The Public Competition Enforcement Review: Poland
Mr Tomasz Chróstny was appointed as the new President of the Office of Competition and Consumer Protection (OCCP) in January 2020 after the resignation of the former President – Mr Marek Niechciał. Before his appointment, Mr Chróstny was the Vice President of the OCCP and was responsible for consumer protection matters.
We observe that Polish antitrust enforcement has developed in 2020. The President of the OCCP conducted numerous dawn raids and instigated several antitrust proceedings. The antitrust enforcement also concerned individuals since for the first time the President of the OCCP used its powers to impose fines on the managers of the companies.
Since late June 2017, claiming damages for harm suffered as a result of a competition law infringement is supposed to be easier. The Antitrust Damages Directive has been finally transposed into Polish law, and the Polish Damages Act came into force on 27 June 2017. The objective of this Act is to facilitate the recovery of claims concerning legal presumptions, procedural facilitations and quantification of harm. The Act applies not only to cartel infringements but to all other infringements of competition law, including prohibited vertical agreements and abuse of a dominant position. Furthermore, it covers not only EU competition law infringements, but also infringements based solely on Polish competition law. The Private Enforcement Act introduces a number of solutions that should facilitate seeking compensation from competition law infringers through private enforcement. Nonetheless, despite the Act being in force since mid-2017, such cases remain relatively rare in Poland, which is mainly as a result of low cartel detection.
Another important development was the enactment of a new law aimed at limiting the use of contractual advantage and granting new powers to the OCCP. The Act on Countering Unfair Use of the Contractual Advantage in Trade of Agricultural and Food Product came into force on 12 July 2017. It lists examples of practices that may be considered as an unfair use of contractual advantage. These practices pertain to agricultural and food products and include, inter alia, unjustified contract termination, a unilateral right to withdraw from a contract and the unjustified extension of a payment term. Pursuant to this Act, the OCCP has the power to initiate proceedings in these cases ex officio, and in cases of infringement it is entitled to impose a fine of up to 3 per cent of annual turnover. Since the entry into force of the Act, the President of OCCP issued 11 decisions concerning unfair use of contractual advantage. Some other proceedings are still ongoing.
In 2020, as in past years, the OCCP focused on consumer protection, in particular in the banking and financial sectors. But we also observe some developments in the antitrust enforcement exemplified by a substantial number of dawn raids and an increased interest in the vertical restraints, in particular resale price maintenance. As regards merger review, although the vast majority of cases were closed in Phase I, we observe a growing number of more complex reviews in Phase II.
As regards cartels, the OCCP continued to focus on bid rigging. According to publicly available information, in 2020 the President of the OCCP initiated six new proceedings concerning alleged bid rigging. In 2020 and in the beginning of 2021 the authority issued 10 decisions concerning bid-rigging arrangements, and in eight of them imposed fines on infringers. Besides bid-rigging cases, the President of the OCCP also issued significant cartel decisions in which companies and their managers were fined.
i Significant cases
Since the 2017 OCCP's decision concerning the cartel between producers of fibre board and particle board, the President of the OCCP decided in 2020 and early 2021 on two major cartel cases and also fined managers of the companies involved in the cartel.
