Changes in Polish competition law. Implementation of the ECN+ Directive

On 27 April 2023, the President of the Republic of Poland signed the Law on Amendments to the Law on Competition and Consumer Protection and Certain Other Laws, which is intended to implement, among other things, the what is referred to as the ECN+ Directive (the “Act”).

The Act aims to increase the effectiveness of the operations of the Polish Office of Competition and Consumer Protection (the “OCCP”), to unify the competition law systems across the European Union and to streamline certain aspects of proceedings before the OCCP. The Act will come into force within 14 days of its promulgation. 

Major changes introduced by the Act include:

1. the extension of the liability of a parent company for the unlawful conduct of its subsidiary (parental liability);
2. the extension of the liability of business associations and their members;
3. the expansion of the OCCP’s powers to impose remedies;
4. the expansion of the OCCP’s powers to obtain information from individuals;
5. the protection of communication with an independent lawyer in the course of dawn raids / inspections; 
6. changes in the imposition of fines;
7. changes in the leniency programme; and
8. the enhancement of the independence of the OCCP President. 

The extension of the liability of a parent company for the unlawful conduct of its subsidiary (parental liability)

The Act provides for the extension of the liability for anti-competitive practices to undertakings exercising a decisive influence over an undertaking which has entered into an anti-competitive agreement or abused a dominant position. Accordingly, such liability extends to persons holding managerial positions in undertakings exercising such a decisive influence. 

Decisive influence means the existence of economic, legal and organisational ties, the effect of which is that the undertaking on which decisive influence is exercised carries out or adapts to the instructions given to it by the undertaking exercising a decisive influence in a way limiting or preventing its independent operations on the market. The OCCP will have to demonstrate the existence of such a link. 

The Act provides for the presumption of having a decisive influence in the case an entity holds more than a 90% interest in an undertaking. The undertaking has the right to rebut such presumption by demonstrating the absence of a decisive influence in practice. 

Accordingly, when calculating fines, the OCCP will take into account not only the turnover of the undertaking directly participating in anti-competitive practices, but also the undertaking (and its corporate group) exerting a decisive influence. The liability of such undertakings for the payment of the fine will be joint and several.

These changes will provide the OCCP with the ability to impose higher fines and on a wider range of undertakings (joint and several liability). 

The extension of the liability of business associations and their members

The Act extends the liability of business associations and their members for anti-competitive practices by:

• if the infringement made by the association is related to its members’ activity, giving the OCCP the power to impose a fine that may amount to 10% of the combined turnover of the members active in the market affected by the infringement; and
• introducing joint and several liability of business association members for the payment of a fine in the event of the association’s insolvency, limited to a maximum of 10% of the turnover of individual member undertakings. 

A business association member will be able to avoid such joint and several liability if it can demonstrate that it did not implement the association’s decision causing the infringement, did not know of the existence of the decision or it actively distanced itself from it prior to the initiation of proceedings.

The expansion of the ability to impose remedies

Previously, the OCCP, after discovering the existence of an anti-competitive practice, could impose only one structural remedy on an undertaking, which consisted of entrusting the performance of a certain business activity, including the performance of this activity at different levels of trade, to individual entities within a corporate group or separate organisational units within the undertaking’s structure. 

The Act expands the powers of the OCCP so as to allow it to impose various structural remedies in such a situation, including the divestiture of an undertaking, the disposal of assets or shares, and other interference in the structure of undertakings. This will significantly expand the powers of the OCCP to affect the structure of markets. 

The expansion of the powers of the OCCP to obtain information from individuals

The Act expands the powers of the OCCP to demand the provision of all necessary information from: (i) individuals who cannot be classified as undertakings (e.g. current and former employees of an undertaking, members of its bodies, witnesses and whistle-blowers); and (ii) other legal persons and organisational units that are not legal persons to which separate regulations grant legal capacity. Until now, such requests could only be addressed to undertakings and to a very limited extent, to other entities, including individuals. 

Complementary to this expansion of the OCCP’s powers is the introduction of freedom from self-incrimination for individuals. Individuals will be able to refuse to provide information or documents if doing so would expose him/her or his/her relatives to criminal liability. It will also not be possible to use information obtained from an individual against him/her or his/her relatives in proceedings against such individuals under the Act.

