The Polish competition authority’s new guidance on antitrust fines | In Principle

The Office of Competition and Consumer Protection has published new guidelines on the methodology for calculating fines for anticompetitive practices. The main objective is to bring the regulator’s practice into line with the recent amendments to the Competition and Consumer Protection Act, e.g. regarding fines for parent companies and consideration of the adequacy of the fine. But there are other changes as well, and some of them raise concerns.

The communiqué with the new guidance on antitrust fines appeared on the Office of Competition and Consumer Protection (UOKiK) website on 9 April 2024. The new “Guidance on determination of fines in matters involving anticompetitive practices” is dated March 2024 and is effective from the beginning of the current year.

The need to update the guidelines

In the communiqué, the president of UOKiK states that the new document is in line with the EU’s ECN+ Directive (2019/1), which expanded and unified the powers of EU member states’ competition authorities over anticompetitive practices. It requires that when calculating fines, the authority take into account both the gravity and duration of the infringement. Based on case law of the Court of Justice, “decisive influence” by a parent company over a direct infringer may make them a “single economic unit,” and thus under the directive this notion of an “undertaking” should be taken into account, and the turnover of the entire capital group to which the infringer belongs may be taken into account as the basis for assessing the fine. The amendment to the Competition and Consumer Protection Act which came into force on 20 May 2023 introduced these elements into Polish law. Therefore, it was only a question of time before UOKiK issued new guidelines on antitrust fines, taking into account these changes and superseding the already obsolete 2021 guidance.

A changing focus

According to the UOKiK communiqué, the new guidelines address the imposition of fines on entities that are part of corporate groups, and on parent companies. The new guidance is intended to clarify how the duration of the violation, the type of practice, and the market impact affect the amount of the fine. The document also adds to the earlier guidance on mitigating and aggravating circumstances taken into account in assessing fines.

The president of UOKiK regards strengthening the analysis of the adequacy and proportionality of the fine to reflect the “totality of the case” as one of the most significant changes. This could lead to departure from strict application of the rules for punishment, either up or down, although this would require additional justification in the decision.

Application of the guidelines

The guidance concerns determination of the amount of fines imposed on undertakings by the president of UOKiK for infringement of the prohibition against anticompetitive practices set forth in Art. 6 (competition-restricting agreements) and Art. 9 (abuse of a dominant position) of the Polish act and Art. 101 and 102 of the Treaty on the Functioning of the European Union.

The guidance is intended only as a description of the approach to imposing these fines. Citing rulings by the Constitutional Tribunal, the regulator cautions that the guidance is not a tool for businesses to precisely estimate the fines they face. The aim is only to standardise the method for setting fines, not to set equal or comparable fines in certain categories of cases.

As in the 2021 guidance, the regulator also states that the guidance is not legally binding, and the publication only means that the authority intends to set fines in antitrust cases in this manner. Possible deviations from the guidelines will be separately justified in the decision.

The guidelines state that they apply to cases where antitrust proceedings are initiated after 1 January 2024.

“Decisive influence” and fines for parent companies

The main new feature arising under the amended Competition and Consumer Protection Act is the possibility of imposing fines on entities controlling undertakings directly committing antitrust violations. Practitioners were particularly looking forward to issuance of the guidance on this issue.

This concerns situations where the direct violator is decisively influenced by another undertaking (Art. 6b(2)–(3) of the act). This happens when there are economic, legal or organisational ties between the undertakings, such that business that is influenced carries out or adapts to instructions given to it by the influencer in a manner limiting or preventing it from behaving autonomously. There is also a presumption that one undertaking exerts decisive influence over another if holds over 90% of the capital in the subsidiary.

Pursuant to Art. 106(3a) of the act, the turnover of the parent company will be taken into account by the president of UOKiK when determining the maximum fine, which according to Art. 106(1) of the act is 10% of the turnover for the fiscal year preceding imposition of the fine. When decisive influence is established, this 10% figure will refer to the turnover achieved by the undertaking(s) exercising decisive influence and the subsidiaries.

On the other hand, under Art. 106c, if it is found that an undertaking directly infringing the ban on restrictive practices has been decisively influenced by another undertaking or undertakings, the president of UOKiK may impose a combined fine on the direct infringer and the undertaking(s) exercising decisive influence over it, for which they will be jointly and severally liable.