Alleged bid rigging, price collusion and market sharing on a Warsaw heat market
The case concerned market-sharing, price-fixing and bid-rigging arrangements concluded between two heat providers in Warsaw, PGNIG Termika and Veolia. The President of the OCCP established that the agreement lasted from 2014 until 2017. While PGNIG Termika escaped the fine by filing the leniency submission, Veolia was fined approximately €26 million. This was the total fine imposed on a company directly involved in the execution of the infringement and its parent company that not only was aware of the agreement but was also one of the initiators. Therefore, the parent company was also found to be directly involved in the infringement. There is no parental liability doctrine in the Polish competition law yet but the planned implementation of the ECN+ Directive will bring substantial changes in this regard. This case is also novel because the President of the OCCP for the first time imposed fines on Veolia's manager (PGNIG's manager escaped the fine as they benefited from the leniency granted to the company).2
Alleged market sharing by fitness clubs
In January 2021, the President of the OCCP issued a decision concerning 16 companies operating fitness clubs and a company – Benefit Systems – offering benefit packages (including sports and recreation packages). Companies were found to exchange information and engage into market sharing. In particular, they agreed on locations of fitness clubs to be opened. Benefit Systems had a role of supervisor and coordinator of the market sharing agreement. At the same time, it realised its own business strategy consisting of acquiring fitness club chains and promoting its MultiSport benefit package among the companies participating in the agreement. The OCCP imposed fines of over 32 million zlotys. Further, the authority also sanctioned six managers who were involved in the anticompetitive arrangement.3
Market sharing, price fixing and bid rigging by association of marketing agencies
In September 2020, the President of the OCCP issued a commitment decision concerning the Association of Marketing Communication (SAR). The President of the OCCP questioned SAR's actions consisting of obliging agencies to resign from participation in tenders that did not envisage a rejection fee for providing results (such as a presentation) of a creative process. Further, the authority also considered that SAR had initiated a system of exchange of information on tenders. SAR withdrew from the practices questioned by the President of the OCCP and accepted commitments. These require SAR to emphasise in its documents that participation in tenders should be an individual decision of every potential participant and not to make available to its members tools increasing transparency regarding tenders.
Alleged bid rigging by producers of railway sleepers
In April 2020, the OCCCP fined six producers of railway sleepers.4 The case was interesting because producers acted as a consortium, which in principle under public procurement law is a permissible cooperation. The OCCP explained that lack of an objective justification for the establishment of a consortium may lead to it being considered bid ridding. It was not the first decision in recent times targeting consortiums; at the end of 2019, the OCCP came to an analogous conclusion in the case regarding undertakings providing air dump services for vaccines for foxes.5 Furthermore, similar decisions may be expected in relation to the undertakings operating on the waste market, as the OCCP declared taking action in that sector.
ii Trends, developments and strategies
The detection of the most harmful anticompetitive agreements is the declared objective of the OCCP. To facilitate this, the authority tries to encourage individuals and undertakings to inform it about identified irregularities. The OCCP introduced a whistle-blower system as well as published guidelines on how to submit a leniency application.
The Polish Damages Act entered into force in 2017. It facilitates bringing claims for damages for competition law infringements; thus, we may expect that those who suffered harm as a result of such anticompetitive conduct may be incentivised to bring their claims to court. Despite this legislative development, private enforcement cases remain rare in Poland.
In 2020 the OCCP issued two sets of guidelines: guidelines concerning methodology on imposing fines for individuals and clarifying how the rules will be applied in individual cases, and guidelines clarifying how the OCCP will use its powers during the unannounced inspections. The former generally replicated the model of fining of undertakings for antitrust infringements, with a set of rules on how the basic fine and subsequently mitigating and aggravating factors will be applied by the OCCP. The latter can be regarded as a document codifying the current practice of the OCCP as to its dawn raid practice.
The OCCP launched the pilot whistle-blowing programme in April 2017 with the aim of increasing the detection of prohibited agreements between undertakings.6 This policy is aimed at allowing the OCCP to obtain information from anonymous individuals who have become aware of an illegal practice. Individuals are able to inform the authority through its dedicated telephone number or email address and provide evidence of competition-restricting practices. It follows from publicly available information that the authority has received 5,418 calls and emails informing about potential irregularities pertaining both to the competition and consumers laws.7 The OCCP is also working on legislative changes designed to ensure that the concept of a whistle-blower is incorporated into the provisions of Polish competition law on a permanent basis.
To increase the effectiveness of the whistle-blower system, the OCCP launched a new online platform for potential whistle-blowers in December 2019.8 It aims to simplify the provision of information to the authority and at the same time to protect the anonymity of a whistle-blower. The President of the OCCP receives numerous complaints, and some of them gave rise to the antitrust proceedings (e.g., an antimonopoly proceedings concerning resale price maintenance against printers' manufacturer). Taking into consideration all the advantages of the online platform, it seems that it will be quite widely used by potential anonymous informants.
Implementation of the Damages Directive
The Polish Damages Act, implementing the EU Damages Directive, entered into force in 2017. the Act covers not only competition law infringements relating to the European market, but also those related solely to the national market, and consequently does not multiply the regimes for claiming damages for competition law infringements. The most important aspects of the Act aim at facilitating the recovery of claims concerning legal presumptions, procedural facilitations and quantification of harm.
