Compliance management in competition law

by Joanna Lech

3 August 2020

Compliance is a set of rules in place in an organisation to ensure that it operates in compliance with applicable laws and in-house standards, principles of good governance or intra-group procedures.

Compliance with applicable lawsis, among others, compliance with competition law in its broad sense, as governed by national and EU laws.

In Poland, competition law is regulated, among others, in:

• Competition and Consumer Protection Act;
• Unfair Competition Act;
• Act on Claims for Damage Caused by Breaches of Competition Law (Damage Claims Act).

The main target groups of competition laws

Competition law is applicable, first and foremost, to consumers (Article 4(1) of the Competition and Consumer Protection Act (CCPA), Article 2 of the Unfair Competition Act (UCA)) or enterprises (Article 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), so to a large group of people and enterprises that are not only obliged to observe the law themselves, but also to ensure that their employees do that too.

Competition and Consumer Protection Act

Competition law is based on three principles (according to the CCPA):

1. a prohibition to conclude antitrust agreements (Article 6–8 CCPA and Article 101 TFEU) understood as a prohibition to conclude agreements which have as their object or effect the elimination, restriction or violation of competition within the internal market (among others by fixing, directly or indirectly, purchase or selling prices or other trading conditions of goods);
2. a prohibition to abuse a dominant position (Article 9 CCPA and Article 102 TFEU) understood as a prohibition to abuse a dominant position on the relevant market by one or more enterprises, which consists in particular in imposing, directly or indirectly, unfair prices (including extortionate or abnormally low prices), long payment deadlines or other conditions of purchase/sale of goods or in limiting production, sale or technical development to the prejudice of contractors or consumers;
3. concentration control (Articles 13–17 CCPA, regulation no. 139/2004) understood as supervision by the President of the Office for Competition and Consumer Protection of the intention to, among others, merge two or more independent enterprises or to take over – by purchasing or taking up shares, other securities or otherwise – direct or indirect control over one or more enterprises by one or more enterprises, which could limit competition.

Unfair Competition Act

According to the Unfair Competition Act, an act of unfair competition is any activity contrary to law or good morals if it threatens or violates the interest of another enterprise or customer.

Acts of unfair competition include in particular:

• misleading marking of an enterprise;
• false or fraudulent indication of the geographical origin of goods or services;
• misleading marking of goods or services;
• violation of a trade secret;
• solicitation to terminate or not to perform the agreement;
• imitation of products;
• slander or dishonest praise;
• hindering of access to the market;
• bribing of a public official;
• unfair or prohibited advertising;
• establishment of a pyramid selling scheme;
• conducting or organising business as a consortium;
• unjustified extension of payment deadlines for the supplied goods or services.

Enterprises and their employees should be fully aware of which acts performed in the company may be considered violations of law under the applicable laws.

Tools for prevention of violations

Competition law policy is an internal document in place in the organisation, whose main purpose is to make the employees and third parties aware of the laws in force, of prohibitions and penalties for their violations.
The policy is an internal legal act of the organisation and it is usually implemented by entity’s management. It should be a kind of a comprehensive overview of acts of unfair competition, provide descriptions of the acts as such, specify penalties for violations of law and say what to do in the event of suspicion of such an act (or clear doubts related to competition law).

Training is another tool which allows minimising the risk of potential violations and is considered the most common form of passing knowledge to employees.

Sanctions

Pursuant to the CCPA, penalties may be imposed not only on the enterprise but also on the individual acting on its behalf. The penalties are severe and the amount of fines depend on the type of offence.

Examples of sanctions imposed on enterprises for offences, even if committed unintentionally:

• up to 10% of the turnover generated in the financial year preceding the year in which the fine is imposed;
• a fine of an equivalent of up to 50 million euro.

Examples of sanctions imposed on individuals acting on behalf of enterprises for offences even if committed unintentionally:

• a fine of up to 2 million zloty;
• a fine of up to fifty times the average remuneration.

The Unfair Competition Act provides, among others, for civil liability for committing an unfair competition act as well as criminal liability for some acts. An effective compliance system in an enterprise is also a guarantee of compliance with competition law in its broad sense.

As penalties for breaching competition law are severe, it is necessary to spread knowledge about competition law both among entity’s management and among employees.

To minimise the risk of sanctions, it is recommended to introduce an internal competition law policy and hold regular training sessions in this regard. These actions will increase the effectiveness of the compliance system in every enterprise.