Compliance management and the Polish antitrust law

An effective compliance system should prevent infringements of legislation in force in the company. However, its task is also to uncover irregularities when it has come to such and if necessary, to report violations of the law to competent State bodies. These two features of compliance management systems cause that especially antitrust regulations cannot be disregarded in the preparation and implementation of internal compliance policies in Poland.

Important cornerstones of Polish antitrust law

The Polish competition law prohibits essentially two types of behaviors which restrict free competition between companies: conclusion of competition agreements and abuse of dominant market positions. In addition, mergers of companies from a defined merger size are subject to the supervision of the Polish competition authority.

Impair competition agreements between companies

Agreements between companies which purpose is the elimination, limitation or an adverse effect on competitors in other ways on the relevant market are not allowed.

Prohibited agreements are especially those, which

• set prices and other purchasing or sales conditions directly or indirectly (such as the appointment of sugar producers to offer their products no longer under a precisely designated minimum price on the market – price cartels),
• limit or control the production or the approach, as well as technical progress,
• divide the sales or purchasing market (such as the allocation of customers or territories, which are supplied only from specific companies participating in the consultation),
• use discriminatory or diverging terms and conditions in comparable treaties with third parties, creating for these people different conditions of competition,
• make the conclusion of contracts conditional on the acceptance or the provision of another service, which has no factual or habitual relationship with the subject of the contract,
• restrict the access to the market or replace companies not covered by the agreement from the market,or,
• set conditions for the submission of bids between companies participating in tenders, or between these companies and the organizer of the tender, in particular with regard to works to be performed or the pricing.

Impair competition agreements can be on one hand concluded between the companies which actually should be at the same economic level in a real competitive relationship (so-called horizontal agreements, such as between producers upon a certain minimum price for cement products in a given region), but also between companies that operate at different levels of trade (so-called vertical agreements, e.g. between a producer and its distributors).

For example, the Polish subsidiary of a foreign producer operates as an official importer of the corresponding products and cooperates with different independent distributors in Poland not belonging to the group. The products are provided by the Polish subsidiary basing on uniform contracts to these distribution companies for resale. These contracts contain a price list, where the rates to be used by the subsidiaries to the end customer are called „recommended prices“, which should not fall below. In addition, the sales contracts contain provisions specifying certain consequences, if the distributors do not follow the „recommended prices“ and fall short of these.

These arrangements are regarded as prohibited price agreements within the meaning of the Polish competition law, because the free pricing of the Distributor is limited. He must be an independent entrepreneur, able to set the prices for the offered products and services. It is not relevant how the companies participating in this agreement refer to the contractual provisions. Important here is the fact that it has come to a collusive price agreement between the Polish subsidiary and distributors in Poland. Thus, the end customer has no possibility to acquire the products produced and sold in Poland by the foreign group to a different (lower) price than the „recommended“. For the imposition of a delicate fine by the Polish competition authority, it is not necessary that the companies involved have actually achieved their objective of the restriction of competition. The existence of this agreement is sufficient so far.

The Polish competition law exempts the price-fixing agreements and agreements on purchasing or sales conditions from the ban either concluded between competitors, whose common shares of the relevant market does not exceed 5% or companies, which are not in competition and whose own share in the relevant market does not exceed 10%.

In addition, the prohibition of the appointment of prices and other purchasing or sales conditions between companies does not apply, if:

• this agreement contributes to improving the production, goods distribution, or technical or economic progress, and
• this appointment guarantees the purchasers or users a corresponding share of the benefits, arising from this agreement, and
• this agreement does not impose any restrictions on the participating companies, which are not necessary for the attainment of the purpose and
• these agreements do not create opportunities for participating companies to prevent competition on the relevant market in terms of a significant part of certain goods.

It is important in this context that in case of any existing doubts of the antitrust authority, the company must prove that the above conditions for exemption from the prohibition are given.

Abuse of a dominant position

Measures by companies, which constitute an abuse of a dominant position by one or more companies, are also not allowed. Such abuse exists in particular if a dominant company:

• directly or indirectly impose another company unfavorable rates in particular excessively high or excessively low prices, as well as long payment terms or other unfavorable purchasing or terms of sale,
• limits production, the approach or technical progress, to the detriment of competitors or of consumers,
• uses discriminatory or diverging terms and conditions in comparable treaties with third parties that creating different conditions of competition,
• make the conclusion of contracts conditional on the acceptance or the provision of another service, which has no factual or habitual relationship with the subject of the contract,
• counteracts the creation of conditions that are essential for the emergence of competition or the development of competition,
• impose discriminatory contract conditions on another company, bringing not justified benefits.

The Polish competition law thus prohibits not the fact of holding a dominant position, but only the use of this position for purposes that are not allowed by law.

Responsibilities of a manager in case of violation of the Polish competition law

The amendment of the Polish competition law entering in force January 18th, 2015 one introduced the possibility to make also members of the Executive Board of a Polish subsidiary company accountable for certain violations of the antitrust law. And so a Managing Director may have imposed especially with a delicate fine (up to 2.000.000,-PLN), if a violation of a prohibited price agreements or non-permitted sharing of markets by a subsidiary company are determined by Polish antitrust authorities during his time of office.

The liability of the Director requires that through its intentional act or omission it came to a violation of finally listed antitrust prohibitions by the company. Intentional action shall be understood among other things as the signing of an anti-competitive agreement by a Managing Director. An intentional omission will occur in this context, when a member of the Board of management has knowledge that another managing director wants to sign a restrictive agreement and does not prevent this.

Importance of the presence of a compliance system for antitrust violations

The President of the Polish Office for the competition and consumer protection has pointed out in an interview published on November 5th, 2015 (https://uokik.gov.pl/komentarze_wyjasnienia_i_stanowiska.php?news_id=12005) that a compliance system may not exist only on paper, to take account of the Polish competition law violations. A compliance management system is rather only effective if it uncovers irregularities and the entrepreneur turns after that to the Cartel office. He then has the opportunity to participate in the so-called leniency program, which under certain conditions foresees the departure from the imposition of a fine by Polish antitrust authorities. But even if the Cartel Office detects antitrust violations before the entrepreneur submits a corresponding notice, the entrepreneurs still have the possibility to influence positively the extent of the financial penalty, through sustainable improvements to an existing compliance system and a close cooperation with the antitrust authority.

The position shown in this interview of the President of the Polish Office for the competition and consumer protection very clearly shows how important it is to introduce an effective compliance management system in the company.

Gladly we advise you on the development of a compliance system tailored to the needs of your subsidiary company in Poland.