The President has signed the Act on the Change of the Act on Competition and Consumer Protection and the Act the Civil Procedure Code

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1 30 June 2014 The President has signed the Act on the Change of the Act on Competition and Consumer Protection and the Act the Civil Procedure Code Introduction On 10 June 2014, having considered amendments proposed by the Senate, the Sejm adopted the Act on the Change of the Act on Competition and Consumer Protection and the Act the Civil Procedure Code ( the Amendment ). Today the Amendment has been signed by the President. The new provisions will enter into force six months after the date of publication. The Amendment introduces new legal institutions into Polish competition law, such as it now being possible for fines to be imposed on natural persons, twophase merger control proceedings, leniency plus, voluntary submission to a penalty (settlement procedure) and remedies. Furthermore, significant changes will be introduced into the current provisions of the Act of 16 February 2007 on competition and consumer protection ( the Act ). Finally, the Amendment specifies some of the provisions of the Act in order to remove any doubt as to their interpretation, which has arisen in practice. Table of contents Introduction... 1 Merger control... 1 Inspection and search... 2 Leniency, leniency plus, settlements... 4 Remedies... 5 Fines... 6 Consumer protection... 6 Other amendments... 7 Comments... 7 Below we present the most significant amendments. Merger control The most crucial changes in the provisions regarding merger control include: Exemption from assessment by the President of the Office of Competition and Consumer Protection ( UOKiK ) of concentrations in the form of mergers of undertakings or the creation of joint ventures, where none of the undertakings participating in the concentration has exceeded in the territory of the Republic of Poland a turnover in excess of EUR 10 million in any of the two preceding financial years. Hitherto such an exemption was available only in the case of concentrations in the form of acquisitions of control. This amendment will make it possible to avoid the obligation to notify the UOKiK of the numerous concentrations that do not have an appreciable impact in the territory of Poland. It will also result in the further harmonisation of Polish law with European legislation. Clarification that, in the case of a concentration in the form of an acquisition of control or an acquisition of part of the property, the Amended act on competition and consumers protection 1

2 exemption is granted if the combined Polish turnover of the targets and the part of the property to be acquired did not exceed the threshold of EUR 10 million. At the same time, it has been indicated that in the case of an acquisition of control or an acquisition of part of the property from undertakings participating in the same capital group in a series of concentrations executed over two years, the total turnover of the undertakings to be acquired and the acquired property shall be taken into account. The objective of this modification is to eliminate the practice of circumventing the rules by dividing transactions into smaller parts which separately do not need to be notified owing to the low turnover. Disregarding the turnover of the seller s capital group in the case of concentrations in the form of acquisitions of control or acquisitions of the part of the target s property. This change will reduce the number of concentrations notified to the UOKiK and simultaneously result in the closer harmonisation of Polish and European merger control rules. The introduction of two-phase merger control proceedings. Pursuant to the Amendment, notifications of intended concentrations that will not have a significant effect on competition shall be processed within a month, i.e. half of the current statutory period. At the same time, in certain cases the UOKiK will be entitled to extend, by way of a nonappealable decision, the proceedings by an additional 4 months. This will be possible in the event of: (i) particularly complex matters (ii) matters where, stemming from the information contained in the notification, there is a reasonable likelihood that the concentration will result in a significant impediment to competition or (iii) matters requiring a market study. The introduction of two-phase proceedings is modelled on solutions functioning in the European Union and numerous Member States. The introduction of a statement of objections. This institution will allow an undertaking to become acquainted with the UOKiK s view of the case in question and therefore make it possible to propose modifications to the planned concentration so as to ensure its compatibility with competition law. In practice a statement of objections will precede the submission of conditions. The possibility of making confidential, upon a request of the undertaking, the final date for the fulfilment of the conditions should the UOKiK issue a conditional decision. This will prevent situations where, if the conditions consist in the sale of assets the prospective buyers negotiation position becoming stronger because they are aware of the final date for the fulfilment of the conditions. Inspection and search The Amendment introduces a number of changes with respect to inspections and searches; in particular it separates inspections from searches, specifies the rights and obligations of the controlled and controlling party and also Amended act on competition and consumers protection 2