Notably, the antitrust authority may initiate proceedings directly against an undertaking exercising decisive influence over an infringer (Art. 88(3a)). The guidance states that when proceedings are conducted against both the direct infringer and an undertaking exercising a decisive influence over it, imposition of a joint fine will be the rule.

The rules for considering the combined turnover of the direct infringer and an undertaking exercising a decisive influence over it are also reflected in the rules discussed below for determining the base amount of an antitrust fine.

Fines for violation of Polish and EU law

An infringement of the prohibition against anti-competitive practices under Art. 6 or 9 of the Polish act may simultaneously violate the prohibition in Art. 101 or 102 TFEU. Although in such a case separate fines could be imposed for violations of Polish and EU law, the Polish regulator states in the new guidance that if a restrictive practice violates both EU and Polish law, as a rule it will be penalised with one fine. The adequacy of the fine will not change simply because the practice could be classified in more than one way.

Starting figure

The first step in determining the amount of the fine is to set the starting figure. The regulator has adopted a vague rule that this figure (and the base amount, about which more below) is tied to one average year of violation.

The starting figure constituting the original basis for the fine is a percentage of the undertaking’s turnover, termed the “relevant turnover.” This is the total turnover within the meaning of Art. 106(3) of the act achieved by the undertaking(s) directing participating in the violation, in the last calendar year of the violation period as found in the decision terminating the proceedings.

The novelty is that the guidance provides examples of the turnover taken into account in determining the starting figure, considering, among other things, what proportion of the undertaking’s total turnover is generated in what territory, from the sale of what products, or who participated in the arrangement.

Especially in the case of exercise of decisive influence over a direct participant in the violation by another undertaking, it is relevant whether the products or services of each are substitutable, whether both entities participated in the arrangement, etc. If, for example, the products were not substitutable, and only the Polish subsidiary was involved in the arrangement, only the turnover of the direct violator is taken into account when imposing the joint fine. But if, for example, a corporate group to which the direct violator and the entity influencing it belong conducts activity as a whole in Poland, and both businesses participated in execution of the arrangement, then the relevant turnover is the sum of the total turnover of both undertakings. In each case, however, the total turnover of the relevant undertaking(s) is taken into account when determining the starting figure for calculating the antitrust fine.

The initial figure will be set by designating a percentage in the range of 0.01% to 3% of the relevant turnover.

Notably, in the new guidance the authority has taken a step backward compared to the 2021 guidance. Both now and before, the president of UOKiK takes into account the severity of the violation. However, the previous guidance provided the definitions of each type of violation and strictly corresponding thresholds (1–3% of turnover for very serious violations, 0.2–1.0% of turnover for serious violations, and from 0.01% to 0.2% of turnover for other violations). The new guidance provides only a general picture of the most serious examples of restrictive agreements and abuse of a dominant position, without in any way scaling their severity against the starting figure.

Before, after establishing the relevant starting figure in the first step, the regulator increased it by no more than 90% or decreased it by no more than 50%, depending on the characteristics of the product and the recipients, market characteristics, share of the revenue from the goods in question in the total turnover of the undertaking, the effects of the violation on market participants and their (ir)reversibility, to determine the base amount.

Now these factors are elements for determining the starting figure. Their definitions are fine-tuned, and the share of revenue is replaced by the criterion of how organised the infringement was (e.g. whether the participants monitored their behaviour to prevent “cheating”). The percentage range has also been abandoned, settling for statements such as that the regulator “will set the starting figure closer to the upper limit.” This actually reduces the transparency of the process of assessing antitrust fines.

Base amount

As defined above, the starting figure is the baseline for determining the “base amount” of the fine, in which the starting figure is reduced or increased by ±75%, taking into account:

• The ratio of the direct violator’s revenue from the relevant products to its total turnover (this criterion for determining the base amount was carried over from the previous guidance)
• Specific threats to the public interest (especially by secret cartels) and general deterrence (this is a new criterion)
• The combined economic power of the entities between which there is a relationship of decisive influence (another new—and vague—criterion)
• Any prior violations of antitrust law dissimilar to the violation for which the fine is being imposed (this is another new criterion, and the most questionable, as it is an aggravating circumstance outside the statutory catalogue, which will be discussed below).

