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 2019. The President of the OCCP conducted numerous dawn raids and instigated several antitrust proceedings. The antitrust enforcement activities reflect EU trends since vertical restraints and anticompetitive infringements in the online sector were under focus.
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.
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 six decisions concerning unfair use of contractual advantage. Some other proceedings are still ongoing.
In 2019 as in past years, the OCCP focused on consumer protection, in particular in the banking and financial sectors. But we 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, the vast majority of cases were closed in Phase I, which resulted in a reduction in the average length of proceedings. At the same time, we saw a steady number of merger cases decided in Phase II. In 2018 there were eight such decisions, as well as eight in 2019.
As regards cartels, the OCCP continued to focus on bid-rigging. According to publicly available information, in 2019 the OCCP initiated 10 new proceedings concerning alleged bid-rigging. In 2019 the authority issued six decisions concerning local bid-rigging arrangements, and in five of them imposed fines on infringers. Besides bid-rigging decisions, no cartels matter was terminated in 2019. However, the OCCP instigated some new proceedings; therefore, its cartels enforcement pipeline seems to be promising.
i Significant cases
Since the 2017 OCCP's decision concerning the cartel between producers of fibre board and particle board, there was no major cartel decision issued in 2019. The OCCP issued bid-rigging decisions concerning illegal arrangements in local tenders, concluded mostly between family members. However, some interesting large-scale proceedings are ongoing.
Alleged market sharing by fitness clubs
In June 2018, the OCCP instigated the antimonopoly proceedings against 16 companies operating fitness clubs and the company offering benefit packages for employees (including sports and recreation packages). The OCCP alleges that the companies entered into a market sharing agreement. Interestingly, the OCCP also instigated the proceedings against individuals since it found evidence confirming that the managers of six companies participated in the agreement. The proceedings are ongoing.2
Alleged sharing of Warsaw market by energy providers
The OCCP instigated proceedings against four providers of thermal energy in Warsaw and investigates whether the companies entered into market sharing, price-fixing and bid-rigging arrangements. Based on evidence, collected among other things during dawn raid, the authority alleges that the companies agreed between themselves to stop competing and focus on their basic core activities (i.e., energy production for one of the companies and sale of the energy for the other).3
Alleged market sharing by truck dealers
In April 2019, the OCCP instigated antimonopoly proceedings against dealers of DAF trucks. The OCCP considers that these companies entered into market sharing agreement. The proceedings were also instigated against the managers of the companies.4
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.
The Polish Competition Authority (PCA) launched the pilot whistle-blowing programme in April 2017 with the aim of increasing the detection of prohibited agreements between undertakings.5 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 numerous calls and emails informing about potential irregularities pertaining both to the competition and consumers laws. 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 2019.6 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.
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 lawbelow we also provide a description recently initiated proceeding.
Resale price maintenance in online sales of printers
In late December, the OCCP imposed fine of approximately 1.4 million zlotys on Brother, the manufacturer of printers and other electronic devices for imposing minimum resale prices on online resellers.7 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 prices of their competitors. The manufacturer cooperated with the OCCP as it submitted leniency application and entered into settlement, therefore the initial level of fine was decreased by 40 per cent. The case is noteworthy for two reasons, first it was initiated as a result of a whistle-blower complaint, second the settlement procedure was applied for the first time.
Ongoing resale price maintenance proceedings
The PCA instigated several other proceedings concerning potential resale price maintenance. These include antimonopoly proceedings: (1) against Solgar, a Polish distributor of supplements;8 (2) producers and distributors of bicycles;9 (3) a Polish manufacturer of scooters;10 and (4) a manufacturer of nail polishes.11 In some of these proceedings, restrictions on resale prices concern online resellers. Interestingly, in case against Solgar, charges were brought also against managers.
ii Trends, developments and strategies
As regards the enforcement of restrictive agreements, no substantial case law development was seen in 2019. 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 2019. But the President of the OCCP instigated proceedings against a leading online shopping platform in Poland – Allegro.12 It alleges that Allegro used the platform in a way favouring its own online shop. The proceedings are still ongoing.
