Poland: Office of Competition and Consumer Protection
Legislative and sectoral developments
For the Polish Office of Competition and Consumer Protection (UOKiK), 2017 has brought about significant developments, mostly on the legislative front in the form of two new acts: one concerning private enforcement of competition law and the other regarding contractual advantage in the agriculture and food industry.
On 27 June 2017, the Act on private enforcement of competition law entered into force, introducing provisions of the EU Damages Directive (2014/104/EU) into the Polish law. With the new provisions in force, the Competition Authority continues to act in the public interest by imposing fines for specific unlawful practices, the protection of competition, however, is no longer the exclusive domain of UOKiK as a new private law route of enforcement became available, allowing the aggrieved parties to enforce their claims in an effective manner. Anyone who suffered a loss as a result of unlawful practices is able to bring an action, including both consumers and the counterparties or competitors of the undertakings that have infringed the provisions of competition law. The claims are examined by regional courts regardless of the value of the claim.
The claims, may pertain, inter alia, to the practices that UOKiK designates in its decisions as anticompetitive agreements or abuse of a dominant position, as well as to infringing activities with respect to which no proceedings or decisions of the Competition Authority have been initiated or issued so far. Furthermore, those who suffered a loss as a result of infringements of competition law identified by the European Commission as well as – in certain cases – by the competition authorities of other EU member states may also bring an action before the Polish courts. The option to bring an action is available not just to the aggrieved parties themselves, but also to their representatives – associations of consumers or undertakings.
The regulations intended to make it easier to enforce claims for damages also include the presumption of culpability on the part of the perpetrator of the infringement, as well as the presumption that the infringement of competition law is the cause of the losses incurred. All this means that the burden of proof that no infringement of the provisions of applicable law has taken place has been put on the defendant. Moreover, the court examining the given case is also bound by the findings contained in the final decision of UOKiK in which the given practice was found to have restrictive effects on competition.
The new regulation also introduced a new measure to the Polish civil law in the form of the application for disclosure of evidence. Under the new regulations, the court – acting at the request of a claimant who substantiates his claim and undertakes to use the evidence obtained exclusively for the purposes of the proceedings in question – may order the defendant undertaking in possession of evidence such as documents or email correspondence to disclose such evidence. When the party of the proceedings fails to comply with such request, the court may order such party to pay costs of the proceedings regardless of the final outcome thereof, or even consider the facts that were to be determined on the basis of the requested materials as having been duly ascertained even of the absence thereof.
Important legal changes were also introduced by the Act on counteracting unfair use of contractual advantage in trade of agricultural and food products, since with its’ adoption, UOKiK received new powers as the authority designated to enforce the applicable provisions. The law itself came as a reaction to a number of unfair trading practices that have been occurring in the food and agriculture supply chain.
In Poland, these issues were resolved by the common courts of law on the basis of various regulations, including the provisions of the Act on counteracting unfair competition. This, however, proved insufficient for the problem to be solved. Attempts at introducing industry self-regulation had also been ineffective due to the fact that the interested parties had ultimately failed to reach an agreement. For the reason above, it had become necessary to put these issues on the legislative footing.
In order to effectively resolve disputes between suppliers and recipients of agricultural and food products, the Polish legislator has decided to introduce the concept of abuse of contractual advantage. Contractual advantage as such may be described as significant disparity in economic potential between two parties of a negotiation, with the weaker one lacking sufficient capacity for selling or purchasing products from other undertakings. According to the new legislation, when one of the parties of a transaction in the agriculture and food sector (both suppliers and acquirers) is subject to abuse by a commercial partner with contractual advantage, UOKiK is entitled to take action. The powers and procedures of UOKiK are similar to the ones specified in Polish competition law. The proceedings are initiated ex officio and not at the request of any party of such proceedings. Any entrepreneur, however, who has a reasonable suspicion that he or she is being subject to any practices that involve the unfair use of contractual advantage may submit a written complaint to UOKiK.
