The new president of the Office of Competition and Consumer Protection plans to reinforce the regulator’s activity aimed at preventing negative market impacts. His priority will be elimination of harmful practices—not necessarily punishment. Proceedings are to be conducted faster and more efficiently. There will also be many internal changes at UOKiK.
This article is based on a videoconference with Tomasz Chróstny on 15 April 2020 by politykainsight.pl, as well as press releases and publications by UOKiK and the European Commission.
Tomasz Chróstny was appointed by the Prime Minister of Poland to serve as president of the Office of Competition and Consumer Protection (UOKiK) about three months ago (on 27 January 2020). Earlier, from August 2019, he served as vice president of UOKiK responsible for protection of consumers and preparing the office for tasks helping reduce payment gridlock in the economy. By education he is an economist.
The COVID-19 pandemic began shortly after the new president took office, and as the central governmental administrator responsible for protection of competition and consumers, he actively joined anti-crisis efforts, drafting legislation for the Anti-Crisis Shield and modifying the office’s internal and external operations to meet crisis conditions.
Priorities of UOKiK
As president of UOKiK, Chróstny plans to strengthen the office’s activity combating negative impacts on the markets, primarily involving:
- Protection of consumers and households
- Preventing payment gridlocks and mitigating their impacts
- Exploitation of contractual advantages by large enterprises in trading in agri-food products
- Combating bid-rigging in public tenders
- Application of compliance programmes and increasing the effectiveness of the office’s activities, including more efficient proceedings
- Approval of aid programmes for Poland.
Protection of consumers, combating payment gridlock, and exploitation of contractual advantages in the agri-food sector
Beyond pronouncements, the office is actually taking various steps, particularly concerning protection of consumers and households. Apart from activity under the Anti-Crisis Shield, UOKiK recently launched an investigation to determine whether the largest food producers and retailers were unfairly exploiting their negotiating advantages with counterparties during the pandemic. UOKiK sought explanations from about a hundred businesses: large retailers operating in Poland and the largest meat and dairy producers and processors of fruits, vegetables, grain and oil-producing crops.
These proceedings are being conducted under the Contractual Advantage Act (Act Combating Unfair Exploitation of a Contractual Advantage in Trading in Agricultural and Food Products of 15 December 2016). The president of UOKiK takes the view that proper functioning of the agri-food sector during the pandemic is vital for Poland’s food security. In this respect, the office is checking whether large entities from the agri-food sector have changed their sales and price policies during the pandemic to the detriment of smaller traders, and whether deadlines are being met.
Financial liquidity at each link in the chain for supplying food to consumers is also being checked, as well as compliance with payment deadlines between businesses under the Act Combatting Excessive Delays in Commercial Transactions of 8 March 2013 (we discussed the changes that entered into force at the start of this year in the article “Compliance and new regulations on payment gridlock”).
State aid programmes for Poland
According to Chróstny, an immediate aim is for the competition authority to play a more active role in the European Commission’s approval of support programmes (permissible state aid) for Polish undertakings and the Polish economy.
The Commission has already approved several such programmes. In early April a EUR 22 billion programme intended for Polish businesses having difficulty accessing capital during the pandemic was approved—to date the largest state aid programme for a member state’s economy approved by the Commission. In addition, there was a smaller programme worth about EUR 110 million approved by the Commission on 22 April 2020, facilitating the issuance of public guarantees for loans supporting the Polish economy during the pandemic.
As a specialised body of the government administration, UOKiK will intermediate in discussions between the Polish government and the European Commission.
More compliance, less formal contacts, and faster proceedings
The UOKiK president declares that it is necessary and desirable to expand areas of compliance for businesses. He wants the office to provide businesses with knowledge on the compliance of their behaviour in numerous fields with competition and consumer protection law. This may lead the office to issue a range of new guidance documents and interpretations of regulations, and to increase UOKiK’s educational role also in direct contacts with businesses.
Great emphasis is to be placed also on increasing informal contacts and pursuing “soft” measures by the office. Chróstny stressed in the videoconference that the priority should be to eliminate detrimental practices from commerce. This has to do with the strategy of soft measures on the office’s part, namely persuading undertakings to change their harmful market behaviours and nip infringements of competition in the bud, as soon as irregularities are uncovered by the regulator, without having to take formal steps (undertakings could revise their anticompetitive behaviour without incurring statutory consequences). According to the head of UOKiK, such actions could be more effective and generate more benefits than long-lasting formal proceedings. Effectiveness rather than punishment is to be the hallmark of the office’s policy. On the other hand, UOKiK is to be much more open to undertakings, and to the possibility of individual consultations and informal adoption of a position by the regulator on specific undertakings and interpretation of the regulations. Does this mean a possibility that UOKiK will issue something along the line of comfort letters, as in the case of the European Commission? That is not known. It was hard to draw unequivocal conclusions on this issue from the conference with Chróstny.
