Proposal to increase the powers of the President of the Office of Competition and Consumer Protection (UOKiK).

In 2018, the European Parliament and the Council adopted Directive 2019/1, which aimed to give national competition authorities in Member States a minimum set of common powers so that they could enforce competition law more effectively and ensure the proper functioning of the internal market. More than two years have passed since then, and the period during which Member States should implement the provisions of the above-mentioned Directive into their national legal systems is coming to an end.

Therefore, with the deadline approaching, the President of the Office of Competition and Consumer Protection (UOKiK) has revealed his ideas for the practical implementation of EU regulations into the Act on Competition and Consumer Protection, which forms the basis for the activities of this authority in Poland. As is usually the case on such occasions, there is also a noticeable attempt to introduce other changes not directly related to the Directive. Given that the scope of the President of the Office of Competition and Consumer Protection's proposals is quite significant, below we present those assumptions which, in our opinion, may have the greatest impact on the activities of entrepreneurs.

LIABILITY OF DOMINANT ENTREPRENEURS

In our opinion, the proposal with the potentially greatest impact on the activities of entrepreneurs, in particular large ones with a dispersed structure, is the introduction of liability for competition law infringements on dominant entrepreneurs, i.e. those exerting a decisive influence on a dependent entrepreneur.

As indicated by the President of the Office of Competition and Consumer Protection (UOKiK), the above regulation should be understood to mean that, in the case of a subsidiary, the entrepreneur exerting decisive influence is not only the parent company, but also the grandparent company and subsequent companies exerting decisive influence on it. The scope of liability is therefore extremely broad.

As a result of the introduction of this regulation, if a violation is found to have been committed by an entrepreneur exercising decisive influence, the President of the Office of Competition and Consumer Protection will be able to impose a joint penalty on that entrepreneur and on the subsidiary entrepreneur, and the liability for the joint penalty imposed on these entrepreneurs will be joint and several. Importantly, for the purposes of calculating the combined penalty, the turnover of the undertaking exercising decisive influence and its subsidiaries will be taken into account, i.e. it should be assumed that the turnover of the entire capital group will be taken into account.

This change may have a significant impact on the amount of financial penalties imposed. Given the increased activity of the antitrust authority in recent times, as well as the significantly higher penalties imposed by this authority than in recent years, this circumstance should further emphasise the importance of compliance, especially in large corporate structures.

A NATURAL PERSON WHO HAS CEASED TO CONDUCT BUSINESS ACTIVITIES MAY STILL BE PUNISHED

Another important proposal is to broaden the definition of an entrepreneur whose activities are subject to assessment by the President of the Office of Competition and Consumer Protection (UOKiK). This authority proposes that a natural person who has ceased to conduct business activity should also be considered an entrepreneur. This measure is understandable, especially in cases concerning the protection of collective consumer interests, where there have been situations in which the President of the Office of Competition and Consumer Protection (UOKiK) was unable to hold natural persons accountable, as they often deliberately ceased their business activity. For this reason, this solution will undoubtedly contribute to closing a certain systemic gap in this area.

GREATER RISK FOR MEMBERS OF BUSINESS ASSOCIATIONS

Further proposals by the President of the Office of Competition and Consumer Protection provide a basis for imposing financial penalties on business associations in cases where a given infringement is related to the activities of its members.

It is proposed that the penalty imposed on an association of entrepreneurs may not exceed 10% of the total turnover of each member of that association operating on the market affected by the infringement in the financial year preceding the year in which the penalty is imposed.

Importantly, in the event of the association's insolvency, the association will be obliged to call on its members to make contributions to cover the amount of the penalty, and if these contributions are not made within the time limit set by the President of the Office of Competition and Consumer Protection (UOKiK) in an amount covering the entire amount of the penalty, he may demand payment of the penalty from each of the entrepreneurs whose representatives were members of the decision-making bodies of that association.

However, the President of the Office of Competition and Consumer Protection will not be able to demand payment of the penalty from entrepreneurs who prove that they did not implement the decision of the association of entrepreneurs causing the infringement, or were not aware of the existence of such a decision, or actively distanced themselves from it before the proceedings were initiated.

Undoubtedly, the proposed amendment is justified, as until now the issue of penalising members of business associations has been a kind of grey area in which the President of the Office of Competition and Consumer Protection could not act entirely freely. This means that entrepreneurs participating in industry organisations should strengthen their ongoing supervision of the activities of such organisations in order to respond adequately and immediately to any activities that are questionable from the point of view of competition law. Failure to do so may make it difficult to prove that they are not responsible for infringements of the law.

CHANGE IN THE RULES FOR CALCULATING PENALTIES FOR PROCEDURAL VIOLATIONS

Until now, the penalty for any procedural violations, such as failure to provide information to the President of the Office of Competition and Consumer Protection (UOKiK), could amount to a maximum of EUR 50 million, regardless of the entrepreneur's turnover, which could raise reasonable doubts.

The President of the Office of Competition and Consumer Protection proposes that the maximum ceiling be set as a percentage of turnover (a financial penalty not exceeding 3% of the turnover achieved in the financial year preceding the year in which the penalty is imposed).