The Authority may only intervene where the total value of the turnover between the supplier and the recipient exceeded 50,000 zlotys during any of the two years preceding the year in which proceedings are initiated and where the turnover of the supplier or recipient which applies the practices in question exceeded 100 million zlotys during the year preceding the year in which the proceedings are initiated. Having established unfair use of contractual advantage, UOKiK is able to issue prohibition as well as commitment decisions and impose a maximum fine of 3 per cent of the company’s turnover. The Act on contractual advantage entered into force on 12 July 2017. Implementation of the new law and application of the novel powers was one of UOKiK’s focal point in 2017.
UOKiK has also played a key role in legislative amendments in the water and sanitation services sector. Until 2018, there was no regulator in this sector (some municipalities had some regulatory powers, but as non-specialised units they were not effective). In this situation, practices of abuse of a dominant position were often encountered in this market and UOKiK, when issuing antitrust decisions concerning this sector, practically acted as a regulator of last resort. For this reason, in 2016, the Polish Council of Ministers assigned UOKiK to draft the bill that would establish a water sector-specific regulator and form part of a major reform of the law on water. In October 2016, UOKiK submitted the draft text of the law to the ministry responsible for the amendment of the water law. UOKiK’s proposal provided the entity designated to perform the function of water-sector specific regulator will be approving water or sanitation tariffs and will be issuing opinions on regulations. The Authority actively participated in further works on the final shape of the new regulations that entered into force on 1 January 2018. According to the new provisions, the new regulator acts locally through established branch offices. It is important to emphasise that this entity is not fixing the ultimate price for water and sanitation services – it only ensures the prices are neither excessive nor unjustified.
UOKiK also contributed to the creation of a competitive water market by means of an advocacy action. On 13 July 2016, UOKiK published the ‘Guidebook on the Water and Sanitation Services Market’ (the Guidebook). The aim was to raise awareness of applicable rules of competition law among providers, supervisors and users of water and sanitation services. The publication provided general information on competition protection law and policy, taking into consideration the specificity of the water sanitation market. It outlined typical infringements committed in the water and sanitation services sector, covering irregularities in contract design and enforcement and the most problematic issue identified by UOKiK – building networks and connecting them to customers. In order to clearly illustrate the issues at hand, UOKiK presented specific infringements that have been the subject of its decisions. The goal was for the guidebook to be as user-friendly as possible and accessible to a large audience, not to professionals only. Ever since the publication of the Guidebook, UOKiK has been informed about new practices on the market. This shows that UOKiK’s advocacy initiative was a success, as it not only spread knowledge on competition rules, but also pushed consumers to report illegal activity to UOKiK. UOKiK’s publication was also recognised internationally by winning ‘Best Implemented Advocacy Strategy at Multiple Levels’ in the competition advocacy contest, organised in 2017 by the ICN and the World Bank Group.
In the foreseeable future, cartel detection and fight against bid rigging in public procurement will remain high on UOKiK’s agenda. Due to the growing importance of digitisation, the Authority will also exercise scrutiny over the digital sector. In the legislative area, UOKiK is reviewing the functioning of the Act on competition and consumer protection. Depending on the results, further amendments will be considered.
UOKiK’s activity in antitrust
In the area of antitrust, UOKiK closed 2017 with 87 preliminary proceedings launched and 19 decisions concerning competition-restrictive practices issued. 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 a testament of the Authority’s policy of transparency and open dialogue with the business community, which also includes enforcement of competition law through negotiations.