Given the ongoing proceedings concerning vertical restraints, it is expected that the OCCP will continue to focus on vertical restraints. Further, the substantial number of dawn raids conducted in 2019 shall be rationally expected to translate into a corresponding number of antimonopoly proceedings. These will be instigating not only against companies but also against individuals – managers. It follows from the numerous public speeches of the OCCP officials that the OCCP will always verify whether an individual by its acts or omission contributed to a company's competition law infringement. So far the OCCP has used its competences to fine managers. However, given the number of ongoing proceedings in which charges were brought also against managers, one cannot exclude the possibility that the first decision imposing a fine on manager will be issued this year.
Sectoral competition: market investigations and regulated industries
In 2019, the OCCP published information concerning two market investigations, regarding the market for waste management in municipalities in 2014-201913 and press printers.14 Both reports reviewed the competitive structure of the respective markets.
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.15 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 follow the approach to issue at least one report from market investigation each year. In the recent years the investigations have been oriented to consumer services, such as insurance,16 investment funds17 or pharmacies.
Given the increasing focus of both Polish and EU policymakers on the environmental and sustainability issues, the OCCP may focus on analysing market conditions within this segment of economy, in particular as the OCCP has already made a comprehensive survey of waste management services in Poland.18
The European Commission and EU courts adopted several rulings concerning state aid enforcement in Poland in 2019 that are worth noting.
In May 2019, the General Court quashed the Commission's decision from June 2017 declaring Polish tax measure for the retail sector a incompatible state aid.19 The General Court decided that the Commission incorrectly considered the tax as a selective measure. This is because, according to the General Court, the Commission established the incorrect reference system of taxation while it failed to establish differentiation between retail undertakings in a comparable legal and factual situation in the context of the redistributive objective set by Poland for tax measure used. As a result, the General Court concluded that the Commission's classification of the measure as state aid was proved to be erroneous. The Commission appealed the judgment to the Court of Justice of the European Union.
In December 2019, the Commission approved under EU State aid rules the Important Project of Common European Interest which also covered Poland.20 €240 million of state aid within this project is aimed to be granted for three Polish projects. Those projects concern all segments of the battery value chain. Apart from Poland, the programme covers six Member States – Belgium, Finland, France, Germany, Italy and Sweden.
Commission also approved regional aid worth €36 million for LG Chem's investment in electric vehicle factory in the Dolnoslaskie region.21 The assessment of the aid was performed on the basis of the Regional Aid Guidelines 2014–2020.
i Significant cases
The OCCP issued four conditional decisions in 2019. These concerned acquisitions of petrol stations by BP Europa,22 of cinemas by Multikino's,23 a subsidiary of Vue International and pharmacies by DOZ and Panathea.24
In its conditional clearances the OCCP primary relied upon the structural commitments. In BP Europa/Arge, Multikino/Cinema 3D as well as Panathea/Dolnośląska Grupa Apteczna the OCCP ordered divestiture of certain assets on the local markets for relevant services. In turn, a mix of structural and behavioural commitments was adopted in the proceedings concerning Air Products' acquisition of ACP Europe and Eurocylinder, which were subsidiaries of ACP that specialise in liquid carbon dioxide. The behavioural commitments consisted of Air Products obligation to maintain the prices of liquid CO₂ unchanged in relation with three main customers of this product, until the end of relevant contracts. At the same time, the OCCP permitted the increase of its prices pursuant to the formula included in the commitments, if the prices of raw materials increased. During the proceedings, for the first time, the OCCP market-tested the commitment proposed by the notifying party.
As regards gun-jumping cases the OCCP continues to take the broad approach of the OCCP to assuming its jurisdiction in cases concerning acquisition of assets and parts of business of other undertakings. Such an approach is evidenced by the case of an acquisition of twelve stores by Dino Polska (owner of a supermarkets chain) from its franchisee.25 The transaction consisted of three steps: (1) purchase of real estate from the franchisee; (2) lease of stores to the franchisee; and (3) acquisition of remaining tangible and intangible assets from the franchisee. Dino Polska notified the transaction after implementing first two steps, however the OCCP found that the concentration was already implemented after the acquisition of real estate with a retail outlet. According to the OCCP, Dino Polska, as the owner of a supermarket chain, could easily adapt the retail outlet for the purpose of its business activity and continue the operation of the shop located in the outlet, in particular as it was previously operated under its brand by its franchisee. As a result, the OCCP imposed on Dino Polska a fine amounting to 100,000 zlotys.
