New guidelines on penalties for competition law infringements issued by the Polish Antimonopoly Authority (UOKiK)

Competition law is not only a concern for big companies - smaller firms and even charities have been among the recent targets of the Polish Antimonopoly Authority (UOKiK) and the European Commission investigations, with the prospect of fines of up to 10 % of turnover where infringements are discovered. It is now vital for every manager to have a working knowledge of the competition law and be aware of the consequences, especially in the case of capital groups under one controlling entity.
 
On 9 April 2024 new guidelines on penalties for competition law infringements were issued by the Polish Antimonopoly Authority (UOKiK). The UOKiK’s previous guidelines on penalties for infringing the competition law did not provide guidance on how the Office would calculate penalties in a situation where the penalty should be imposed both on a direct infringer in Poland and on its parent company abroad. The liability of a parent company for anti-competitive practices was introduced into the Polish competition law in May 2023.
 
Before May 2023, entrepreneurs who directly infringed the anti-competitive prohibitions in Poland could be given a fine of up to 10 % of their turnover in the financial year preceding that in which the fine was imposed. Additionally, penalties of up to PLN 2 m could have been imposed on managers who intentionally allowed a company to infringe such prohibitions.
 
Under the current rules, if you run a Polish company which belongs to a capital group and you infringe Poland’s competition rules, you could end up being fined up to 10% of the annual turnover of the entire capital group. This is because an infringement committed by a Polish company is considered to be committed also by “a company that exercises a decisive influence on the Polish company” which in practice means a parent company. Under the current rules, a decisive influence is deemed to be exercised if a parent company holds more than 90% of the Polish company’s share capital.
 
Not only a parent company can end up being fined for competition law infringements committed by its daughter company in Poland but also individual managers of the parent company can face serious penalties. A penalty of up to PLN 2 m can be imposed on managers of the parent company who intentionally allowed for the competition law to be infringed.
 
The recent amendment of the competition law, however, did not provide detailed rules for calculating penalties imposed on more than one company within the same capital group where the liability of the parent company is based only on the fact that it exercised a decisive influence. Now, the new rules provide guidance on how these penalties should be calculated.
 
How will UOKiK impose a penalty on a capital group?
 
Regarding the question of how many penalties the UOKiK will impose if it brings charges against more than one company from the same capital group as part of a single competition-infringement case, the UOKiK states that:
 

• • The principle will be to impose a single combined fine in proceedings against an economic entity that has directly infringed competition law and its parent company. This does not mean, however, that the UOKiK rules out the possibility of imposing more than one penalty. It is possible that the UOKiK would consider imposing more than one penalty in a situation where two group companies have an independent stand-alone role in a competition law infringement.
   
  An equally important question concerning penalty amounts is the turnover to be taken as the basis for calculating the penalty.
   
  The main issue in this question is whether the turnover of the entire capital group (i.e. all the economic entities that influence the direct infringer of competition law) or the economic entity or entities held liable for the infringement should be taken into account for the calculation of the penalty at the first stage (i.e. before taking into account other influencing factors). In this regard, the UOKiK stated that:
   
  • • When calculating the amount of the penalty, it will take into account the “relevant turnover” (i.e. the turnover of the economic entity or entities directly involved in the infringement in the last calendar year of the infringement period).
    • The turnover of the entire group, however, will be taken into account when calculating the maximum penalty that can be imposed (i.e. 10% of the turnover achieved in the financial year preceding the year when the fine is imposed).
     
    What are the anti-competitive practices under Polish law?
     
    It is worth reminding about the most common anti-competitive practices under Polish law.
     
    1. Illegal contacts and agreements 
    
    The most flagrant example of illegal conduct infringing competition rules is the creation of a cartel between competitors, which usually involves price fixing. A cartel is where two or more businesses agree not to compete with each other; this conduct can take many forms, including price fixing, market sharing, rigging bids or restricting output of goods and services. These practices are forbidden because they restrict competition. They can take many forms and need not be officially approved by the companies involved. The most common examples of these practices are:
     
    • • price fixing (price fixing is where two or more businesses agree on what prices they will charge to avoid having to compete which each other. Price fixing is not limited to agreements between competitors setting a specific price for goods or services – it also includes competitors agreeing to fix any part of a price or to set price according to an agreed formula);
      • market sharing (market sharing occurs when businesses collude to carve up markets and not compete for the same customers. This could be in relation to the sale of a specific product, a geographic area or a particular type of customer);
      • agreement on customer allocation;
      • agreement on production limitation;
      • distribution agreements between suppliers and re-sellers where, for example, the price charged to customers is imposed by the supplier;
      • limiting access to the market or eliminating from the market entities which are not parties to the agreement.
       
      All agreements and exchanges of information between you and your competitors that reduce your strategic uncertainty in the market (around your production costs, turnover, capacity, marketing plans, etc.) can be seen as anti-competitive.
       
      2. Abuse of a dominant position
       
      If your company has a large market share, it holds a dominant position and must take particular care not to:
       
      • • charge unreasonably high prices which would exploit customers;
        • charge unrealistically low prices which may drive competitors out of the market;
        • discriminate between customers;
        • force certain trading conditions on your business partners;
        • prevent the formation of conditions necessary for the emergence or development of competition;
        • share markets according to territorial, product, or entity-related criteria;
        • limit production, sale or technological progress to the prejudice to contractors or consumers.

         
        How can I avoid cartel conduct or abuse of dominant position?

         

        - Make sure that you and your staff are familiar with the requirements of the competition rules.
        - Think carefully about who you are, or may be, in competition with, especially if sub-contracting is involved.
        - Do not fix prices, do not agree discounts or any matters relating to price with your competitors.
        - Do not agree to restrict output in any way, or to allocate customers or geographic markets between competitors.
        - Do not exchange pricing, how much you plan to produce in the future, customer information or which markets you sell into with your competitors.
        - If you are approached by another business to discuss pricing, allocating customers, bids for contracts or restricting outputs you should raise an objection straight away.
        - Review internal documents, policies and procedures for compliance with the Polish competition law and seek independent legal advice. 
        
        Some agreements are not prohibited - if they can be justified as benefiting consumers and the economy as a whole. Usually, it requires legal analysis by competition lawyers.