Recently, the President of the Office of Competition and Consumer Protection (Polish name: Urząd Ochrony Konkurencji i Konsumentów “UOKiK”) announced the initiation of antimonopoly proceedings in connection with the suspected coordination of actions by the Polish Basketball League and its member clubs against their players. The aim of the collusion was, among other things, to agree the terms of termination of players' contracts and to withhold payment of their salaries.
The Polish authority consulted its Lithuanian counterpart, which is conducting proceedings in a similar case. It also consulted the European Commission regarding the matter. In addition, the Portuguese antitrust authority is investigating a similar case against football clubs suspected of having made a prohibited agreement whereby they undertook not to recruit players from rival clubs.
This demonstrates that problems where competition law and employment law meet are becoming more and more widespread. Furthermore, they extend beyond the borders of Poland and affect sports worldwide, also appearing in other sectors of the economy, as can be seen in cases conducted around the world (e.g., the US). For this reason, we have decided to highlight several interesting aspects that may be involved in such cases.
Who does UOKiK protect?
Firstly, UOKiK is a public authority dedicated to undertaking actions in the public interest.
Yet, considering that potentially higher salaries for employees (players) and increased costs for businesses (clubs) may result in higher prices (e.g., for tickets) for consumers (fans) in the future, the question arises as to whether UOKiK is actually protecting the public interest or the individual interests of particular players in this case. Is this a situation where employees (players) and consumers (fans) have two different goals and their interests are opposed?
Looking for an answer to this question, it should be remembered that greater competition among undertakings and independent efforts to attract employees not only affects the individual situation of a business entity or employee. Greater "mobility" of employees may have a positive impact on the market of products and services because it would create a better market offer. In other words, using competition law terminology, general "welfare" (including that of consumers) will be greater.
What can the players gain from the case at the end of the day?
It is worth considering what effects the proceedings conducted by UOKiK may have with regard to the situation of players whose salaries have been reduced or with whom employment has been terminated.
If UOKiK finds that an agreement between business entities has violated competition law, the agreement becomes invalid. In the case under consideration, does this mean that the particular actions taken by the clubs towards players employed under employment contracts or civil law contracts may become invalid?
Under employment law, the rule is that the sanction of invalidity does not apply to employers’ statements on the termination of employment relationship. As the Supreme Court has repeatedly pointed out, a legal act, such as the termination of an employment contract, has been regulated in the Polish Labour Code, so it cannot be argued that the carrying out of an act as such is contrary to the law (e.g., the judgment of 8 December 2016, II PK 271/15).
In addition, Article 58 of the Civil Code (sanction of invalidity) does not refer to every contradiction with the law, but only (which is often overlooked) to the contradiction of the content of the legal act itself with the law. In our case, it is taken for granted that the content of the termination notices or agreements was correct. What was incorrect were the reasons for them and the circumstances around them (the agreement between the clubs).
For the above reasons, the invalidity of the agreement between the business entities, even if it was in fact the basis for the club's decision to terminate the contract with the player, will not result in the invalidity of the termination of the employment contract itself.
Moreover, it will also not be the basis for challenging the termination. According to Article 45 § 1 of the Labour Code, only in the case of a violation of the provisions on termination of employment contracts would an employment court reinstate the employee to work or award compensation. Competition law rules do not meet this requirement (they are not rules on the termination of employment contracts).
What is the situation in the case of civil law contracts? It is almost identical due to the above-mentioned construction of Article 58 § 1 of the Civil Code. An attempt can be made to invalidate the contract on the grounds that the actions of the club were contrary to the ‘principles of social existence’. However, in practice, courts very rarely use this option.
The players are actually left with the option of seeking damages only, and this would be not only by applying general principles laid down in the Civil Code. They can also do it on the basis of the act on claims for repairing damage caused by infringing competition law under which the infringing party (in our case, the relevant club) will be obliged to make good for the damage.
As compared Polish competition law to the Civil Code (Art. 471 or Art. 415), the latter option is more advantageous because Article 7 Polish Protection of Competition and Consumers Act provides for the presumed existence of a causal link between the violation of competition law and the damage suffered by a given person. Furthermore, a final decision of UOKiK recognizing a practice as infringing competition laws is binding on the court.
However, the most difficult part of the case is proving the fact of suffering damage and the amount of damage (the EU guidelines are not particularly helpful in this respect). In the case under consideration, damage resulting from the unlawful agreement between the clubs could be, for example, the lack of employment opportunities with a competing club. Yet, in such event, we will be, nearly always, dealing with potential damage, which is not compensated under Polish law. Even with the reversed burden of proof, it is hardly possible to prove that if not for the agreement the player would have found employment with a rival club.
To recap, even the annulment of the agreement made by the clubs in breach of competition rules will not affect the individual contracts of the players or the terms of such contracts. Taking advantage of the precedential nature of the pending proceedings, it is worth considering whether this state of affairs is fair. This is because we are dealing with a situation in which, despite the recognition as unlawful of the act that could have led to the carrying out of further individual acts aggravating the situation of particular persons (players/employees), those actions remain fully effective.
To sum up, it is worth using the above-mentioned proceedings before UOKiK as a basis for a discussion on whether, in certain cases, the invalidation of an agreement infringing competition rules should not also influence the legal situation of particular individuals and the effectiveness of legal acts performed in relation to them, connected with an unlawful activity of business entities.
What more could UOKiK do?
As we have indicated, the subject of the relation between competition law and employment law has been raised for quite a long time in the EU and around the world, but it has not been widely analysed by the Polish antimonopoly authority until now. The current proceedings conducted by UOKiK are still pending and the final outcome has not been determined. But it is of great significance that the Polish office has already expressed such a definitive opinion on matters pertaining both to competition law and employment law. In its announcement, UOKiK made it clear: "We do not question the right to introduce savings and financial restrictions, but each time such actions should result from the actual and individual economic situation of a particular club. Pursuant to antitrust law, agreements on salaries or agreements on not competing for employees are prohibited."
It would be helpful if UOKiK, following the actions of its US counterpart, had issued guidelines for HR departments, describing the potential violation of antitrust law in the context of hiring. The US guidelines explicitly indicate that agreements between companies not to solicit employees, as well as agreements on the amount of remuneration offered to employees, are prohibited. The prohibition also applies to the sharing of confidential information relating to other terms and conditions of employment.
In addition, it is worth noting that sharing information on employees is often necessary in connection with planned merger and acquisition transactions. Therefore, it will helpful if UOKiK states what type of information could be exchanged in this context.
By Hubert Hajduczenia, Senior Associate, and Agnieszka Staszek, Associate, DLA Piper