With respect to formal proceedings as such, both investigations and antitrust proceedings are to be conducted more smoothly and efficiently. When regulatory and judicial proceedings drag on interminably, that increases uncertainty for the parties, the market, and consumers. The solution is supposed to organisational changes planned within the office, particularly increased flexibility in management of staff and improved analytics. This means that to resolve difficult, complicated cases, the necessary resources and large-enough teams will be assigned to the matter, drawing on a range of specialists to efficiently examine the case and prepare a resolution.
What penalty policy?
The UOKiK president made an interesting comment on the imposition of fines for violation of competition law. He said that the aim of the office is to increase pressure on management and to make more frequent use of the possibility of punishing individuals managing enterprises. Under Art. 106a of the Competition and Consumer Protection Act, the president of UOKiK may impose a fine of up to PLN 2 million on a manager (a broad term covering persons directing the operations of an enterprise, particularly persons performing managerial functions or serving as members of the management board) if the individual has knowingly allowed the enterprise to commit a violation of the ban on concluding most types of anticompetitive arrangements. But it should be borne in mind that financial liability of managers is secondary to liability of the undertaking itself, and a manager cannot be punished apart from penalties imposed on the undertaking.
Internal changes at UOKiK
To bring the office into line with the current situation and more effectively discharge its statutory duties (in particular priority matters identified by the president of the office), an amendment has been drafted to the charter of UOKiK (the current charter dates from 3 January 2020, as issued by the decree of the Prime Minister of 20 December 2019 (Monitor Polski 2019 item 1198)). The proposed changes to the charter, dated 13 March 2020 and published on the UOKiK website, focus on modifying the organisational structure of UOKiK headquarters.
Under the proposal, new organisational units would be established at UOKiK (the International Cooperation Bureau, the Communications Department, the Department for Combating Tender Conspiracies, and the Contractual Advantage Department), while the current Consumer Analysis Department and Press Office would be eliminated.
The tasks of the new Department for Combating Tender Conspiracies would focus exclusively on fighting bid-rigging in public tenders, which in UOKiK’s view are difficult practices to uncover but highly detrimental to the competitiveness of the economy.
The Contractual Advantage Department would coordinate UOKiK’s tasks provided for in the Contractual Advantage Act (tasks now carried out by the UOKiK field office in Bydgoszcz).
The new International Cooperation Bureau would assume certain tasks now performed by the UOKiK Executive Office. The aim is to streamline the office’s performance of duties arising out of membership in international watchdog organisations such as the European Competition Network and the Consumer Policy Network. This change should also achieve more efficient cooperation with other competition authorities, including the European Commission.
The tasks of the former Consumer Analysis Department would be assumed by the Market Analysis Department, and tasks involving the office’s media policy would be assumed by the new Communications Department.
The amended charter of UOKiK is expected to be signed by the Prime Minister and published in the near future.
Tomasz Chróstny also announced expansion of UOKiK’s analytical resources, particularly IT, in light of the rapid growth of the digital economy and the need for the office to have adequate tools at its disposal.
To what extent will the plans for UOKiK be realised? We shall see. For now the office headed by the new president is concentrating on combating the negative consequences of the epidemiological crisis on the economy and its component parts, i.e. the state, businesses, and consumers/households, which is a natural task.
According to the announced plans, we may expect to observe greater dynamism in UOKiK’s activities across various areas. The office is supposed to be a strong, competent institution for protecting competition and consumers, and more effective in combating market irregularities. Will the new president succeed in injecting new life into the office’s work? Paradoxically, the current crisis may help achieve these aims, and introduce changes in law beneficial for the economy and all its elements (including businesses). But will the tempo of the announced changes fall when the pandemic ends and the socio-economic situation settles?
One thing is certain: the president has a vision for the operations of the Office of Competition and Consumer Protection for months and maybe years to come.
Andrzej Madała, Competition and Consumer Protection practice, Wardyński & Partners