Period of violation

As mentioned above, the starting figure and base amount are determined relative to one average year of violation. The total period of the violation is the first factor considered when modifying the base amount.

In this regard, the new guidance does not make any changes. The base amount is multiplied by the number of full years of the undertaking’s participation in the violation. If in the last partial year of the violation for which a fine is imposed, the period of participation exceeded 6 months, the regulator will increase the multiplier by 0.5. Thus, based on the examples given in par. 34 of the guidance, for fines imposed for a violation lasting 3 years and 3 months, the base amount will be multiplied by 3; for a violation lasting 3 years and 9 months, by 3.5; and for 4 years and 2 months, by 4.

Mitigating and aggravating circumstances

The only significant change in this regard is the amount by which the base amount will change taking into account the period of violation, reflecting the mitigating and aggravating circumstances defined in Art. 111 of the act (an open-ended list for mitigating circumstances and a fixed list for aggravating circumstances).

Previously, the fine could be mitigated in the range of ±50% of the base amount. Now, the range is ±25%.

Beyond that, the regulator only elaborated on the discussion of the mitigating circumstance of the undertaking’s abandonment of the practice prior to initiation of antitrust proceedings, clarifying that participation is not regarded as “abandoned” simply because another participant has withdrawn from the arrangement, or for example in the case of bid-rigging, the arrangement becomes moot because the contract has actually been awarded.

Apart from these adjustments (and introduction of the new, questionable non-statutory aggravating circumstance mentioned above, i.e. taking into account unrelated antitrust violations in determining the base amount), there were no other changes in the application of mitigating and aggravating circumstances.

Maximum fine

Similarly to the 2021 guidelines, when the amount of the fine determined by applying the foregoing rules exceeds the maximum amount specified in Art. 106(1) of the act (i.e. 10% of the turnover for the year preceding imposition of the fine), the fine will be capped at that maximum.

Adequacy of the fine

There is a major change in the interplay between mitigation and proportionality of the fine.

In the 2021 guidance, the regulator stated that it may refrain from imposing a fine, or impose a particularly low fine, if this will suffice to meet the objectives of the antitrust regime. The previous guidance also allowed for extraordinary increase of the fine if the amount otherwise determined is too low to achieve the objectives of the fine, and in particular is grossly inadequate to the undertaking’s total turnover or the scale of its operations.

In the new guidance, the president of UOKiK states that in imposing a fine, the authority “will take into account whether the amount resulting from the analysis at the previous stages is grossly inadequate under the circumstances” (another vague and discretionary criterion) and will have a deterrent effect.

The new guidance also stresses that this discretionary modification may apply especially to entities that have not exceeded EUR 100,000 in turnover in recent years, and are thus subject to the EUR 10,000 upper fine limit. Thus, especially in these cases, the fine “may be modified (up to a maximum of the equivalent of EUR 10,000), in particular if the circumstances of the case show that the turnover achieved does not reflect the actual economic potential of the undertaking, or the fine set in accordance with the foregoing rules would not serve its purpose.”

Conclusion

The new “Guidance on determination of fines in matters involving anticompetitive practices” contains several significant changes from the 2021 guidance.

First, the rules for adopting the basis for assessing a fine for violators belonging to a broader corporate group, taking into account the turnover of their parent company, are useful, although still unclear. In this regard, the new guidance failed to meet market expectations, because it did not adequately specify what turnover of the structure above the direct violator will be taken into account. In this regard, practitioners will still have to wait for court rulings on appeals against decisions by the competition authority.

Notably, the authority has muddied the waters in some of the fine assessment criteria and rules, including removal of the range and increase in the authority’s discretion beyond what was provided in the previous 2021 guidance. This should be considered a step backwards in the transparency of how fines are assessed.

Finally, the new guidance betrays a narrowing of the regulator’s focus on the deterrent effect of antitrust fines.

Although the president of the Polish Office of Competition and Consumer Protection stresses that the guidance is not meant as a tool for businesses to calibrate the specific fines they may face for anticompetitive practices, they nonetheless play this important function for the market. Despite the shortcomings, imperfections and uncertainties in the guidance discussed above, it can and should be used by undertakings to mitigate the risk of antitrust fines.

Dr Marcin Kulesza, Competition & Consumer Protection practice, Wardyński & Partners