Newsletter competition 6/18

PRICE ALGORITHMS – THREAT TO COMPETITION OR OPPORTUNITY FOR CONSUMERS?

Application of new technologies is no longer an idea for making one’s business more attractive, but more and more frequently a necessity. The European Commission warns businesses about the application of price algorithms and the entailed possibility of infringing competition law. Nevertheless, the Luxembourg based Conseil de la Concurrence has found that the advantages of application of an algorithm in one of the cases were so important that the businesses in questions escaped the punishment for antitrust law infringement.

 

WHAT DID THE CASE INVOLVE?

The complaint concerned a mobile application for ordering taxis online (it did not involve Uber this time :). If a client wanted to travel by taxi, the application would find the nearest taxi and calculate the fee due. The fee was determined by the application and neither client nor the driver had any influence on it.

The authority found that coordinating prices among drivers constitutes a horizontal agreement, i.e. one concluded among direct competitors. Nevertheless, the authority refrained from punishing the businesses stating that the individual exemption could be applied.

WHY DID THE AUTHORITY APPLY THE EXEMPTION?

The authority held that using the platform has positive implications. Above all, it allows the empty trips to be reduced, cuts the time of waiting for a taxi and eventually reduces the price for the service. It was assumed that such benefits could not have been obtained without trip prices being pre-determined and that there was no other, equally efficient way to obtain such results. Moreover, the application covered fewer than 30% of all taxis in Luxembourg so even in there was an agreement between the taxi companies, there was still considerable competition on the market.

The decision is unusual in that it concerns one of the most severe restrictions of competition, i.e. price-fixing among competitors. The Polish anti-trust authority emphasises that in this case it is very difficult to benefit from an individual exemption. In Poland, such exemption in horizontal relations was only applied once – in the case of the Polish Association of Pieniny Raftsmen in 2011. Thus it is an exceptional situation.

 

CASE LAW: DOES LACK OF RESPONSE TO A COMPLAINT ALWAYS MEAN MEETING THE CUSTOMER’S DEMANDS?

A business that fails to respond to a customer’s complaint is presumed to have accepted it. It can, however, challenge the validity of the claim both as regards the principle and the amount claimed before a court. The Supreme Court so held in a resolution concerning a complaint handled by financial market entities. However, the resolution may have impact on complaint-handling procedures in other industries, too.

WHAT DID THE ISSUE INVOLVE?

The case involved the Act on complaint-handling by financial institutions and on the Financial Ombudsman. In the event of such entities, the business has in principle 30 days (and sometimes 60 days) to handle a complaint. Whereas in the event of failure to meet the deadline, the complaint is deemed to have been accepted according to the customer’s demands. Presented to the Supreme Court were to possible ways of interpreting the provision. The first states that where the deadline for an answer is not met, the regulations preclude the business in question from questioning the validity of the customer’s claims. However, the Supreme Court agreed with the other position whereby the failure to meet the deadline results in a presumption that the business has accepted the complaint. It can, however, challenge the validity of the claim in court. It must then demonstrate that the customer was not entitled to the claim or was entitled to a lower amount.

WHAT DOES IT MEAN?

Although the Supreme Court’s resolution concerns complaint handling on the financial market, similar regulations can be found in the Civil Code and the Act on consumer rights. One of these allows the business 14 days to respond where a client demands, under a manufacturer’s guarantee, that a fault be removed or the price be reduced. In other cases, a 30-day term applies. Hitherto it was clear that failure to meet such deadline meant that the complaint had been accepted.

However, the Supreme Court’s resolution may considerably affect consumer protection while improving the position of businesses if the courts apply it analogously to complaints from outside the financial industry. A business will be in a position to escape liability provided that it can prove that the customer’s claim is groundless. On the other hand, it may reduce the willingness of businesses to respond to complaints on time. Also, customers might not be willing to exercise their rights seeing that they might get involved in litigation with the business in question.

 

NEWS

On 9 July 2018, an amendment to the Civil Code will enter into force concerning the limitation of claims. For businesses, the most important changes will concern seeking satisfaction of time-barred claims from consumers. Details of the amendments together with examples can be found in an article written by our laywers for Dziennik Gazeta Prawna.

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