3 specifies the provisions on fines imposed for failure to collaborate during an inspection. The most important amendments regarding inspections and searches encompass: The separation of inspections and searches aiming at improving and expediting the application of both instruments. Clarifying the UOKiK s entitlements to access files, books and all kinds of data carriers by clearly indicating the possibility to request electronic mail as well as all kinds of data carriers and devices with IT data. This includes also those owned by undertakings other than the one being inspected. It has also been indicated that the person carrying out the inspection shall have the right to copy IT data from data carriers. The implementation of a reference to particular provisions of the Criminal Procedure Code that shall be applicable to searches. This reference concerns provisions on the handling of documents found in the course of a search which contain legally protected information. With regard to legal professional privilege, reference to the provisions of the Criminal Procedure Code on legal privilege has been considered as sufficient. Searches will be allowed solely in relation to competition-restricting practices in the course of explanatory or antimonopoly proceedings, with the objective of obtaining information or objects that may serve as evidence. The prerequisite for conducting a search is stipulated as the existence of valid reasons for believing that the said information or objects are being stored in the searched premises. In the course of explanatory proceedings, the UOKiK shall be entitled to request that a search be conducted only in the case of there being a justified suspicion of a serious breach of the Act, in particular when evidence could be obliterated. The specification of provisions on fines imposed on an undertaking which does not collaborate during an inspection. The amended provisions clearly specify which acts will be considered to be a lack of cooperation, i.e. preventing or impeding the initiation or conduct of an inspection or search as well as a failure to fulfil obligations imposed on the undertaking pursuant to the Act. Additionally, the Amendment introduces the possibility to impose a fine in an amount not exceeding fifty-times the average monthly salary on persons performing managerial functions or members of a management body. If the rights of an inspected undertaking or other persons are violated, they will have the right to lodge a complaint during the search. However, such complaint will not stop the search. The complaint is to be lodged, through the UOKiK, to the Court of Competition and Consumer Protection. The court shall consider it within 7 days. Where the court considers the complaint to be justified, any evidence obtained during the search cannot be used in the course of UOKiK proceedings, Amended act on competition and consumers protection 3

4 any other proceedings conducted by the UOKiK or other proceedings conducted on the basis of separate provisions. Leniency, leniency plus, settlements The Amendment specifies provisions regarding leniency and sets forth new institutions so-called leniency plus, leniency for natural persons and voluntary submission to a fine. The most important amendments: Introducing the possibility for the initiator of an agreement restricting competition to obtain full immunity. Hitherto, neither initiators nor undertakings which induced other undertakings to enter into a prohibited arrangement have been eligible for full immunity. Change regarding the final date for the cessation of participation in a prohibited arrangement. Currently this is not later than on the day of filing a leniency application to the UOKiK. Pursuant to the Amendment, the cessation shall have take place no later than immediately after the notification. This change results from the practical difficulties with the immediate termination or annexing of contracts or from withdrawing from meetings of cartel members. The amendment is also expected to facilitate dawn-raids at the premises of other cartel members. Modifications to rules on reducing fines for undertakings that cannot obtain full immunity. When assessing the amount of the fine, the UOKiK will reduce the fine that would be imposed absent the leniency application on a percentage basis (30-50% for the first applicant eligible for fine reduction, 20-30% for the second applicant, and up to 20% for the following applicants that meet the requirements). Leniency plus is a newly introduced institution. An undertaking that has submitted a leniency application but has not obtained full immunity shall have the possibility to obtain an additional reduction of its fine (of 30%) with regard to the first arrangement, on condition that it provided the UOKiK with information on other arrangements restricting competition to which it is a member. In such a case, the undertaking may obtain full immunity with regard to such other agreements on which it provided information. This institution is assumed to enhance the attractiveness of leniency and facilitate the effectiveness of the programme. The Amendment implements the possibility to impose fines on managing persons. In order to encourage these persons to provide information on prohibited arrangements, new provisions have been introduced. They provide for a leniency programme also being available to persons that would be liable for the abovementioned infringements. To that end it is to be assumed that the application submitted by the undertaking has also been submitted on behalf of all managing persons who would be the subject of UOKiK proceedings in this matter. Amended act on competition and consumers protection 4

5 The UOKiK shall be entitled to offer, ex officio or upon the request of the party, access to a settlements procedure. The decision to apply this procedure will be dependant upon the UOKiK s discretion; however the main criterion will be the acceleration of the proceedings. A settlements procedure can be initiated at each stage of the proceedings. Simultaneously, the UOKiK will be entitled to withdraw from the procedure at each stage of the proceedings. An effective submission of a declaration concerning voluntary submission to a fine shall result in a 10% reduction of the fine that would otherwise be imposed on the undertaking. Exercising this procedure does not eliminate the possibility to lodge a complaint against the UOKiK s decision to a court. Nonetheless, lodging a complaint will result in the loss of the 10% reduction. Declarations of the undertaking in relation to the settlements procedure shall be subject to the same protection as information regarding an application for immunity or a reduction of the fine. Remedies Undertakings have reported their doubts concerning the proper manner by which decisions should be executed. Remedies are new institution introduced into Polish competition law with the objective of tackling this situation. Pursuant to the Amendment, the UOKiK shall be entitled to impose remedies where an infringement of competition law in the form of an anticompetitive arrangement or abuse of a dominant position occurs. The UOKiK shall have at its disposal two types of remedies: structural and behavioural. The Amendment provides for an open catalogue of behavioural remedies, including: licensing of intellectual property rights on nondiscriminatory terms, contract modification, imposing an obligation to supply particular products or providing particular services on nondiscriminatory terms. As to structural remedies, the UOKiK shall have the right to charge the carrying out of the activity in question, including carrying out this activity at different levels of trade, to particular entities in the capital group or separate organisational units within the undertaking s structure. Owing to the more invasive character of structural remedies, the UOKiK shall be entitled to impose them only where there is no equally effective behavioural remedy or where any equally effective behavioural remedy would be more burdensome for the undertaking concerned. The Amendment provides for the implementation of a consultation procedure. In the course of this procedure, the UOKiK will inform the undertaking about its intention to impose particular remedies, and the undertaking will have 14 days to present its view. The UOKiK shall have the right to determine the final date for the implementation of the remedies along with an obligation to provide information regarding the stage of implementation of remedies. Failure to provide such Amended act on competition and consumers protection 5

