The Polish Office of Competition and Consumer Protection (UOKiK) has closed the year 2015 with 177 preliminary proceedings launched, 41 proceedings completed in the area of antitrust and 235 mergers reviewed. Furthermore, UOKiK also counteracted anticompetitive practices with soft interventions, which basically consist in educating undertakings on the best practices to follow when complying with competition law provisions and calling on them to voluntarily stop applying competition-restrictive practices. Such actions are testament to the Office’s policy of transparency and open dialogue with the business community, which also includes enforcement of competition law through negotiations.
In 2015, UOKiK carried out 58 of such interventions, out of which 52 were concluded. In 50 cases the undertakings voluntarily complied with UOKiK’s recommendations, which prove that their efficiency lies in swift elimination of illegal market behaviour without having to start antitrust proceedings.
Nevertheless, this cooperative approach has not diverted our attention from the main challenge of neutralising cartel behaviour. In the coming years cartel detection will remain the Office’s top priority. Horizontal agreements, especially with the objective of price fixing, are the most damaging type of trade restrictive practice, distorting competition on the market, harming consumers and slowing down the development of the economy as a whole. Unfortunately, because of their secret nature they are particularly difficult to uncover. Last year UOKiK was empowered with new competition enforcement tools and measures to boost the effectiveness of its investigations and was equipped with an array of novel instruments to restore competition on the market. Still, it is possible that to reach a satisfactory level of enforcement we might have to consider paving the way for further modifications to the system of competition protection. Perhaps the introduction of informant rewarding schemes is the way to go. Either way, looking back at 2015 we cannot help but appreciate the benefits the new competition legislation has provided.
Swifter merger control proceedings
Turning first to merger control, the amendment of the Act on Competition and Consumer Protection, in force since 18 January 2015, introduced a new two-stage procedure for the control of concentrations. The objective was to shorten and simplify merger proceedings, a goal which as proved by the 2015 statistics, has been achieved. The time required to issue a merger decision in 2015 amounted to an average of 34 days, 22 days fewer than in 2014. Overall, out of 212 concentration decisions issued in 2015 (seven rendered following assessment in Phase II), no transaction was blocked and conditions were imposed in one case only. Furthermore, the new procedure of ‘competition concern’, which enables parties to be notified of potentially harmful effects of their transaction, has become fully operational with five such notifications issued in 2015.
Modernised consumer protection law
Following the enactment of the ‘competition’ amendment of the Competition and Consumer Protection Act on 17 April 2016 the amendments to its ‘consumer’ provisions came into force. The new law equipped UOKiK with new tools to detect and challenge consumer abuses, especially in the financial sector. It introduced a new system of eliminating abusive clauses in consumer contracts. UOKiK is now empowered to issue administrative decisions regarding abusive clauses in consumer contracts, subject to judicial review. Moreover, with court’s permission UOKiK investigators are able to pose as consumers to gather evidence (acting as ‘mystery shoppers’). The new law also allows UOKiK to publish free communications and warnings on public radio and television, making it possible to quickly and effectively warn consumers about behaviours or practices that seriously threaten their interests.
New procedures for improved procedural fairness
Alongside developments in the legislative area, UOKiK has made significant changes to its internal procedures. As of 1 September 2015 it began issuing voluntary ‘detailed justification of charges’ – an equivalent to the statement of objections used by the European Commission and other EU competition authorities. The Office presents its justification of charges to enterprises when it has finished gathering evidence in a case. The document submitted to the parties contains a factual and legal justification of the charges it is pressing along with evidence to support them, so that the undertaking has the opportunity to respond before a decision is issued. UOKiK’s aim in establishing this procedure was to enhance parties’ right of defence, to give them an incentive to negotiate settlements or propose commitments, but also to increase the quality of its decision-making.
UOKiK has also set up another mechanism for evaluating the consistency and quality of its proceedings and decisions. Made up of representatives of UOKiK’s management, heads of departments and experienced case handlers, the Office formed an Evaluation Committee, tasked with evaluating the decision-making process in light of its policies and priorities at each step of a proceeding, from initiation to completion. The Committee plays a key role in this regard, ensuring the authority’s resources are deployed in the most efficient fashion, as well as monitoring timeliness of proceedings.
New ‘Competition and Consumer Protection Policy’
With legislative amendments and new procedures in place, UOKiK also drafted a strategy paper called the ‘Competition and Consumer Protection Policy’, which indicates the most important issues regarding the development of competition in the Polish economy, as well as UOKiK’s goals and priorities for the near future. In 2015, for the first time, this policy document combined both competition and consumer protection to underscore the synergy between the two policies, as well as to increase transparency and the state’s cohesive activities in these areas. In terms of consumer protection activities the document advocates intensified proceedings into infringements of collective consumer interests and targeted legal action, especially in the financial services sector. The outlined strategy also seeks to improve the system of competition protection by sharpening the methods of cartel detection and close scrutiny of the telecommunications sector. The competition authority, on the other hand, is expected to increase the level of transparency of its activities, adopt an open approach in dealing with the business community and last but not least strengthen the rules for procedural fairness.