The Act raises hopes as to the facilitation of compensation claims for competition law infringements. So far, bringing a successful compensation claim has been difficult due to the demanding tort law rules regarding evidence. The Act does not extend the powers of the OCCP, but intends to supplement the authority's actions. Following its entry into force, undertakings infringing competition law will face not only fines imposed by the OCCP, but also will be exposed to the risk of civil proceedings that could result in potentially substantial amounts of damages to be paid.
Implementation of the ECN+ Directive
In January 2021, the President of the OCCP presented the proposition of amendments to the Polish Competition Act aiming to implement the ECN+ Directive.
The scope of changes includes the introduction of parental liability doctrine to the Polish competition law. In case of the competition law infringement, the President of the OCCP will be able to impose a fine jointly on the company infringing the competition or abusing the dominant position and on the company having a decisive influence over the infringer. The proposition also regulates imposed on associations of undertakings which is not currently covered by the provisions of the Polish Competition Act. According to the proposal, the association may be fined up to 10 per cent of the total turnover of its members operating on the affected market in the financial year preceding the year in which the penalty was imposed. The planned changes also cover leniency, structural remedial measures, dawn raids and procedural guarantees for companies such complex regulation of legal professional privilege, statement of objections (until now it has not been covered by the provisions of the Polish Competition Act). The deadline for the implementation of the ECN+ Directive already lapsed on 4 February. Thus it should be expected that the draft bill will proceed quickly and will be enacted during this year.
Given the declarations of the OCCP regarding increased cartel detection, we may expect that various means already implemented (for instance, the leniency plus and whistle-blower system) will bring some results in terms of antitrust enforcement in Poland. More activities in the area of antitrust is also a prerequisite for the development of private enforcement of the competition law. Some damages claim proceedings are ongoing; nevertheless, the implementation of the EU Damages Directive is expected to further increase the rate of these claims.
Antitrust: restrictive agreements and dominance
i Significant cases
Given rather undeveloped OCCP's case law below we also provide a description recently initiated proceeding.
Resale price maintenance in online sales of music equipment
In November 2020, the President of the OCCP imposed a fine of approximately 0.5 million zlotys on Yamaha, the producer of music equipment, for imposing minimum resale prices on online resellers. The President of the OCCP established that the company monitored retail prices and intervened in case of non-observance of minimum prices. The retailers also contributed to monitoring and informed the manufacturer about the prices of their competitors. The manufacturer cooperated with the OCCP as it submitted a leniency application and entered into a settlement, so the initial level of the fine was decreased by between 50 and 10 per cent. It was the second time the settlement procedure was applied. The first application took place at the end of 2019 in a similar case concerning printer manufacturer Brother.9
Ongoing resale price maintenance proceedings
The OCCP instigated several other proceedings concerning potential resale price maintenance. These include antimonopoly proceedings: (1) against Fellowes Polska, an authorised Polish office equipment distributor;10 (2) pharmaceutical wholesalers;11 (3) a Polish manufacturer of scooters.12 In some of these proceedings, restrictions on resale prices concern online resellers. Interestingly, in case concerning pharmaceutical wholesalers, the OCCP run down raid in headquarters of six companies' headquarters.
Ongoing proceeding regarding an abuse of dominant position on the e-commerce market
In December 2019, the President of the OCCP started an investigation concerning the practices of the largest e-commerce platform in Poland – Allegro.pl. After complaints coming from many sellers using Allegro, the President of the OCCP conducted the search of the company's premises and established that illegal practices may have taken place. The President of the OCCP believes that Allegro might have used information on the platform's operation, unavailable to other sellers, to better position and display its own offers from the Official Allegro Shop in the search results. The Official Allegro Shop could also use some promotional features which were unavailable to other sellers. Considering Allegro's strong position on the market, these actions could be potentially regarded as an abuse of dominant position according to Polish competition law.
ii Trends, developments and strategies
As regards the enforcement of restrictive agreements, no substantial case law development was seen in 2020.
