Poland

Magorzata Modzelewska de Raad, Pola Ciupa and Joanna Kruk-Kubarska

Wierzbowski Eversheds

Competition authority

New president

At the beginning of June 2008 a new president was appointed to head the Polish Office of Competition and Consumer Protection (OCCP). The previous president of the OCCP, Marek Niechcia, was replaced by Magorzata Krasnodebska-Tomkiel.
The new head of the OCCP has announced plans to achieve greater effectiveness in detecting violations of anti-monopoly law. It may be translated into more frequent inspections of undertakings (including ‘dawn raids’ at corporate headquarters). This is evident from the new president’s announcement that the OCCP intends to buy new software that will make it easier to search electronic resources. This may make it possible to conduct inspections of a greater number of companies.
The new head of the OCCP is also planning to impose stiffer fines for violations of competition regulations. In the past, undertakings found to be abusing a dominant position or taking part in unlawful agreements have been subject to fines typically in the range of 2 per cent to 5 per cent of their annual revenues. These fines did not come close to the upper limit allowed by law, which is 10 per cent of annual revenue.
While threatening undertakings violating competition regulations with higher fines, the new OCCP president has also announced that greater emphasis will be placed on the fine reduction programme. Those who decide to inform the OCCP of an illegal agreement that they are a party to may expect to have their penalty reduced or even waived.

New priorities

The new Competition Policy for 2008-2010, which has been adopted recently by the Polish Council of Ministers, provides for the following objectives: more efficient detection of anti-competitive practices and monitoring of state aid along with more effective methods of merger assessment.

New law

New Competition and Consumer Protection Act

A new Competition and Consumer Protection Act was adopted on 16 February 2007, and came into force 21 April 2007.
The scope of regulation has not changed. The new statute maintains most of the provisions of the current statute. The major changes are:
• The anti-monopoly proceedings will no longer be instituted by (binding) motion. An institution of a notice on prohibited practices has been introduced instead. Previously, most of the proceedings were initiated by motion and most of them resulted in a decision on the non-infringement of the competition law. The new legal construction aims at improving the functioning of the OCCP by enabling its president to limit the conducted proceedings to those regarding major infringements of the competition law and having the most significant impact on the market. The new institution of a notice on prohibited practices may induce the proceedings but will not bind the president of the OCCP.
• The President of the OCCP is empowered to impose fines on the undertakings infringing the collective consumer interests. Under the previously binding law, the fines could be imposed for competition restricting practices but not for the infringements of the collective consumer interests. The new statute stipulates a penalty up to 10 per cent of the undertaking’s turnover.
• The new statute increased turnover thresholds in excess of which an intended concentration requires notification to the president of the OCCP. The new thresholds are: e1 billion of the worldwide aggregated turnover or e50 million of the national aggregated turnover. Such change is expected to result in the president of the OCCP being obliged to control only most significant concentrations, those which indeed affect competition on the market.

Regulation on dawn raids

The regulation on dawn raids of 17 July 2007 replaced the 2001 regulation. The essential change under the new regulation is that now companies in Poland may be dawn raided by the anti-monopoly authority not only in the course of the anti-monopoly proceedings but also in the course of the proceedings on infringement of the collective consumer interests which also are within the anti-monopoly authority’s competence.

Regulation on turnover calculation

The Regulation of 17 July 2007 on turnover calculation for the undertakings taking part in the concentration provides for a method of turnover calculation and highlights the factors that need to be taken into account in the process of determining of turnover for the purpose of merger control procedures.

Regulation on notification of intention of concentration

The Regulation of 17 July 2007 on notification of intention of concentration provides in detail the obligatory conditions to be fulfilled be the notification submitted with the OCCP, including the list of documents and information that need to be provided by the parties to the concentration. Moreover, the regulation stipulates the amount of mandatory fee to be paid in order to institute anti-monopoly proceedings.