Nevertheless, this open dialogue with business and UOKiK’s cooperative approach have not diverted our attention from the main challenge of neutralising cartel behaviour. In the coming years, cartel detection will remain UOKiK’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’s enforcement portfolio included a decision dismantling a cartel operating in the wood-processing industry. During the proceedings, the Authority established that five manufacturers of wood-based panels used to produce furniture were fixing prices over the period of nearly four years. They also exchanged sensitive information (eg, about planned price increases and sales volumes). As such, activities may result in increased prices being paid by their business partners, and since the furniture industry generates approximately 2 per cent of Polish gross domestic product, the illicit agreement exerted a significant negative impact on the country’s economy. The outcomes of the agreement had the potential to indirectly harm consumers as higher costs of wood-based panels could have affected the prices that end-users pay for furniture. The agreement enabled the entrepreneurs to eliminate the uncertainty as to behaviour of their competitors. This allowed them to lower the level or rivalry and to boost their bargaining position in relation to the buyers. The evidence required to initiate proceedings was obtained by the Authority during a dawn raid at the entrepreneurs’ premises. Details concerning the illicit agreement were also supplied by Swiss Krono, the company that took advantage of the leniency programme and received total immunity. Fines imposed on other participants of the cartel exceeded, in total, 135 million zlotys. Since the evidence gathered in this particular case has proved that the practices relied upon by manufacturers of wood-based panels could have impacted trade between EU member states, the investigation was also conducted under EU law and the draft decision was consulted with the European Commission.
A vertical agreement was also uncovered on the market for hygiene products. By means of an oral hearing held at the competition authority’s premises, UOKiK established that since 2010, SCA Hygiene and SCA Hygiene Products, producers of cleaning cloths and hygienic materials, together with its distributors, had been fixing minimum resale prices for products sold to institutional customers such as companies, agencies, hotels, shops and restaurants. Collusion between entrepreneurs has a detrimental impact on both their honest competitors and the recipients of their products. The total amount of fines imposed upon the parties to the proceedings exceeded 3.2 million zlotys. One of the distributors, having submitted a leniency application, received total immunity.
Furthermore, during the course of the year, UOKiK continued to carefully monitor the market for possible bid-rigging practices. In 2017, the number of detected competition infringements in tender proceedings amounted to seven. In addition to the proceedings, UOKiK also continued its advocacy efforts and organised, in the framework of a project called ‘Knowledgeable Contracting Authority – Competition Law in Public Procurement Tenders’, a series of workshops for employees of public administration bodies to equip them with knowledge on bid-rigging practices and to give them practical tips for their detection. This advocacy measure was met with positive feedback.
Along with 32 training sessions organised all over Poland with participation from nearly 1,400 employees of governmental and self-governmental administration bodies, the e-learning platform www.szkoleniazmu.uokik.gov.pl was created. The platform is used to deepen the knowledge and practical skills acquired at trainings to identify and combat bid-rigging, and as an educational tool for those who could not benefit from stationary trainings.
When conducting antitrust proceedings, UOKiK relies a great deal on economic analysis. When needed, antitrust or merger case-handlers have, at their disposal, economic experts working in the Department of Market Analysis. In this light, UOKiK decided to launch a public discussion on the role of economics in competition law, planning workshops on this topic. The first meeting took place on 8 February 2017 and tackled practical use of economic analysis in antitrust cases. The second workshop was held on 25 April 2017 and focused on the newly adopted directive on private enforcement. More specifically, the participants debated on the use of economic tools when performing an assessment of damages incurred as a result of competition law infringements. During the third workshop, organised on 13 October 2017, its participants discussed the new Act on counteracting unfair use of contractual advantage in trade of agricultural and food products, as well as the experiences and legal solutions of other European countries in this regard.
In addition to UOKiK’s hard enforcement are the soft measures applied by the Competition Authority. These measures contribute in great deal to the eradication of anticompetitive practices from the Polish market. By sending an official letter, UOKiK calls upon the parties to cease anticompetitive practices. This form of direct communication with undertakings enables UOKiK to swiftly react to market distortions and restore fair competition without the need to carry out a formal and usually time-consuming antitrust procedure. In times when the market environment alters fairly quickly, it is necessary for the Competition Authority to dispose of adequate tools that will allow for a prompt intervention. In 2017, UOKiK sent 53 requests asking undertakings to withdraw competition restricting practices. The undertakings voluntarily abandoned challenged practices in 29 cases, proving that efficacy of a competition authority may be achieved by other means as well.
