Leveling the playing field, American Investor, Fall 2017

New rules for enforcing private claims against violators of antitrust laws

The aim of competition law is to protect the level playing field for all participants in a market. Despite a number of laws protecting the free market at the level of the European Union and within the legal system of the member states, there is no end to media reports on alleged price-fixing arrangements between different market players, and how players with a dominant market position abuse it to their advantage.

Cartels may be the most spectacular manifestation of anticompetitive behavior. Tracking how cartel members reach their understanding, carry out their agreed terms, and monitor each other’s compliance with the arrangement would read more like a spy novel than the dry justification for an administrative decision issued by the competition authority.

Legal tools

The main tool for combating violations of competition law in Poland is fines. The highest penalty imposed to date by the president of the Office of Competition and Consumer Protection (UOKiK) finally totaled almost PLN 340 million (more than USD 120,5 million at the time) and involved a cartel of Poland’s largest producers of cement. For over 11 years, seven companies fixed prices, significantly distorting competition on the domestic market. On the EU level, fines many times higher have been ordered by the European Commission, which supervises the EU market when it comes to antitrust practices. The highest penalty, EUR 2.42 billion, was imposed recently on Google. The Commission found that Google had abused its dominant position as an internet search engine by illegally favoring its own price comparison service in search listings.

The EU take

While the amounts of some fines have been spectacular, the question is whether and how businesses harmed by anticompetitive behavior can seek damages from the perpetrators, and if so, what kind of damages they may sue for.

So far, Polish law has made it very hard to pursue damages for infringement of competition law. Without going into the details, as in any case seeking damages it is necessary first and foremost to prove a violation of law and the fault of the infringer, as well as the fact of the injury and—particularly difficult to prove—the amount of the injury.

The EU’s Private Antitrust Damages Directive (2014/104/EU) was intended to help plaintiffs overcome these difficulties. The directive was issued in 2014 and implemented in Poland by the Act on Claims for Redress of Injury Caused by Violation of Competition Law of April 21, 2017. The act entered into force on June 27, 2017, and introduces what are intended to be effective private civil means to combat infringement of competition law.

Interestingly, when the European Commission announced the record fine against Google, it noted in the press release that any person or business affected by Google’s anticompetitive behavior can bring a civil action for damages before the courts of the member states.

New provisions

The most important rules introduced by the Act on Claims for Redress of Injury Caused by Violation of Competition Law involve the following issues.

First, cases seeking compensation for injuries caused by violation of competition law will be heard at the first instance by the regional courts, regardless of the amount of the claims.

Second, the act introduces legal presumptions intended to make it easier for injured parties to prove their claims. A violation of competition law is presumed to cause harm, and there is a presumption of fault on the part of the perpetrator. The plaintiff will still be required to prove the value of the injury, but the court will be authorized to request legal assistance from the president of UOKiK, in particular, in determining the amount of the loss, if warranted by evidence and information held by the regulator. In the statement of claim or during the course of the proceeding, the plaintiff can apply for disclosure by the defendant, a third party, the president of UOKiK or other competition authority of evidence in their possession supporting the plaintiff ’s claim for damages.

If the defendant fails to comply with the court order requiring disclosure of evidence, or destroys the evidence, the court may apply sanctions which can include deeming the allegations that were to be supported by the evidence to be proved. The regulations governing disclosure of evidence are subject to a range of restrictions, however. And to make its defense, the defendant can also apply for disclosure of evidence (e.g. in the plaintiff ’s possession).

In turn, if a party applies for disclosure of evidence in bad faith, violates restrictions on evidence imposed by the court, or uses the evidence for purposes other than the specific proceeding, the court may ignore the evidence and impose a fine on the party of up to PLN 20,000. Also, the findings made in a legally final decision of the president of UOKiK recognizing the practice in question as anticompetitive are binding on the court in a private suit for antitrust damages. If the decision is appealed to the court, the judgment issued by the court in the appeal will be binding on the court in the damages action. The act also extends the limitations period for claims of this type to 5 years (previously the general 3-year limitations period on tort claims applied).

Wait and see

The president of UOKiK has expressed optimism about the new act, regarding it as a step in the right direction. Only time will tell whether or not the new law amounts to any major change in terms of the effectiveness of private enforcement of claims for damages arising out of antitrust violations.

We cannot exclude that private enforcement will adversely affect Poland’s leniency program. Bearing in mind the risk of civil claims, businesses might be more cautious considering a request for waiver or reduction of fines if they admit to having participated in a prohibited agreement.

Certainly the new law should already be taken into account by anyone observing what appear to be anticompetitive practices and considering pursuing a private claim against the infringers, and also by those who have reason to believe that such claims may be pursued against them and need to be prepared to show that they are not violating the law.

Published in: American Investor, Fall 2017