The Polish Competition Authority has been increasingly active as the market watchdog. In assuming his position as President of the Competition Authority in 2016, Marek Niechcial announced his commitment to strengthening competition law enforcement via a stricter approach, more investigations, and higher fines for wrongdoers. The last two years demonstrate that the Authority is working towards delivering on this promise.
The Polish Competition Authority (UOKiK) is increasingly active in investigating both entire market sectors and particular business entities. Between January and June 2018, the Authority conducted six dawn raids in more than ten locations (the raids affected distributors of musical instruments and accessories, sportswear and sports equipment, motor vehicles, photo equipment, and marketing agencies). This is a lot compared to previous years, especially when taking into account that each dawn raid involves considerable resources.
The current President of the UOKiK, when assuming his position, was very clear that in his view there should be more fines, and the fines should be higher. He criticized the concept of soft measures (such as contacting market participants, highlighting questionable behaviors, and providing an opportunity to have them adjusted before formal proceedings are initiated and fines imposed). He explained that in case of serious anti-trust infringements, administrative proceedings and fines are necessary, as they “bring order to the market.” Finally, he emphasized that the penalties are far too low. The law allows fines of up to 10% of the annual turnover, but the base amounts are in practice much lower – usually around 0.1-1% and never higher than 3%. According to the current President of the UOKiK, this is too low, and a base amount of 6% is more appropriate. Two years into his term, it can be seen that the UOKiK is implementing his suggestions. The total amount of penalties imposed in 2017 was PLN 222 million – the highest in the last six years. To compare, the total amount of penalties in 2016 was PLN 107 million, in 2015 it was PLN 47 million, in 2014 it was PLN 86 million, and in 2013 it was PLN 135 million. Also, the Authority announced that it will propose changes to its guidelines regarding the calculation of fines, so as to increase the percentages.
Liability of Managers
In July 2018, and although it has had the power to do so since 2015, the UOKiK announced that for the first time it is considering imposing fines for competition law infringement not only on the companies involved, but also on the individuals responsible. A penalty can be imposed on a manager (a member of the management body or other person holding a managerial position) who intentionally allows a business entity to enter into an anticompetitive agreement. The maximum penalty is PLN 2 million (approximately EUR 460,000). Until now, this power has not been used. Recently, however, the UOKiK has initiated proceedings against 17 fitness services businesses (fitness clubs and an operator of sports and recreation packages), citing potential market division. In a public statement, the UOKiK noted that the evidence it has collected may indicate collusion between seven managers of the fitness companies and initiated proceedings against these individuals. The proceedings – both in relation to the business entities and the managers – are pending and whether the individuals concerned will ultimately be fined remains to be seen. However, this shows that the UOKiK is heading towards a stricter approach towards individuals.
Promotion of Whistleblowing
Finally, the Authority is committed to introducing and promoting the concept of whistleblowing. Last year it introduced a pilot program in this respect. A whistleblower is a person, often an individual (such as a past or present employee, client, even a competitor; but not someone responsible for an infringement, as such people should rather make use of leniency programs), who is in possession of useful information and/or evidence regarding a cartel or other anticompetitive conduct. The UOKiK has made a special telephone number and e-mail address available for whistleblowers wishing to deliver such information while keeping their identity secret if they wish to. The Authority is also in favor of some form of legal protection for whistleblowers to secure them from potential negative consequences. It is worth noting that this is not a purely Polish concept, but is based on solutions already used in other countries. Whistleblowing in general is becoming increasingly popular with competition authorities around the world as yet another effective tool to uncover secret cartels.
By Malgorzata Urbanska, Partner, CMS
This Article was originally published in Issue 5.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.