Regulation on exemption of certain vertical agreements from the prohibition of competition restricting agreements

The Regulation of 19 November 2007 on exemption of certain vertical agreements from the prohibition of competition restricting agreements concerns agreements concluded between non-competing undertakings operating on different levels of trade and allows undertakings whose market share is below 30 per cent to benefit from a ‘safe harbour’. It means that the agreement will be automatically exempted from the prohibition imposed on agreements restrictive of competition if the relevant market share ceiling of 30 per cent is not exceeded.
However, the regulation does not apply to two sets of restrictions. The first set concerns hard-core restrictions. Companies are not allowed to use such restrictions in their agreements (for example, a producer may not impose on its distributors resale prices). Secondly, the regulation excludes certain obligations from the coverage of the block exemption even though the market share threshold is not exceeded. However, the block exemption continues to apply to the remaining part of the vertical agreement if that part is severable from the non-exempted obligations. The most important concerns non-compete obligations – requiring distributors to resell only the brands of one supplier – when their duration exceeds five years. Such agreements are not covered by the regulation as they may have a strong foreclosing effect on the market.

Other new regulations

Besides the regulations listed above, in 2007 the following new regulations were adopted in the field of competition law:
• the Regulation on exemption of certain specialisation agreements and R&D agreements from the agreements restricting prohibition of competition;
• the Regulation on the exemption of certain agreements regarding technology transfers from the agreements restricting prohibition of competition; and
• the Regulation on the exemption of certain agreements between insurance companies from the agreements restricting prohibition of competition.

Procedural developments

Leniency

A leniency programme was introduced into the Competition Act in 2004. There have been two successful leniency applications since. Both of the fine reductions were granted in the price-fixing cases in the market for construction materials:
In September 2006, Castorama took advantage of the leniency programme in the case where the record penalty of total 110 million zlotys (approximately €28.2 million) was imposed on the parties to the prohibited agreement between Polifarb (a paint and varnish producer) and seven DIY stores: Bricomarche, Castorama, Leroy Merlin, Nomi, Obi, Platforma and Praktiker. Castorama was fined 50,000 zlotys (approximately €12,820).
In January 2008 Tikkurila (a paint and varnish producer), was fined 2.172 million zlotys (approximately €600,000). Although this was far from the maximum fine of 10 per cent of annual turnover, this was the highest fine imposed on the party to the minimum resale price and fixed margin agreement involving Tikkurila and 84 wholesalers.

Decreasing number of anti-monopoly proceedings

Due to the fact that the anti-monopoly proceedings are no longer instituted by motion, their number has significantly decreased. Three hundred and sixty-one proceedings were conducted in 2006, compared to only 248 in 2007. The notice on prohibited practices, which has replaced the motion-triggered proceedings, gave rise to instituting only 37 anti-monopoly proceedings in 2007.

Procedural fine record

The OCCP decided to impose its highest ever fine for provision of misleading information during a dawn raid. In decision of 30 April 2007, Cementownia Ozarów was fined 2 million zlotys (over e600,000) for non-disclosure of a document as well as attempts to mislead the authority during one of the most spectacular dawn raids exercised by the OCCP, which took place in May 2006 at the 13 premises of the 11 cement producers. The companies, according to the OCCP, were engaged in a price-establishing and market-partitioning cartel.

Merger review

Since Poland became a member of the EU, the Polish OCCP has applied the Council Regulation No. 139/2004 on the control of concentration between undertakings (the EMCR).
Relying on article 9 of the ECMR, the OCCP has submitted three requests for referral so far. Only one of them resulted in the actual referral of the case by the Commission to the OCCP.
The first referral concerned a concentration in which Burda and Hachette Filipacchi Presse were to acquire joint control of a newly created joint venture. On 21 March 2006, the OCCP requested the referral of the proposed concentration with a view to assessing it under Polish national competition law, pursuant to article 9(2)(a) of the Merger Regulation. This request was withdrawn on 25 April 2006.
The second referral concerned the Linde and BOC concentration. On 27 April 2006 the OCCP has submitted a request for referral pursuant to article 9(2)a of the Merger Regulation as a result of which the deadline of the first phase was extended to 6 June 2006. The OCCP took the position that the concentration threatens to significantly affect competition on a number of local markets in Poland, in particular, the bulk and cylinder supply of various industrial gases, helium retail supply as well as the supply of calibration mixtures and refrigerants. By a letter dated 18 May 2006, the OCCP withdrew its request for referral against the background of remedies.
At the beginning of 2007 the Commission referred a supermarket merger case to the OCCP president under article 9.3 of the EMCR. The Commission has decided to refer the case in its entirety as it considered the proposed concentration would only affect competition in Poland. As a result of the proceedings, the OCCP president gave a conditional clearance for the concentration between Carrefour Nederland and Ahold Polska.

