How fines are calculated for failure to notify a concentration | In Principle

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How fines are calculated for failure to notify a concentration

The potential fine for carrying out a concentration without obtaining the required approval of the president of the Office of Competition and Consumer Protection (UOKiK) is up to 10% of the annual turnover of the enterprise, even if the failure was not wilful. A manager or board member who fails to make a required notification may have to pay as much as PLN 200,000. But what circumstances does the competition authority consider when determining the amount of the fine?

Major changes to Art. 111 of the Competition and Consumer Protection Act were introduced in the June 2014 amendment which entered into force in January 2015.

Art. 111 governs the issue of determining the amount of fines imposed on undertakings or managers (or members of the corporate authorities of the undertaking) for violations of competition law set forth in Art. 106–108 of the act.  These provisions also concern the negative consequences of failure to notify an intended concentration.

In particular, the provisions govern the fines which the competition authority may impose (but is not required to impose) for:

  • Carrying out a concentration without obtaining the required approval of the president of UOKiK, even if this is not done wilfully (Art. 106(1)(3)), or
  • Failure (wilful or non-wilful) to notify an intended concentration (Art. 108(1)(2)).

In the first instance, the fine is imposed on the undertaking, and may be no higher than 10% of the turnover of the undertaking in the financial year preceding assessment of the fine.

In the second instance, a fine may be imposed on an individual performing a managerial function or serving as a member of the authority managing the undertaking, and the fine cannot be higher than 50 times the average monthly wage in the enterprise sector (for the last month of the preceding quarter).

Before the recent amendment, Art. 111 also governed the rules for calculation of fines by the president of UOKiK, but it was rather general and imprecise, providing that mitigating factors could include, in particular, the period, degree and circumstances of the violation and the existence of any previous violations.

In its current wording, Art. 111 sets forth much more detailed instructions for determining the amount of fines, including fines imposed for violations of merger control provisions. These rules are mainly addressed to the president of UOKiK (in addition to bodies overseeing the actions of the regulator, particularly the Court of Competition and Consumer Protection), and the competition authority should be guided by these rules in pursuing its sanctions policy.

Firstly, the article provides that in determining the amount of a fine, the president of UOKiK shall consider in particular the circumstances of the violation, the existence of any previous violations, and the period, degree and market consequences of the violation, but then goes on to state that the degree of the violation shall be assessed by the president of UOKiK in light of the nature of the violation, the business of the undertaking in question, and the specifics of the market on which the violation occurred (Art. 111(1)(1)). The wording of the act suggests that this is an open list, and thus the regulator could also apply other criteria not specifically mentioned in the act.

New normative conditions affecting the determination of the amount of fines are also provided—mitigating and aggravating circumstances which the authority should consider.

Mitigating factors in the case of failure to notify an intended concentration include more specifically (i) informing UOKiK of carrying out the concentration and (ii) cooperation with UOKiK during the proceeding, particularly by helping the regulator conduct the proceeding quickly and efficiently.

Unlike the mitigating factors, the aggravating factors are listed in the act exhaustively (a fixed catalogue). In the case of failure to notify an intended concentration, these are (i) having committed a similar violation before and (ii) the wilfulness of the violation.

The rules set forth in Art. 111 of the Competition and Consumer Protection Act establish the framework for imposition of fines, and as such set the limits of the administrative discretion of the regulator with respect to the levels of fines.

The recent changes should encourage uniformity and transparency in application of the policy for imposing sanctions for violation of the act, which had frequently been called for.

Andrzej Madała, Competition Law Practice, Wardyński & Partners