The protection of communication with an independent lawyer in the course of dawn raids / inspections 

The Act clarifies and codifies the rules for protecting the confidentiality (the possibility of not sharing with the OCCP) of written communication between the inspected undertaking with an independent lawyer in the course of dawn raids / inspections (legal professional privilege). This protection extends to communications or letters and documents prepared for the purpose of exercising the controlled party’s right to legal protection in connection with the subject matter of the investigation to which the inspection relates. Thus, this protection will be very limited (it will not apply to communication with in-house lawyers).

It also clarifies the procedure for handling letters, documents and written communications that the inspected undertaking claims are covered by legal professional privilege, including the envelope procedure before the Court of Competition and Consumer Protection (the “Court”). This procedure also includes the ability to take a cursory look at a letter or document to identify basic information about it (e.g. the author, addressee, title, subject matter, dates of drafting, etc.) before the Court initiates the envelope procedure. Given the secrecy protection, this is a controversial solution. 

Fines

Until now, the fine for procedural violations (misleading the OCCP, failing to provide information when summoned, obstructing an inspection) by an undertaking could amount to up to EUR 50 million. The Act changes this amount to up to 3% of annual turnover. The Act also expands the catalogue of infringements subject to a fine, which includes, among others, failure to appear at a hearing and a failure to effectuate remedies, commitments and interim decisions imposed by the OCCP.

Additionally, the Act changes the amount of the periodic penalty payment, so as to compel undertakings to comply with their obligations, from EUR 10,000 per day to a maximum of 5% of the average daily turnover of the undertaking for each day of delay. The Act also expands the catalogue of procedural violations for which this penalty for a delay may be imposed. 

Leniency programme

The most significant change to the leniency programme is that is it now possible that an individual who notifies the OCCP or a law enforcement agency of bid-rigging and discloses all of the relevant information before the law enforcement agency becomes aware of the bid-rigging may not be subject to criminal liability for it. 

The Act also introduces more stringent requirements for filing an effective leniency application and clarifies the scope of cooperation with the OCCP:

• the OCCP will not accept a leniency application in the event the OCCP becomes aware that the undertaking planning to file the application, from the moment such intention arose: (i) destroyed, falsified or concealed evidence of the existence of an agreement, or (ii) disclosed the intention to file an application (excluding disclosure to other antitrust authorities); and
• the OCCP may consent to the continued participation of an undertaking that has applied for leniency in an anti-competitive agreement if, in the opinion of the OCCP, such continued participation is necessary to preserve the effectiveness of the actions of the OCCP.

A leniency programme application will cover group companies and board members of individual group companies.

Additionally, the Act introduces the possibility of excluding the punishment of individuals by the OCCP if a leniency application is filed in another EU member state and the relevant procedural criteria are met.

Enhancement of the independence of the OCCP President 

The OCCP President will be appointed by the Prime Minister for a 5-year term, and the same person will only be able to hold the position for two terms. During their term of office, the OCCP President may be dismissed only in the cases explicitly specified in the Act. The catalogue of such cases is closed and does not contain vague premises. The first term of office of the current OCCP President will formally begin on the date the Act enters into force.

Other changes introduced by the Act:

• issuing a statement of objections at the stage of initiating antitrust proceedings, instead of at the final stage of such proceedings;
• increasing the protection of information obtained in the course the proceedings and activities of the OCCP and the Court, including in particular under the leniency programme and in connection with settlement submissions;
• expanding and improving cross-border cooperation between EU member states in respect of, among other things: (i) investigative activities, (ii) mutual notification by authorities of the progress of ongoing proceedings, and (iii) the cross-border enforcement of fines;
• expanding the OCCP’s powers concerning dawn raids / inspections through: (i) the introduction of the possibility of directly requesting oral explanations from employees or other persons acting on behalf of or for the inspected undertaking, (ii) the introduction of the possibility of continuing dawn raids / inspections at the OCCP’s headquarters (or delegation) with the possibility of the controlled undertaking’s participation, (iii) the expansion of the OCCP’s ability to involve the police and other state control authorities, and (iv) the expansion of the possibility of conducting inspections outside the hours of the undertaking’s daily operations; and
• codifying the judgment of the Polish Constitutional Tribunal issued on 16 January 2019, No. P 19/17, by way of the introduction of the right of searched undertakings to file a complaint against the decision of a court to grant permission to execute a dawn raid of an undertaking and the related procedure.