The President of the Polish Competition Authority Imposes Financial Penalties on Managers for the First Time
On December 7th, 2020, the President of the Polish Competition Authority informed the public about the first decision of its kind regarding the Competition Authority imposing a fine on managers. The fine, an amount of PLN 200,000.00, was imposed on the President of the Management Board of Veolia Energia Warszawa S.A., Jacky Lacombe. Lacombe has been found guilty of violating the competition law.
This decision concerns the market of heat production and sale of heat within the territory of Warsaw and the arrangements made by the entrepreneurs in the period 2014–2017. The Competition Authority found that the entrepreneurs violated the competition law by concluding a price-fixing and market-sharing agreement. The President of the Competition Authority imposed a fine of PLN 92, 208,077.56 on Veolia Energia Warszawa S.A. and a fine of PLN 27,546,221.35 on Veolia Energia Polska S.A.
Although the President of the Competition Authority has had the competence to punish managers for breaching prohibitions on entering into anti-competitive agreements since 2015, so far, its activity has been focused on punishing entrepreneurs for competition infringement. Since July 2020, when the guidelines on the level of penalties for managers were published by the Competition Authority, it was said that the public office would soon start punishing managers of companies. This first decision in this matter shows that penalties for managers may now become a reality and may be severe.
According to Polish competition law, a managing person is a person who manages a company, in particular a person who performs a managing function or is a member of the managing body, for example, a member of the management board, partner in a partnership, proxy, or manager of department in the company.
In Poland, the Competition Authority may impose a fine of up to PLN 2,000,000.00 on a particular manager if he deliberately violates the prohibitions regarding the conclusion of anti-competitive agreements. However, the fine may be reduced under the procedure of voluntary submission to penalty. Moreover, the managing person may also file a leniency application.
The following rules shall be considered when setting the fine amount in a particular case:
Step 1 – Basic amount
The Competition Authority shall first determine the basic amount, considering the nature of the infringement. A distinction shall be made between three types of infringement:
- very serious violations: PLN 75,000.00–PLN 300,000.00
- serious violations: PLN 50,000.00–PLN 100,000.00
- others: PLN 10,000.00–PLN 75,000.00
Step 2 – Degree of influence on the infringement
The Competition Authority shall then consider the degree of the manager’s influence on the infringement. Once this is determined, the Competition Authority shall multiply the basic amount by a suitable rate according to the following scheme:
- high degree: 0.75–25
- average degree: 0.35–75
- moderate degree: 0.15–35
Step 3 – Mitigating and aggravating circumstances
Subsequently, the mitigating and aggravating circumstances shall be taken into consideration. These constitute the basis for increasing or decreasing – up to 50% – the amounts calculated in Steps 1 and 2.
Step 4 – Determination of the period of infringement
The amount determined so far shall be multiplied by a particular rate corresponding to the period within which the manager was responsible for the infringement:
- six months or less: 0.5
- more than one year: equal to number of years
For an infringement of more than 6 months in the last infringement year, the rate of 0.5 shall be applied.
Step 5 – Previous infringements
The Competition Authority shall then consider whether the manager has previously committed any other breach of the competition law. If so, each previous infringement increases the determined penalty by 5%.
Step 6 – The adequacy of the penalty to the infringement
Further, the adequacy of the penalty to the infringement shall be verified. The Competition Authority shall check whether the penalty realises the deterrent function and verify the amount of the calculated penalty in relation to the manager’s income and his economic situation.
Step 7 – Verification of the maximum penalty
Finally, the public office shall check whether the calculated penalty at previous stages does not exceed the statutory maximum amount of PLN 2,000,000.00. If it exceeds this amount, the penalty shall be automatically reduced to the maximum amount.
Currently, the decision of the Competition Office is still not legally binding. Therefore. it is likely that the punished entities will appeal to the competition court. Nevertheless, the said decision is a breakthrough and shows that future decisions of this kind may be financially severe. Thus, it seems that a proper competition compliance program is crucial for each company to function.
The abovementioned financial responsibility of managers also applies to foreign entrepreneurs operating in the Polish market. Thus, this law should be taken into account especially by those foreign entrepreneurs who come from legal systems where the criminal law liability is applicable only for competition law infringement by managers, for example, the French legal system.
Ewa Weinar, Attorney-at-law, Wołoszański & Partners Law Firm. Specialises in civil and commercial law, with a particular focus on competition law.