Apart from the case law of the Competition Authority, Polish antitrust law is also shaped by rulings of the judiciary. In 2017, the Polish Court of Competition and Consumer Protection rendered a significant resolution, concerning rules on searches conducted by UOKiK. In this resolution of 7 March 2017, the court emphasised that the powers which the Office for Competition and Consumer Protection can exercise during dawn raids should not be interpreted broadly and that it is strictly bound by the scope of the inspection outlined in the search warrant. Thus, the Authority is not empowered to copy or print documents that go beyond the scope of the warrant. According to the aforementioned resolution, UOKiK’s inspectors cannot review copied electronic evidence for the first time at their own premises without the presence of the inspected company’s representatives. Instead, the Authority has to perform a proper search at the inspected company’s premises. The court stated that, in the case in question, inspectors had collected evidence that was outside the inspection’s scope, and such an approach could have violated legal professional privilege. The court concluded that the practice of copying the contents of hard drives, laptops, personal computers or emails for further review at the Authority’s premises (without the inspected company’s representative) is unacceptable under the applicable law. After the judgment was issued, our Authority informed on its website that no law had been violated in the discussed case, as all electronic evidence had been kept in sealed envelopes and not been reviewed by inspectors. So it should be emphasised that the court accepted our practice when it comes to working binary copy. However, UOKiK has modified its approach in line with the court’s guidelines and now reviews electronic evidence at the premises of inspected companies.
It is worth mentioning that searches of entrepreneurs’ premises are one of the most effective measures that may be used by the Office of Competition and Consumer Protection to gather evidence of unlawful practices. In 2017, UOKiK carried out eight dawn raids with search in competition-related cases (and an additional four in cases concerning contractual advantage). One of these searches was ordered in the course of the preliminary proceedings concerning the electronic sales market and was intended to verify whether the undertaking, Grupa Allegro (owner of online auction sales platform allegro.pl), is according favourable treatment to its own online store – in particular, by prioritising the products offered in search results – at the expense of other sellers. Companies that enjoy a strong position on the electronic sales market promoting their own prodcuts is an issue antitrust authorities all over the world to tackle on a daily basis. The investigation involving Grupa Allegro is still pending and no conclusions in terms of possible anticompetitive behaviour have been made.
Looking ahead, UOKiK’s biggest challenge remains the prosecution and detection of cartels. In order to reach that goal, in April 2017, UOKiK launched a pilot whistle-blower programme. This new investigative instrument provides an anonymous channel to report illegal practices. Within the framework of the programme, a dedicated hotline and email address have been set up for anyone who wishes to inform about a possible breach of competition law. In 2017, we received about 1800 notifications (790 emails, 1,000 phone calls and five meetings), a number of which pertained to possible competition infringements. In our opinion, the programme is effective and should be further developed and promoted. UOKiK also intends to work on legislative changes designed to ensure that the concept of a whistle-blower is incorporated into the provisions of antitrust law on a permanent basis.
Act on contractual advantage in practice
As mentioned above, in 2017, UOKiK gained new powers in the field of combatting unfair practices in the food supply chain. The first few months of the new law’s implementation proved to be start-up time with several preliminary proceedings following farmers’ and food processors’ notifications or media reports. In order to protect sources of information and identities of the notifiers, all of them were launched ex officio.
In the very first proceedings, UOKiK examined the raw milk supplies market. In the course of the proceedings, a dozen of Poland’s biggest dairies were sent a request for information. The analysis was based mostly on the documents submitted by the companies, such as standard supply agreements and statements by the milk producers’ organisations. Among the issues that attracted our attention were matters such as: exclusivity of supplies to only one diary; contract termination periods; clarity and unambiguity of its provisions, especially those specifying farmers’ consideration (eg, how the prices were determined and which parameters were taken into account).