Conditional merger clearances

Recently, the OCCP has begun to take advantage of the provisions of the Competition and Consumer Protection Act, which provisions allow for conditional clearances for concentrations. The undertakings under such decisions shall usually dispose its assets in a certain way in order to prevent potential infringements of competition on local markets. There have been three such conditional clearances delivered by the OCCP recently.

Multikino and Silver Screen (June 2008)

Multikino, which had intended to purchase Silver Screen, is a part of ITI Holdings media holding. Mulitikino operates 14 multi-theatre cinemas and Silver Screen operates five multi-theatre cinemas in Poland. The OPCC president’s investigation identified concerns in the market in Gdynia where the merged entity would have a strong market position. In order to address the concerns, the condition was imposed on Multikino that none of the companies of the ITI Holdings would purchase any rights to the multi-theatre cinema in the constructed shopping mall in Gdynia (Wzgórze Gdynia). Moreover, Multikino was committed to submit annual information on the number and location of multi-theatre cinemas in Gdynia operated by Multikino or any of the ITI Holdings companies. This obligation would expire upon the opening of Wzgórze Gdynia shopping mall.

Carrefour Nederland and Ahold Polska (July 2007)

The case was referred to the OCCP president under article 9.3 of ECMR.
Carrefour Nederland had intended to purchase 100 per cent of shares in Ahold Polska, which operates 183 Albert supermarkets, 15 Hypernova mini-markets and four petrol stations.
In the course of the proceedings the OCC president examined the potential effect of the merger on the relevant markets: national retail market for consumer goods, local markets for hypermarket, supermarket and discount shops (HSD markets) and local oil retail markets. It was determined that the concentration would result in a significant restriction of competition in five local HSD markets. In order to remedy the potential increase of the market share, Carrefour was committed to transfer various rights (property right, perpetual usufruct, lease rights) to supermarkets operating in those five local markets.

CRH Deutschland and E. Schwenk (June 2007)

CRH Deutschland had intended to purchase 100 per cent of the shares of E. Schwenk and its 11 subsidiaries and to purchase 50 per cent of E. Schwenk’s shares in four other companies, including Res-Bet operating in Rzeszów.
The business activity of the interested companies overlapped in eight local concrete sales markets in Poland. According to the OCCP president, the concentration would horizontally affect three local concrete sale markets in the area of Warsaw, Rzeszów and Bydgoszcz. In order to remedy the potential increase in the market share, CRH Deutschland committed to sell its Res-Bet shares to an independent buyer by the end of 2008.

Abuse of dominance

The OCCP statistics show repeatedly that the majority of the competition cases derive from the violation of the prohibition on abusing a dominant position. The year 2007 was not an exception. There have been 59 final decisions on anti-competitive practices issued by the OCCP president; 50 of those decisions referred to the various forms of abuses of dominant position.
At the end of 2007 the OCCP president imposed its highest ever fines for abuses of dominant position.
In October 2007 PZU Zycie was fined over €15 million for applying contractual provisions in its agreement for collective insurances, which made it difficult to terminate an agreement or switch to another insurer.
In December 2007 TP SA, the national telecom operator, was fined over €23 million for limiting telecom traffic, which could weaken the provision of telecom services by other operators.

Prohibited agreements

A great number of the decisions or proceedings refer to resale price maintenance. It is striking how many of these conducts have been detected or fined recently by the OCCP in the building sector.