In addition, it is proposed to introduce the possibility of imposing a financial penalty on an entrepreneur if the entrepreneur, even unintentionally, fails to comply with a decision of the President of the Office of Competition and Consumer Protection.

INTRODUCTION OF PERIODIC FINANCIAL PENALTIES

One of the proposals of the President of the Office of Competition and Consumer Protection is also to introduce periodic financial penalties to compel entrepreneurs to comply with their obligations. To this end, the President of the Office of Competition and Consumer Protection could impose on these entrepreneurs, by way of a decision, a periodic financial penalty not exceeding 5% of the entrepreneur's average daily turnover achieved in the financial year preceding the year in which the penalty was imposed for each day of delay.

This solution already exists in the EU competition law system and appears to be an effective tool in combating delays in the fulfilment of imposed obligations. However, a final assessment of this solution should be postponed until the publication of specific draft regulations in this area.

ADMISSIBILITY OF STRUCTURAL REMEDIES

One of the more significant changes proposed by the Polish competition authority is to provide for the possibility of imposing structural remedies.

This means that the President of the Office of Competition and Consumer Protection (UOKiK) will be able, if the circumstances of the case so require, to apply any measure aimed at interfering with the structure of an undertaking. This is undoubtedly a kind of nuclear weapon that could significantly affect the freedom of business activity.

Although the President of the Office of Competition and Consumer Protection emphasises that, due to the greater invasiveness of this solution into the internal structure and strategy of an undertaking, he will only be able to use this tool in exceptional circumstances, i.e. when other measures could prove ineffective or when they would be equally effective but more burdensome for the entrepreneur, we express serious concern about the legitimacy of applying such measures in practice. We can only hope that this tool will remain a last resort, used in exceptional situations, in an extremely cautious and balanced manner.

JUSTIFICATION OF ALLEGATIONS ALREADY AT THE STAGE OF INITIATING PROCEEDINGS

The President of the Office of Competition and Consumer Protection also proposes that the justification of allegations should be presented already at the stage of initiating proceedings, rather than, as has been the case so far, at the final stage (which, however, has not yet been regulated in the Act).

This is incomprehensible, as the justification of allegations should provide the entrepreneur with a set of necessary information and evidence that determines the position of the competition authority with regard to the activities of a specific entrepreneur. At the initial stage of the proceedings, the scope of this information may be limited. For this reason, it seems that the proceedings of the President of the Office of Competition and Consumer Protection (UOKiK) regarding the presentation of allegations, as regulated, may adversely affect the entrepreneur's right of defence and is contrary to the purpose of the Directive itself. In our opinion, the current solution, whereby the grounds for the allegations are provided at the final stage of the proceedings, should be continued, while at the same time regulating this issue in the Act.

CHANGES RELATING TO INSPECTIONS/SEARCHES

The President of the Office of Competition and Consumer Protection (UOKiK) also proposes to increase the participation of his Office's employees in searches. It has been proposed that searches be carried out jointly by police officers and Office employees (currently, such searches are carried out by police officers, with Office employees participating).

An even more important issue seems to be the proposal to allow searches to be continued at the Office's headquarters in the presence of the entrepreneur. In the past, a similar practice (but without the participation of the entrepreneur) was often used by the President of the Office of Competition and Consumer Protection, especially in the case of searching the contents of e-mail. As a result of the case law issued by Polish courts, such action was deemed unacceptable, which significantly prolonged the time of the inspection/search at the entrepreneur's premises and forced the authority to engage more personnel. For this reason, the proposed solution seems to address this problem by reducing the time of paralysis of the entrepreneur's work, while ensuring that the entrepreneur can control the correctness of the search process.

LESS PROTECTION OF CORRESPONDENCE WITH LAWYERS

Until now, despite legal doubts, the President of the Office of Competition and Consumer Protection (UOKiK) has generally not analysed the entrepreneur's correspondence with their in-house lawyer or external advisor during a search. Unfortunately, the President of the Office of Competition and Consumer Protection (UOKIK) proposes to change this situation to the detriment of entrepreneurs and to limit the prohibition on searching correspondence containing legal advice only to correspondence with an external lawyer.

Undoubtedly, this approach will significantly affect the comfort of in-house lawyers' work and the use of their services in the field of competition law by entrepreneurs.

SUMMARY

The solutions proposed by the President of the Office of Competition and Consumer Protection (UOKIK) are very broad in nature, sometimes going beyond the implemented Directive or not fully reflecting its purpose. In essence, they significantly increase the powers of the competition authority, while limiting some of the existing powers of entrepreneurs (such as the right to protect correspondence with an in-house lawyer) .

We hope that despite the tight work schedule and the approaching deadline for implementation of the Directive, it will be possible to conduct thorough consultations on specific provisions with market participants, so that the solutions developed ensure the effectiveness of the antitrust authority while preserving the fundamental rights of entrepreneurs. This is all the more justified given that legal certainty and ensuring the quality of the law are values that legislators should pursue in the disrupted post-COVID market reality.