Broad approach to the notion of acquisition of a part of a business of another undertaking was confirmed by the Court of Competition and Consumer Protection (CCCP) which in October 2019 quashed the OCCP's record-level (527,000 zlotys) fine26 for by acquiring business of another undertaking (i.e., Klementynka) without the required OCCP clearance. The evidence gathered indicated that Sezam (i.e., an entity that merged into Bać-Pol) had acquired the most important assets of Klementynka, such as key employees, contracts with key suppliers and customers, and goods designated for immediate shipment, which were Klementyka's main business assets. The CCCP agreed with the OCCP on that Sezam indeed performed a business transaction that constituted concentration under the Polish law. However, at the same time the CCCP concluded that the OCCP erred in establishing the turnover relevant to verify the Polish notification thresholds, hence it was not able to confirm that the concentration was actually notifiable.
In spring 2019 the OCCP also launched an investigation to verify whether Agora, a Polish media conglomerate, did not fail to notify an acquisition of joint control over Eurozet, the owner of several Polish radio stations. In February 2019 Agora acquired, together with a Czech Investment fund SPS Ventures, Eurozet and as a result held 40 per cent of Eurozet's shares (the remaining 60 per cent belong to SPS Ventures). The OCCP is verifying whether 40 per cent stake in Eurozet, together with certain accompanying rights could constitute control for Agora. At the same time, in November 2019 Agora notified to the OCCP the intent to acquire sole control over Eurozet.
The OCCP continues to investigate that Gazprom and five other companies on the allegation that they breached Polish competition law by financing the creation of Nord Stream 2 gas pipeline without obtaining prior merger clearance. 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. This, in the OCCP's opinion, could constitute an attempt to circumvent the lack of consent to create a joint venture, given the similar objective of the JV and financing arrangements.
2019 also marked a record level fine related not only to the merger control proceedings, but also in infringements of competition law in general. In November 2019, Engie Energy, one of the companies which allegedly infringed the competition by allegedly implementing a notifiable without the required OCCP's clearance, was fined with a penalty of €40 million for not providing information required by the OCCP.27 The OCCP came to a conclusion that the fact that the information Engie was requested to provide could have been crucial to the proceedings.
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.28 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 33 days, and remained at a level comparable to that seen in 2017 and 2018, while the Phase II proceedings lasted on average 266 days what evidences a significant increase in comparison to 2018.
The OCCP issued a record 267 merger control decisions in 2019, 260 of which were Phase I decisions.
We saw a steady number of complex merger cases in 2019. In eight cases, a decision was adopted after Phase II proceedings. A further seven cases are currently being investigated in Phase II.29 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 is also widely using statements of objections (SOs), an institution that was introduced in the 2015 review. In 2019, an SO, whereby the OCCP informs the notifying party of its views regarding potential competition concerns resulting from a concentration, was issued in four proceedings.
There were no prohibitions issued by the OCCP in 2019. In concentrations where competition concerns arise, in 2019 the OCCP issued conditional decisions in four cases. No notifying party withdrew its notification in 2019.
After a quieter 2018, in 2019, the OCCP was more active in gun-jumping enforcement cases, issuing two fines for breach of the standstill obligation. In addition, one new proceeding was instigated in this regard. In 2018, we saw no fines for implementation of the concentration without the required OCCP clearance.
It is not anticipated that there will be a major shift in the current merger control policy in 2020.
As seen in 2017, 2018 and 2019 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. In contrast to the enforcement in the area of the anticompetitive agreements, in 2019 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 and Wojciech Podlasin are senior associates at Linklaters C Wiśniewski i Wspólnicy sp k.
7 Decision of the OCCP of 30 December 2019, No. RKR-10/2019.
19 Judgment of the General Court of 16 May 2019 in joined cases T-836/16 and T-624/17.
20 EC press release dated 9 December 2019, available in English at: https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6705.
21 EC press release dated 28 January 2019, available in English at: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_744.
22 Decision of the OCCP of 4 June 2019, No. DKK–121/2019.
23 Decision of the OCCP of 17 May 2019, No. DKK-104/2019.
24 Decision of the OCCP of 18 November 2019, No. DKK-230/2019.
25 Decision of the OCCP of 31 December 2019, No. DKK- 270/2019.
26 Decision of the OCCP of 5 June 2017, No. DKK-86/2017.
27 Decision of the OCCP of 7 November 2019, No. DKK-217/2019.
29 As at 7 February 2020.