UOKiK’s enforcement activity
UOKiK’s 2015 enforcement portfolio comprised proceedings touching upon various sectors of the Polish economy – from construction, rail, online booking, and telecommunications to post-monitoring interventions on the natural gas market.
In the area of merger review, UOKiK issued one conditional consent to a transaction on the cement market. A Polish subsidiary of the international HeidelbergCement Group, Górażdże submitted its application for consent to take over Duda Kruszywa and Duda Beton, two smaller Polish cement producers. In UOKiK’s view, given the dimensions of the geographic market for ready-mix concrete, competition on the market surrounding one specific cement mixing plant in Olszowa would have been significantly reduced. It was established that the three cement producers already command the highest market share in that area, and after the acquisition the expanded enterprise would significantly exceed the 40 per cent share that marks a dominant position. In response, Górażdże submitted a proposal that would have it exclude all of the financial and non-financial assets that make up the plant in Olszowa, hence removing the threat to competition and assuaging UOKiK’s concerns.
UOKiK’s antitrust enforcement activity resulted in the Office fining two dominant undertakings that resorted to anticompetitive practices in their respective markets. In September 2015 Polskie Górnictwo Naftowe i Gazownictwo (PGNiG), a leading Polish oil and gas company, failed to comply with part of the commitment decision it had consented to comply with in December 2013. The commitment required PGNiG to remove from its contracts provisions preventing customers from reducing the amount of gas they had ordered. However, UOKiK’s own monitoring of the commitment as well as feedback from the market indicated that actual implementation of this commitment was less than complete. PGNIG had indeed removed the old contractual provisions, but they had been replaced with new terms that, in practice, yielded essentially the same results. In consequence, UOKiK fined the dominant undertaking €2.45 million. In December 2015 UOKiK found that PKP Cargo (Poland’s largest rail freight operator) abused its dominant position on the rail freight market by introducing regulations allowing it to refuse to sign a special agreement with enterprises it saw as a competitor. The contract extended attractive discounts to companies that did not compete directly with PKP Cargo, while also preventing competitors from expanding their activity and gaining new customers. The undertaking was fined €3.3 million.
UOKiK also succeeded in uncovering a collusion on the watches market, sanctioning it with a fine of over €400,000. Within the course of conducted proceedings, UOKiK found that Swatch Group Polska and several retailers had established minimum retail prices on watches in both brick-and-mortar and online shops. The agreement resulted in consumers being unable to purchase watches for less than a prearranged price minus a given rebate. Three of the retailers also directly exchanged information about prices.
UOKiK’s enforcement activity in 2015 was not limited to imposing fines, it also included interventions of the competition authority, which led to voluntary retraction of anticompetitive practices by the targeted undertakings. In October 2015 four owners of online platforms voluntarily abandoned the use of most-favoured nation clauses (such clauses guarantee that the price, room availability and other conditions offered will not be lower or will be equal to the price offered by competing portals or accommodation). The clauses frequently appeared in contracts drafted by the owners of online accommodation booking platforms and limited competition in the hotel online booking sector.
Follow-up of policy of open dialogue, transparency and direct communication with the business community
The hotel online booking case shows that when restoring competition on a market, the Polish competition authority relies not only on fines, but also opts for open dialogue and communication with the business community. In the pursuit of these objectives, in 2015 UOKiK published an extensive number of guidelines to foster transparency of its activities. The guidelines depicted, among others, the process of issuing commitment decisions, the functioning of the newly introduced settlement procedure, rules followed by UOKiK when setting fines for competition-restricting practices, the process of issuance of the justification of charges, the criteria and procedure to follow when notifying the intention of concentration, as well as UOKiK’s rules for contact with enterprises, for publishing the results of its market studies and informing on judicial control over its decisions.
The water supply and sewage sector
The water supply and sewage sector has been prone to significant irregularities and unjustified price disparities, but at the same time has been left without any regulatory supervision whatsoever. Over the past few years, UOKiK’s interventions on local markets have mainly targeted communes and other providers of water and sewage services and their numerous practices of abuse of dominance consisting in imposing unfair rules for setting up network connections or using an ambiguous billing system. In order to remedy these repeated breaches of competition law and forge a competitive culture, UOKiK intends to publish a guidebook addressed to entities engaged in this sector. It is hoped a clear explanation of competition law provisions in force and advice on how to follow them will help to eliminate anticompetitive practices in the water supply and sewage sector. On the other hand it seems that for this market to function properly, it is necessary for a public authority to exercise targeted regulatory control. UOKiK is of the view that it is important for this task to be entrusted to a separate entity. Discussions in this regard have already begun and the Office’s proposal has yielded positive reactions.