Besides the proceedings described above and bid-rigging decisions mentioned earlier, the OCCP issued one decision concerning resale price maintenance in the online sector. Again, similarly as with cartels, the OCCP instigated numerous antimonopoly proceedings.
No decision on abuse of the dominant position was issued in 2020.
Given the ongoing proceedings concerning vertical restraints, it is expected that the OCCP will continue to focus on vertical restraints. These will be instigating not only against companies but also against individuals – managers. Last year, following numerous public speeches by OCCP officials that the OCCP will always verify whether an individual by its acts or omission contributed to a company's competition law infringement, the first decision imposing fine on a manger was issued and not long after other managers were fined. It is possible that another decision to fine a manager will be issued this year.
Sectoral competition: market investigations and regulated industries
In 2020, the OCCP published information concerning market investigations, regarding the market for waste market.13 This is a continuation of its investigation of the waste market (the first report was published in August 2019). The study concerned the market situation in the years 2014–2019 and covered all installations using the most popular mechanical-biological method of waste treatment in Poland – 171 installations in total. Most of them are managed by operators with a predominance of public capital, mainly local government, and about 30 per cent of the companies operating the installations are private owners.
The OCCP found that in 2019 the fees for municipal waste increased by almost one-third on average, which is a sharp increase as compared to recent years. The main reason was the increase of the prices for collecting the municipal waste by regional municipal waste treatment facilities that are key actors in municipal waste treatment in Poland.
The OCCP suggested establishing a regulatory body that would control costs and prices and potentially introduce maximum prices, in particular in areas where, as a result of existing market structures the development of competitive mechanisms in the short term is unlikely.
i Trends, developments and strategies
Given the OCCP's policy of declared openness and transparency, guidelines on publishing results of market inquiries have been issued.14 In the guidelines, the authority announced that information on the results of all market inquiries will be published. The scope of the information presented to the public may vary, depending on the educational value of the results and the scope of business secrets of undertakings questioned in the course of an inquiry. While deciding on the scope of information, the OCCP should also take into account the efficiency of proceedings conducted by the authority in which the results of the market inquiries may be used.
The OCCP continues to issue at least one report from a market investigation each year. In recent years the investigations have been oriented to insurance,15 investment funds,16 waste management in municipalities17 and press printers.18
The covid-19 outbreak heavily impacted 2020 and was the background for most of the decisions issued last year. In 2020, the European Commission adopted an unprecedented number of decisions concerning state aid in Poland.
In response to the social and economic situation resulting from the pandemic, the Polish government prepared the Financial Shield programmes aimed at assisting the economy. According to the government's estimates, the value of support offered under the Financial Shield programmes amounts to over 312 billion zlotys. A large part of the support constituted state aid and was notified to the European Commission as such.
Major covid-19 related state aid schemes were administered by the Polish Development Fund and took the form of repayable advances for SME19 and liquidity loans20 and preferential loans21 that had a write-off element, in principle, for large enterprises. All of those schemes were approved by the European Commission on the basis of the covid-19 Temporary Framework, while the write-off component of the preferential loan was based on Article 107(2)(b) TFEU, considering that the write-off could amount to the damage that a given undertaking incurred as a result of the pandemic. All the schemes were approved by the European Commission in April and May 2020.
In late 2020 and early 2021, Poland was in the process of establishing new covid-19 related programmes aimed at addressing the adverse economic effects of the covid-19 pandemic on the Polish economy. For instance, in December the European Commission cleared the new scheme for SMEs comprising principally two measures: limited amounts of subsidy for micro-enterprises and support for uncovered fixed costs for small and medium-sized enterprises. The total estimated budget of the scheme was approximately 13 billion zlotys.22
As for the individual aid granted under the covid-19 Temporary Framework in December 2020, the European Commission has approved a state aid fund of approximately 2.9 billion zlotys to the LOT, the Polish national airways. The aid measures consisted of a subsidised loan and a capital injection.23
There were also two interesting non-covid-19 related state aid litigation cases in 2020.
