from the date of the receipt of the CCA decision by Eagle Hills. To ensure compliance with agreed commitments, starting from the day of the submittal of the initial report, the monitoring trustee shall provide semi-annual reports on the effects of the implemented measures.
If Eagle Hills complies with the structural investment measure outlined in Section A earlier than the five-year deadline (as verified by the monitoring trustee), the measure will be considered fulfilled, and further monitoring by the CCA will not be required.
Based on the above reasonings, the CCA accepted the proposed commitments as they have been deemed sufficient to eliminate the anticompetitive effects of the concentration concerned.
The CCA decision in the Croatian language is available here