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In late December 2017, the office of the Polish competition authority Urząd Ochrony Konkurencji i Konsumentów (“UOKiK”) announced the Polish competition authority (“PCA”) hit a collusion of certain manufacturers of wood-based boards used in various applications, including for the production of furniture. According to PCA’s ruling, the collusion lasted from 2008 to 2011 in the form of a cartel. While the participants were in competition to each other, they acted in concert to maintain prices and exchange commercially sensitive information, such as prices, price increase launch dates, and sales volumes, relating to fibreboards and particleboards sold to two categories of customers: industrial customers (e.g. furniture manufacturers) and wholesale customers engaged in further distribution of the products. Such agreements between competitors are by their nature very grave infringements of anti-trust laws (so called hard core restrictions). They are agreements that restrict competition by their very object so that there is no need to prove their anticompetitive effects.
PCA says the cartel was formed by five undertakings: Kronospan Szczecinek Sp. z o.o., Kronospan Mielec, Pfleiderer Group S.A., Pfleiderer Wieruszów Sp. z o.o., and Swiss Krono Sp. z o.o., which belonged to three groups of companies.
PCA’s proceedings were commended in the wake of a raid to the offices of one of the suspected participants and following a notice by Swiss Krono Sp. z o.o., which chose to benefit from the leniency program that allows parties to a collusion to inform on the scheme and cooperate with PCA in exchange for a milder treatment.
Pursuant to the Competition and Consumers Protection Act, the PCA may fine cartel participants for up to 10% of their turnover in the financial year preceding the year on which the fine is imposed. Thus, the Kronospan and Pfleiderer companies were fined for a total of PLN 135,761.340.25, the third biggest financial penalty imposed by PCA in course of its anti-monopoly proceedings ever. One reason why the amount was so big was that the respective groups to which parties to the infringement belonged had substantial shares in the national markets for fibreboards and particleboards, estimated by the PCA at around 70% in total.
Private enforcement of competition infringements
In addition to the PCA being empowered to impose fines if it finds that a forbidden agreement has been made in restraint of competition, private parties harmed by the infringement may pursue civil claims against the infringers.
Originally, such claims had to be enforced pursuant to the general rules of the Civil Code, the effect being that harmed parties were not really interested in pursuing them. Currently, the raising and pursuing of such claims has become much simpler since mid 2017 after the Polish Parliament enacted the act on claims for damages arising from competition law infringements (“Private Enforcement Act” or “PEA”). The Private Enforcement Act lays down conditions of liability for losses occasioned through infringements of competition law and rules governing the pursuit of related claims by way of civil action.
The private enforcement rules in PEA are of double importance in the case of the wood-based products industry collusion. One aspect is that a cartel is of its nature extremely harmful for competition in the market so that it generates claims of those that have been harmed by it.
Under PEA, the infringer must compensate for the loss he has occasioned through his competition infringement. This liability is based on fault. What is more, pursuant to PEA, a competition infringement (including, of course, an anticompetitive agreement) is presumed to lead to losses. However, there is another aspect of the new law that is important when assessing chances for a win in court in the case of damages claims: a final and unappealable decision of the PCA that finds a practice anticompetitive is binding on the court hearing the civil claim. This effect will materialise in the case of the above-mentioned cartel if its participants do not appeal from the PCA’s decision against them to the Court for Competition and Consumers Protection in Warsaw or if, after they appeal, the court’s verdict becomes final and unappealable.
The PCA decision is the first decision on a cartel since the effective date of the Private Enforcement Act. It is therefore interesting to monitor its consequences: perhaps we are seeing the beginning of a wider trend of private enforcement of competition claims as we know it from the Western Europe? This would be a “live test” of the new regulations, a much needed one since their usefulness can hardly be verified based only on the mere language of the law.
About the author
Kamil Kłopocki – lawyer at WKB Wierciński, Kwieciński, Baehr law firm. He specializes in Polish and European competition law and legal aspects of healthcare sector activities.