In December 2020, the Court of Justice of the European Union dismissed the appeal in the case concerning a fund established to compensate Poczta Polska (the Polish Post Office) for providing a universal postal service throughout the country in 2013–2015. The competitor of Poczta Polska, namely Inpost appealed against the European Commission's approving the aid for Poczta Polska, and later also against the General Court's judgment upholding the decision. The Court of Justice of the European Union did not concur with the appeal, rejecting the arguments according to which there was a breach of the principles of non-discrimination, equal treatment and transparency in the award of public contracts, as well as an incorrect interpretation of the provisions of the EU Postal Directive.24
In March 2020, the Court of Justice of the European Union set aside the General Court's judgement and referred the case back to the General Court in the case concerning the transformation of the military airport in Gdynia into a civil one. In 2015, the European Commission issued two subsequent decisions in which it considered financing of the project as incompatible with internal market and ordered its return. Gdynia municipality and airport brought action before the General Court seeking annulment of the European Commission's decisions on the grounds that the parties were not given an opportunity to submit effectively comments on the applicability and possible effect of those guidelines. The General Court annulled the decision claiming that the European Commission cannot, without infringing the procedural rights of the interested parties, base its decision on new principles introduced by a new legal regime (i.e., a new set of soft law) without inviting those interested parties to submit their comments in that regard. After review of the appeal the Court of Justice of the European Union stated that the General Court erred in law when it held that the parties' right to submit comments in circumstances of the case was an essential procedural requirement the infringement of which leads to the annulment of the decision without establishing that the infringement of that right could have affected the meaning of that decision.25 As a result, the judgment was quashed and the case was referred for review anew by the General Court.
i Significant cases
The OCCP issued one conditional decision in 2020. The decision concerned the market of cable television and providing services for accessing the internet, more specifically acquisition of Multimedia Polska by Vectra. So as to reduce a risk to competition, Vectra was obliged to sell its network infrastructure in eight towns where the combined shares of Vectra and Multimedia were the largest. Vectra was also obliged to enable clients to change operators without the need to incur costs in 13 other towns.26 This has been one of the longest merger control proceedings in the history, lasting almost 1.5 years.
In 2020, the OCCP issued three decisions regarding gun jumping with the most significant one being the one concerning Gazprom.
In October 2020, the OCCP imposed an unprecedented fine of €6.45 billion on Gazprom for financing the creation of the Nord Stream 2 gas pipeline without obtaining prior merger clearance.27 In the same decision the OCCP also imposed multimillion fines on five other companies. In 2015, the companies notified the OCCP of their intention to create a joint venture responsible for designing, financing and constructing a pipeline in the Baltic Sea. The OCCP raised concerns with regard to this concentration in July 2016 on the grounds that it could lead to a significant impediment of competition concerning gas supply to Poland. The notifying parties withdrew the notification. In April 2017, the OCCP instigated preliminary proceedings to re-examine the case as it learned that former JV parents signed the contract to finance the construction of Nordstream 2 pipeline.
In the decision the OCCP found that despite withdrawing the notification, the companies never departed from their intention to create the JV and only altered the form of transaction to the contractual one. The OCCP observed that the loan agreements had an identical model of cooperation and structure of their financial contribution to the JV, the parties reserved to themselves a wide range of rights that would enable them to interfere with the Nord Stream 2's activity. Furthermore, the OCCP submitted that because of establishing a pledge on the stocks of Nord Stream 2, the companies were effectively rendered quasi-stockholders of the company. The OCCP concluded that the concentration took place, yet in a different format. As a result, the OCCP applied the concept of the JV very widely, in a manner not seen in the Polish merger control cases before.
In January 2021 the OCCP banned the Agora's, a Polish media conglomerate, acquisition of Eurozet, the owner of several Polish radio stations. The OCCP claimed that the transaction would result in the emergence of a strong radio group that could irreversibly disturb the competition on the local and national radio advertising market and radio broadcast market. The OCCP also found that the transaction could lead to duopoly and marginalisation of the smaller competitors' undertakings, as after the transaction advertisers could use only the services of only Agora and its main competitor RMF FM to reach the optimal number of recipients irrespective of the other smaller and fragmented competition.28 As a part of the proceedings the OCCP did not accept the remedies proposal made by Agora.
ii Trends, developments and strategies
Significant amendments in 2015 introduced a number of significant changes to the Polish merger control system, including two-phase proceedings, revised rules on turnover calculation and amendments to procedural aspects related to remedies.29 It proved to have positive effects for business, in particular as it resulted in reducing the average length of proceedings before the OCCP. The average Phase I proceedings in 2019 lasted 32 days, and remained at a level comparable to that seen in 2017 and 2018, while the Phase II proceedings lasted on average 282 days what evidences a significant increase in comparison to 2018. As of January 2021, the OCCP has not yet published statistics regarding the average length of merger control proceedings in 2020.
