In recent months, the activity of the Polish Competition and Consumer Protection Office (UOKiK) has increased, leading to sanctions for a number of entrepreneurs. We summarize below what we consider the most significant measures taken by UOKiK in 2020.
Combat payment jams
This is especially noticeable when it comes to combating so-called payment blocks. UOKiK has been handling such issues since January 1, 2020. As early as April 2020, it announced that in the wake of the COVID-19 pandemic, it would pay close attention to this issue (we wrote about it previously). By the end of 2020, UOKiK had initiated more than 100 proceedings against entrepreneurs who had not complied with the payment terms established in the law of 8 March 2013 on combating excessive delays in commercial transactions. In case of violation, UOKiK can fine an entrepreneur.
Control of mergers: record fine for Gazprom
On 6 October 2020, the UOKiK president imposed a record fine of PLN 30 billion on Gazprom and Nord Stream 2 project participants for merger (creation of a single entrepreneur) without UOKiK’s approval (UOKiK DKK decision- 178/2020). In 2016, project participants sought approval to create a single entrepreneur – a company under Swiss law – originally owned by Gazprom, in which participants were to acquire certain shares. Given UOKiK’s reserves, they withdrew, no longer having any intention of acquiring shares in the individual company. At the same time, the participants signed a Nord Stream 2 financing agreement, which – according to UOKiK’s decision – would have in fact give them shareholder rights. In the course of the proceedings, UOKiK found that, although the participants other than Gazprom had not acquired shares in the sole company, this sole entrepreneur had, in fact, been created, as the participants have a common interest: they charge interest on the loans granted, and furthermore, they had secured influence on the project as the vehicle could not make strategic decisions without their consent. Therefore, according to UOKiK’s assessment, the participants in the project, not as shareholders, had pursued the original project despite UOKiK not having consented. In other words, even if they hadn’t created a single entrepreneur de iure, they did in fact. In motivating its decision, UOKiK referred to the concept of project participants circumventing the law.
The question is interesting for several reasons. First, UOKiK has imposed a fine for actions that are formally outside its jurisdiction and – by its own admission – that do not formally violate any law, but are aimed at achieving a goal about which UOKiK had expressed its reservations. and could circumvent the law. Secondly, UOKiK found that some rights of lenders can make them in fact shareholders of the beneficiary of the loan. UOKiK’s position, although incorrect in our assessment, may force investors to be more cautious in drafting loan and guarantee agreements under which the financial entity can exert influence over the borrower’s operations.
Abuse of contractual advantage
UOKiK has also redoubled its efforts under the law of 15 December 2016 on combating unfair use of the contractual advantage in trade in agricultural and food products. On 11 December 2020, the regulatory authority imposed a PLN 723 million fine on Jeronimo Martins for violating the act. The violation, according to UOKiK, involved arbitrary forcing suppliers to grant discounts and rebates that were not included in the original contracts. This is a record penalty imposed so far for violating the provisions of the law.
Fines for executives
2020 also saw the first penalty imposed on a business executive who violated antitrust laws. Under the act, if a manager has allowed an entrepreneur to violate certain antitrust laws (Polish or EU) or certain consumer protection laws, he could be subject to a fine of up to PLN 2 billion. Competition and consumer protection laws under which UOKiK can impose a fine on a manager have been in place since 2015, but until December 2020 that threat was only theoretical. In December 2020, after fining the Veolia group companies PLN 120 million for pricing and tendering, UOKiK also imposed a PLN 200,000 fine on one of its board members. Such measures by UOKiK may soon become standard procedure. This presents a challenge for entrepreneurs and managers to act in a way that does not expose themselves to these accusations and their consequences.
What does 2021 have in store?
The trends set by the UOKiK stocks described above are likely to continue this year. We need to prepare for new regulations in relation to business operations via websites. Towards the end of September 2020, a draft amendment to the law on competition and consumer protection was in public consultation. It aims to improve the protection of online consumers and increase the efficiency of the measures taken by the president of UOKiK. As part of its new skills, UOKiK will be able to block the websites of entrepreneurs. We will provide more information on this in our next article.
© Copyright 2022 Squire Patton Boggs (USA) LLPNational Law Review, volume XI, number 19