Similarly to antitrust cases, UOKiK is entitled to conduct unannounced inspections of the premises of any entrepreneur, allegedly involved in unfair trading practices defined in the Act on contractual advantage or being in possession of information related to the case. The first such inspection was conducted in September 2017. The Authority’s officers visited the premises of four companies active in the industrial apples supply market: three apple collection centres and one apple processor.
After the abolition of sugar production quotas in the common market in the end of the 2016–2017 marketing year, certain modifications to sugar beet supply conditions were observed. UOKiK decided to investigate whether the new contracts are fair for agricultural producers, especially regarding transparency of price calculation. The south of Poland was of special concern due to the very limited possibilities of sugar beet producers to change buyer.
Autumn brought media signals that retail chains may try to take advantage of the situation in the butter market. The increases in butter prices were considered by experts to be the result of some global phenomena (eg, a higher demand in the US and a lower supply in New Zealand and Australia). Nevertheless, chain stores were believed to exert pressure on butter manufacturers to sell it cheaper and keep a high margin themselves. Therefore, UOKiK decided to check the reasons for the sudden increase in prices and why the pace of returning to their initial level is so slow. Since October 2017, UOKiK conducted five preliminary proceedings, in the course of which it asked large chains – Lidl Polska, Jeronimo Martins, Tesco Polska, Auchan Polska, Carrefour Polska – for their correspondence with butter suppliers, and to reveal the buying and selling prices of butter.
Due to the application of the Act only being recent, none of the above-mentioned proceedings were concluded nor decisions issued by the end of 2017.
In addition to these enforcement actions, UOKiK has been actively promoting the new law. Representatives of the Authority took part in several meetings with food producers from various sectors, such as bottled water producers, mill sector and flour producers, cereal producers, dairies organisations and fruits and vegetables producers.
The number of notifications and market signals has proved that adoption of the Act was necessary to solve substantial problems within the food supply chain. While there are civil law instruments that may be used by food suppliers to protect their interests against unfair buyers (or vice versa), they proved to not be fully satisfactory and effective. One significant reason is the ‘fear factor’ of smaller players in the food market: they are afraid of commercial retaliation and terminating cooperation by important buyers if they individually bring legal action before the court (eg, for delayed payments or unexpected delivery cancellation). The new law makes it possible to solve problems more globally without revealing the identity of an informant. According to the Act, powers of the Authority and procedures are almost the same as in antitrust cases, and that makes the law easier to execute by competition law enforcers.
Merger control – 2017 highlights
Summing up merger control in 2017, UOKiK instituted 228 merger and acquisition (M&A) cases and issued 206 decisions. The average time for completing merger control proceedings was maintained at a satisfactory level, and for the first stage of the procedure amounted to 33 days. Within this period, no transaction was prohibited, 205 received the green light for their implementation and one was cleared with conditions.
The conditional consent for the PGE takeover of EDF Polska concerned one of the largest companies on the energy market involved in the production, sale and distribution of electrical power. As market testing has proved necessary to reach the relevant conclusions, the Authority decided to proceed to the second phase of the proceedings. The analysis of the collected material has shown that the transaction might have led to a restriction of competition. In response to UOKiK’s objections, the company proposed a condition according to which, in the period 2018–2020, PGE will have to sell all the energy produced by Elektrownia Rybnik (Rybnik Power Station) on the market exchange. UOKiK agreed that the implementation of the entrepreneur’s proposal would offset the concentration’s negative impact on competition and greenlit the transaction.
The amendment to the Act on competition and consumer protection that entered into force in January 2015 has streamlined merger control procedures. Instead of the previous two-month deadline all cases followed, a two-step procedure is now in place that allows UOKiK to issue decisions in simple cases within a month while taking an additional four months to resolve more complex cases or those that require additional market analysis. In 2017, out of 228 merger and acquisition (M&A) cases, 11 were marked for further analysis within Phase II.
