Introduction
Facts
Decision
Comment
Introduction
In January 2012 the Competition Authority fined a leading insurer, Powszechny Zakład Ubezpieczeń SA (PZU), and insurance broker Maximus for alleged market collusion. PZU and Maximus have been fined PLN56.6 million (approximately €13.5 million) and PLN61,858 (approximately €15,000), respectively.
PZU is one of the largest insurance groups in Poland. It deals with property, personal injury and life insurance and open-ended pension funds. Maximus acts as an insurance broker, finding attractive insurance deals for its customers.
Facts
The alleged arrangement concerned group accident insurance for school children, young people and employees in the education sector in the Kujawsko-Pomorskie region. According to the authority, in 2009 PZU and Maximus entered into an anti-competitive agreement. Maximus referred its clients from the Kujawsko-Pomorskie region exclusively to PZU, regardless of the terms and conditions offered by PZU and rival insurance companies. In exchange, PZU agreed to sell insurance to educational institutions exclusively through Maximus. Consequently, PZU did not have to offer competitive terms in order to secure insurance contracts; Maximus eliminated the risk of being bypassed by PZU, which would have been the case had a client purchased insurance directly from PZU.
Decision
According to the authority, the arrangement had an adverse effect on other insurers because even if their offers were more beneficial to customers, they were not recommended by Maximus. Furthermore, it deprived customers of the ability to choose the best insurance policy on offer.
The authority stated that the alleged arrangement was of a "mixed vertical and horizontal nature". Despite the fact that the companies involved officially operated in different product markets (as insurer and insurance broker), in reality Maximus competed with PZU and its agents. This assumption led to the allegation of a horizontal "division of the market".
On issuance of the decision, both PZU and Maximus denied the authority's allegations in official press releases. In particular, the parties questioned the nature of the evidence by which the authority had concluded that they had entered into an anti-competitive arrangement.
PZU highlighted that in 2009 it had entered into 1,270 insurance contracts with schools in the Kujawsko-Pomorskie region, of which only 17 were secured via Maximus. In addition, in 2010 PZU had entered into 1,214 contracts, of which Maximus had acted as an intermediary for only four. PZU suggested that this evidence clearly rendered invalid the allegation of market division made by the authority.
Maximus referred to statistics which showed that in the majority of cases, it had recommended insurers other than PZU. Furthermore, Maximus asked the authority to identify any single instance where Maximus had recommended PZU over other insurers which (according to Maximus's internal records system based on objective criteria) had provided a more favourable quote.
Both parties announced their intention to appeal the authority's decision.
Comment
Whereas previously the authority qualified certain vertical arrangements as having horizontal effects, this is probably the first decision by a Polish regulator which refers to the concept of a hybrid 'vertical-horizontal agreement'. It is debatable, however, whether insurers and insurance brokers can be classed as direct competitors since insurance brokers do not sell insurance, but rather seek insurance offers on behalf of their customers.
Furthermore, the statistics presented by the parties following the issuance of the decision cast doubt on the negative effects of the arrangement for the insurance market and foreclosure effects for competing insurers.
PZU descibed the fine imposed on it as "staggering". Polish law does not link the level of a fine to turnover related to cartel activity (instead, the fine relates to the aggregate turnover of a party that is found guilty). Therefore, in certain instances, the fine amount may substantially exceed the turnover generated by alleged cartel activities.
While recent authority decisions, including PZU/Maximus, reinforce the trend to impose strict fines, there is also a marked tendency by Polish courts to verify in much closer detail whether such high fines are justified.
For further information on this topic please contact Krzysztof Kanton at Soltysiński Kawecki & Szlęzak by telephone (+48 22 608 7000), fax (+48 22 608 7070) or email ([email protected]).