The OCCP issued a record 251 merger control decisions in 2020, 248 of which were Phase I decisions.
In three cases, a decision was adopted after Phase II proceedings. In the extended review proceedings, the OCCP continued to widely use its market-testing competencies aimed at verification of the relevant market definitions proposed by notifying parties or at obtaining views on the notified transaction from other stakeholders. The OCCP largely relies on the results of such tests. Market testing significantly increases the duration of Phase II proceedings, which on average last approximately nine months.
The OCCP continues using statements of objections (SOs), an institution that was introduced in the 2015 review. In 2020, an SO, whereby the OCCP informs the notifying party of its views regarding potential competition concerns resulting from a concentration, was issued in one proceedings.
There was one prohibition and one conditional decision issued by the OCCP between 2020 and January 2021. No notifying party withdrew its notification in 2020.
In 2020 the OCCP actively pursued procedural merger control infringements, both in terms of gun-jumping and non-compliance with disclosure obligations. The OCCP issued three fines for implementing concentrations without the required OCCP clearance. Two decisions in 2020 concerned breaches of disclosure obligation in response to the OCCP's request of information. It is noteworthy that the OCCP issued a fine of approximately €26,000 for non-participation in the market test performed by the OCCP in a Phase II merger control proceeding.30 The other fine of €50 million was imposed on Gazprom, which did not provide the OCCP with documents requested in the gun-jumping case concerning the Nordstream 2 pipeline.31
It is not anticipated that there will be a major shift in the current merger control policy in 2021.
As seen in 2018 and 2019, 2020 also proved that consumer continued to be the OCCP's enforcement priority. But, Polish antitrust enforcement has been developing: the OCCP often conducted dawn raids and instigated numerous antitrust proceedings. Following EU trends, the antitrust enforcement focused on vertical restraints and restriction of competition in the online environment while also starting to impose fines on managers. In contrast to the enforcement in the area of the anticompetitive agreements, in 2020 the OCCP has not issued any decision concerning abuse of dominant position. Considering the relative strength of the Polish mergers and acquisitions market, the OCCP was active in the field of merger review. The OCCP also paid increased attention to cases pertaining to closing concentrations before the required clearance.
1 Anna Laszczyk is a senior associate and Wojciech Podlasin is a managing associate at Linklaters C Wiśniewski i Wspólnicy sp k.
2 Decision of the OCCP of 3 December 2020, No. DOK-5/2020.
4 Decision of the OCCP of 9 September 2020, No. DOK-2/2020.
5 Decision of the OCCP of 18 December 2019, No. DOK-2/2019.
19 The European Commission's decision of 27 April 2020 in case SA.56996.
20 The European Commission's decision of 25 May 2020 in case SA.57306.
21 The European Commission's decision of 29 May 2020 in case SA.57054.
22 The European Commission's decision of 23 December 2020 in case SA.59763 updated by the decision of 12 January 2021 in case SA.60940.
23 The European Commission's decision of 22 December 2020 in case SA.59158.
24 Judgment of the Court of Justice of the European Union of 17 December 2020 in joined cases C-431/19 P and C-432/19 P.
25 Judgment of the Court of Justice of the European Union of 11 March 2020 in case C-56/18 P.
26 Decision of the OCCP of 17 January 2020, No. DKK-25/2020.
27 Decision of the OCCP of 6 October 2020, No. DKK-178/2020.
28 Decision of the OCCP of 7 January 2021, No. DKK-1/2021.
30 Decision of the OCCP of 7 September 2020, No. DKK-158/2020.
31 Decision of the OCCP of 29 July 2020, No. DKK-141/2020.