6 Fines information or providing incorrect or misleading information will be subject to a fine of up to EUR 50 million. The Amendment introduces the institution of direct liability with respect to managing persons for deliberately allowing, through their actions or omissions, an undertaking to conclude a prohibited arrangement that restricts competition. A managing person is to be understood as the person in charge of an undertaking, in particular a person performing managerial functions or a member of a management body. Pursuant to provisions of the Amendment, a fine of up to PLN 2 million may be imposed on a managing person. It is essential to note that both current and former employees of an undertaking will be liable under the same conditions. The liability of a managing person is of secondary nature to the liability of an undertaking, meaning it can only be pronounced in the decision imposing a fine on the undertaking. Furthermore, double liability for the same infringement has been excluded where the managing person acts also as the undertaking in question. The Amendment also modifies provisions regarding fines, thereby removing legal loopholes and doubts as to interpretation. The changes concern mainly: - specifying the scope of an undertaking s information obligations, the non-fulfilment of which is subject to a fine; - reducing the maximum fine that may be imposed on an undertaking that does not generate turnover of up to EUR 10 thousand; - clarifying the premises considered by the UOKiK when assessing the amount of fine; and - specifying the rules on the renouncement of a fine. Consumer protection The Amendment specifies that the UOKiK must publicly warn about suspected practices that infringe collective consumer interests. The UOKiK will be obliged to make such information public where it is apparent from the information collected in the course of the proceedings that there is a particularly well-grounded suspicion that the undertaking engages in a practice infringing collective consumer interests which may result in serious damage or have a negative effect on consumers at large. The UOKiK shall provide information about such suspected practices as well as about their likely effects. Furthermore, the Amendment specifies the provisions regarding commitment decisions issued in proceedings concerning practices infringing collective consumer interests (i.e. decisions in which the UOKiK does not impose a fine Amended act on competition and consumers protection 6

7 in exchange for the implementation of particular commitments). The UOKiK shall be entitled to impose a commitment to issue a declaration with such contents and in such form as may be prescribed in the decision or to publish the decision in whole or in part. Hitherto, the aforementioned commitment was only available in a decision on pronouncing that a practice infringes collective consumer interests. Other amendments The Amendment introduces further changes of a procedural and material nature with the objective of enhancing the efficiency of the Act. The most important changes concern: An extension of the limitation period with regard to practices restricting competition. Currently this is one year from the end of the year in which the practice ceased. The Amendment implements a five-year period, i.e. five years from the end of the year in which the practice restricting competition was abandoned. The limitation period with regard to practices violating collective consumer interests has not been extended. It still amounts to one year. An extension of the term to lodge an appeal against a decision of the UOKiK to one month. Currently such an appeal is to be lodged within two weeks. An extension of the scope of commitments that the UOKiK may impose in commitment decisions. Commitments will consist in taking or discontinuing certain actions with the aim of terminating the infringement (hitherto they concerned preventing the infringement) or removing effects of the infringement. This change pertains to both commitment decisions issued in antimonopoly proceedings and proceedings concerning practices infringing collective consumer interests. Implementing changes in the Civil Procedure Code by granting the UOKiK the right to present in court proceedings its opinion relevant for the case not only in competition law cases, but also in other proceedings that may concern competition and consumer protection, for example proceedings regarding the private enforcement of claims resulting from competition law infringement. Comments The Amendment introduces a number of changes to the Act that have long been awaited by undertakings, and they shall be seen as beneficial to them. This is particularly true for amendments regarding merger control, which will reduce the obligation to notify the intention to concentrate (modification of notification thresholds, disregarding the turnover of the seller s capital group) or will facilitate the notification proceeding (a two-phase proceeding, communicating objections by the UOKiK). Additionally, changes concerning the extension of the time limit for lodging an appeal against a decision issued Amended act on competition and consumers protection 7

8 by the UOKiK and changes with regard to fine reduction in the case of a leniency application or settlement procedure are undoubtedly beneficial. At the same time, the new provisions grant the UOKiK additional tools that enhance the effectiveness by which it can eliminate practices restricting competition. These include leniency plus, fines for managerial persons and the right to indicate a certain manner by which decisions which state the infringement should be executed. Consumer protection shall be reinforced by, among other things, public warnings about practices infringing collective consumer interests announced by the UOKiK. Furthermore, the extension of the limitation period for practices restricting competition to 5 years is also of particular importance. For undertakings this implies that greater consideration must be given to restrictions imposed by competition law in their business activities. Amended act on competition and consumers protection 8

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