On 11 April 2019, the UOKiK President informed the public that he had instigated antimonopoly proceedings against 5 truck dealers suspected of participating in a cartel. The considerable amount of evidence collected by the authority indicates that the businesses had divided among themselves the Polish market into exclusive sales zones. According to the UOKiK President this could have violated both Polish and EU competition laws.
The gravity of the violation is attested by the fact that the antimonopoly authority has decided, for the third time in history, to bring charges not only against the businesses themselves, but also against their high-rank directors. As many as 9 persons face the risk of being punished.
The liability of managers for violations of competition law was introduced to the Act on the protection of competition and consumers over 4 years ago. It aim at enhancing the deterring effect of antimonopoly regulations as well as enabling more efficient information gathering with regard to illegal agreements. The Polish legislator wanted to more efficiently prevent situations where managers – being aware of their impunity – caused the companies they managed to violate competition law for their personal benefit, e.g. in the form of a performance bonus on account of increased sales as a result of an illegal agreement.
The provision in question was modelled on the regulations in force in other European Union states (including Germany, Holland and Belgium), where such penalties have long been commonly used. For instance, in 2014 in Germany, 14 brewery directors were required to pay a total of EUR 3.6 million for participation in a price cartel (the individual fines were in the range 200-250 thousand euros).
Under the Polish law, a managing person is an individual managing a business, in particular one serving a managerial position or being member of the managing body of the business. The assessment whether a given individual satisfies the definition of a managing person is carried out on a case-by-case basis. Such a person must have influence on the market behaviour of the business.
Therefore, liability will typically borne by members of a company’s management board, managers other than board members, such as heads of divisions, but also community or city mayors, e.g. with regard to the public utility services provided by the local authorities managed by them.
Only those managing individuals will be liable who by their deliberate acts or omissions have led to the business violating the prohibitions of the most serious anti-competition agreements. These are enumerated in the Act and include e.g. price cartels or market allocations. On the other hand, the liability of managers does not extend to tender collusions, which are prosecuted under criminal law.
Leading to a violation in practice consists in deliberate failure to comply with, or improper performance of, one’s managerial duties, including the obligations relating to the management and supervision over the business. Demonstrating negligence or recklessness of a manager’s conduct will not be sufficient. Intention to commit a violation must also be attributable to the perpetrator, i.e. a will to commit a violation or consent to a violation where it’s possibility was foreseeable. Moreover, such liability is solely individual in nature, which does not allow for punishing the entire governing body.
The condition for liability is determination by the UOKiK President of liability of the business managed by the person in question for violation under competition law. A business’s allowing a violation results in its managers’ being liable throughout the entire period of the illegal agreement being in operation. Hence, even individuals who no longer work for a given company can be held liable for such violations.
Where an infringement has been determined, managers face fines of up to PLN 2 million. In determining the level of a fine, the UOKiK President will factor in such circumstances as the degree of influence of a manager on the violation, the revenue obtained by the manager in question from a given business as well as the length and market implications of the violation.
Managing persons will be punishable in the course of antimonopoly proceedings against the business managed by such persons, by way of a decision on its liability and punishment. Overturning the decision on the liability of the business will automatically entail overturning the decision on the liability of its managing person.
THE CJEU JUDGMENT IN THE PZU CASE: A DOUBLE PUNISHMENT IS NOT THE SAME AS PUNISHING FOR THE SAME
On 3 April 2019, the Court of Justice of the European Union (CJEU) issued a very important judgment concerning double punishment of the same business, for the same infringement, in the same case (PZU Życie case, C-617/17). The CJEU held that the ne bis in idem principle does not preclude one from imposing two punishments in one and the same ruling – i.e. one for violation of the national competition law, and another for violation of EU regulations. However, the competition authority should ensure that such punishments – seen in aggregate- are proportional to the nature of the violation in question.
The CJEU judgment provides an answer to a request for preliminary ruling in appellate proceedings against the UOKiK President’s decision of 25 October 2007. The UOKiK held in it that PZU Życie had abused its dominant position on the Polish market of collective employee life insurance policies. The violation consisted in shaping the system of collective employee insurance policies so as to make it difficult for employers to change them. The reason was that termination of a collective employee insurance agreement required consent of the employees, who were not party to such agreements. Moreover, the policy required that where an employee who has resigned from the insurance, the employer should continue to pay relevant contributions during the term of such employee’s termination notice (i.e. for the subsequent 3 months). Hence, PZU transferred on employers the financial risk of employees’ resigning from insurance.
The UOKiK President imposed two penalties on the insurer: one, in the amount of PLN 33 million, for violating the state-level competition law, the other, in the amount of PLN 17 million, for infringing EU law. In its cassation filed with the Supreme Court, PZU challenged the imposition of two punishments in a single decision, alleging that the ne bis in idem principle, as expressed inter alia in the Charter of Fundamental Rights of the European Union, was violated thereby.
According to the CJEU, protection against double punishment is not applicable where in a single decision two legal regimes, i.e. state-level and EU competition law regimes, are being applied. Although, EU Member States retain the freedom of punishment, they must ensure a similar effectiveness of punishments for EU law violations. Thus, sanctions are to be imposed on the same grounds and based on the same procedures as in the case of state-level law violations. However, the combined punishment must be in proportion to the nature of the infringement.
The aggregate punishment of PLN 50 million is undoubtedly quite severe. However, in the case of such a large business as PZU too mild a sanction might not have achieved the expected results, i.e. oppressive and instructive.