DIY supermarkets prohibited agreement

The Court for Competition and Consumer Protection basically upheld the decision of the anti-monopoly authority to fine a paint and varnish producer and seven Do-It-Yourself supermarkets for having entered into a prohibited agreement.
In September 2007 the Office of Competition and Consumer Protection president imposed heavy fines on Polifarb Cieszyn-Wrocaw, which had initiated a paint and varnish resale price agreement with Bricomarche, Castorama, Leroy Merlin, Nomi, Obi, Platforma and Praktiker. The system included rebates for those supermarkets that maintained the agreed resale prices and suspension of delivery for those that breached the agreement.
The Court for Competition and Consumer Protection upheld the OPCC president’s decision on the merits but reduced fines for two of the DIY supermarkets, namely Leroy Merlin (from €9.716 million to €5.059 million) and Saint Gobain (former Platforma; from €2.617 million to €1.339 million). The other fines remained unchanged (Polifarb: €9.550 million, Praktiker: €5.04 million, Nomi: €4.165 million, Obi: €1,380, Bricomarche: €101,785 and Castorama: €14,890).

Other decisions in the building sector

In April 2007 the OCCP fined a drainpipe producer and its four distributors over 10 million zlotys (over €3 million) for establishing a resale maximum rebate.
In July 2007, the resale price of Röben products were fixed with its 20 distributors all over Poland. Röben has been fined nearly €200,000, while its distributors avoided any financial sanctions.
A similar type of conduct has been condemned in the mentioned Tikkurila decision of January 2008. The instigator of the minimum resale price agreement, Tikkurila, has been fined over €600,000. The fines have been imposed on the 84 distributors which participated in the prohibited agreements.
Other spectacular fines were imposed in an April 2008 decision concerning a price-fixing agreement between paint producer ICI and Castorama (DIY hypermarket). The latter was punished with a fine of over 36 million zlotys (nearly €12 million), since it failed to meet all the leniency conditions it applied for.
In order to avoid heavy fines, in July 2008, the construction materials producer Xella (owner of the two well-known brands Ytong and Silka) committed itself to alter its policy regarding resale price maintenance covered in its distributor agreements. The OCCP accepted the commitments, which were confirmed in the decision delivered by the OCCP in July 2008.
Recently (July and August 2008), there have been at least two other proceedings instituted against construction materials producers and its distributors. The OCCP is to check whether Kreisler (and its distributors) as well as Gerda Polska (and its distributors) did violate the prohibition to enter into agreements restricting price competition.

Supreme Court precedents

In 2007 the Polish Supreme Court delivered six verdicts in anti-monopoly matters. A majority of the cases are based on the abuse of dominant position provision.
One of the most spectacular decisions of the OCCP was confirmed at the end of 2007.

ZAiKS

In 2004 the OCCP president fined the Authors’ Association (ZAiKS) €139,000 for abusing its dominant position by placing conditions on the protection of compositions granted by ZAiKS, namely by requiring an exclusive licence for publication, recording and broadcasting of the composition. The Association did not agree to any independent kind of publication of a composition. This was considered to be abuse of dominant position by the OCCP president.
The proceedings were instigated based on the motion of a popular band. The Supreme Court upheld the 2004 decision of the anti-monopoly authority on 6 December 2007.
In June 2008, the OCCP fined ZAiKS with a fine of nearly €500,000 for failure to implement its final decision.

Judicial control over temporary decisions

In the first half of 2008 the Supreme Court provided a crucial interpretation of the ‘right to appeal’ interim measures.
The precedent-setting verdict concerned the first-ever ‘temporary decision’ (interim measure) by the president of the OCCP. A temporary decision is issued under the Act on Protection of Competition and Consumers and serves as a temporary injunction for the duration of an anti-monopoly proceeding. In the precedent verdict the Supreme Court followed the point of view that such decision is subject of appeal despite its expiry (it expires automatically once the final decision as to the substance is given).

An extract from The European Antitrust Review 2009