One of the decisions that was reached following a period of market testing concerned the takeover over Platon by Empik. Empik is a company that engages in the sale of goods such as books, newspapers and magazines, music, films, multimedia, electronic equipment and tickets for cultural events. Platon, on the other hand, is a book wholesaler and distributor. Both undertakings pursue their business on a nationwide scale. The information and data pertaining to the size of the relevant markets, as well as the shares of the undertakings involved in the concentration scheme and their competitors, were based solely on the estimates made by the applicant. The president of UOKiK considered it necessary to verify the information in question since the absence of reliable and publicly available data made it impossible for the concentration scheme to be assessed in an appropriate manner. As the analysis of the evidence gathered has shown that no significant restriction of competition will result from the contemplated concentration scheme, UOKiK approved the concentration.
As a rule, UOKiK strives to make the process of merger control as smooth as possible and to openly communicate with the parties to the transaction. Hence, where there is reasoned probability that competition will be significantly impeded by the notified transaction, UOKiK makes its reservations known by means of a competition concern. In 2017, UOKiK expressed such reservations towards four transactions. As a result, one transaction was cleared with conditions (described in detail above) and in three cases the parties withdrew from the transaction altogether. These three cases constituted the planned takeover of Calypso Fitness by Benefit Systems, offering sports and recreation services to employers under a fringe benefits scheme; the acquisition of control over Elester-PKP by PKPE Holding; and a transaction between companies providing a variety of services, including cable TV and internet access (UPC/Multimedia). The UPC/Multimedia case concerned the acquisition of the entirety of shares in Multimedia Polska by UPC Polska. Information gathered through market testing showed that the concentration may have the effect of restricting competition, which led the Competition Authority to present its objections to UPC Polska. In response, the company provided the Authority with additional data and explanatory notes. It also presented several proposals for changes to the transaction in order to secure a conditional approval. None of these proposals, however, would have prevented the transaction from having a detrimental impact. As a result, in March 2018, UPC Polska withdrew its application for concentration approval, which resulted in UOKiK discontinuing merger control proceedings in this case.
Finally, in 2017, UOKiK also issued three decisions sanctioning failure to notify intended concentration. Under the provisions of applicable laws, a transaction must be notified to the Office of Competition and Consumer Protection if it involves undertakings whose combined turnover generated in the preceding year exceeded €1 billion worldwide or €50 million in Poland. These three decisions issued in this regard in 2017 concerned the transaction between poultry farms (Ferma Drobiu Woźniak/Ferma Drobiu Borkows); the takeover of Empik Media & Fashion SA by MO; and the concentration of grocery wholesalers (Klementynka/Seza-Śrem). In the last case, the Competition Authority initiated proceedings against Bać-Pol after receiving information that one of its subsidiaries commenced a concentration scheme without seeking approval from UOKiK. The analysis subsequently conducted by the Authority confirmed these speculations. In 2012, the company known as Sezam-Śrem took over control of a part of the property of another company called Klementynka, with registered office in Wrocław. Since in 2015 Sezam-Śrem became a part of Bać-Pol, it was the latter company against which the proceedings were initiated. Despite the absence of a written takeover contract, UOKiK was able to determine that Sezam-Śrem acquired key assets from Klementynka (agreements and contracts with suppliers and key customers, core workforce and goods earmarked for immediate distribution) as well as all the relevant business secrets (including information on prices paid by counterparties, customer and creditor lists, as well as payment deadlines). As a result, UOKiK imposed a financial penalty in the amount of 527 thousand zlotys on Bać-Pol for the failure to submit a notification on intended concentration. An additional factor that was taken into account in the process of determining the penalty amount was the fact that the undertaking consciously violated the provisions of the Act on competition and consumer protection, the only attenuating circumstance being that it has only done so for the first time.