The OCCP’s extended competences in b2c relations – the amendment of the Act on Competition and Consumer Protection
The President of the Republic of Poland has signed an act which amends the Act on Competition and Consumer Protection, as well as the Act – the Civil Procedure Code. The main aim of the amendment is to replace the inefficient system of in abstracto (abstract) verification of the unfair terms in contracts concluded with consumers (in the course of in abstracto verifications it is assessed whether the clause applied in a consumer contract is unfair (abusive), and if it has been recognized as being abusive, is then put in the registry of abusive clauses). A number of the originally proposed changes were abandoned since they were considered to excessively interfere in the freedom of business activity; for instance, the President of the Office of Competition and Consumer Protection’s, (the "OCCP"), power to conduct searches in cases related to practices violating the collective consumer interest, or the OCCP’s explicit power to oblige entrepreneurs to return the benefits they had gained resulting from the use of an abusive clause. Apart from that, the commented provisions provide the OCCP with new, vital, competences aimed at increasing the efficiency of the protection of consumer interests. The amendments will come into force six months after their publication which will most likely to take place in April 2016.
Below please find the most crucial changes introduced by the latest amendments.
Administrative control of the unfair terms in contracts concluded with consumers
The system of the in abstracto verification of the terms in standard contracts to be concluded with consumers will undergo a complete overhaul. The amendments reflect the criticisms of the current register of abusive clauses. The amendments aim to improve the efficiency and transparency of the system of the in abstracto verification. From the entrepreneurs' perspective, the introduced amendments should be assessed as a tightening of the existing legal regime. Below, please see the most important changes:
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The most significant change, from the entrepreneurs' perspective, is the OCCP’s power to impose a fine once it has recognized a provision in a standard contract as abusive. At the moment, the OCCP can impose fines on entrepreneurs for applying those unfair contractual terms which have been placed in the register of abusive clauses by the Court, i.e. an independent or adversarial court. Taking the above into account, as well as the fact that the criteria for recognizing that a clause is abusive are vague, the present situation creates a great deal of legal uncertainty for an entrepreneur. The extension of the limitation period should induce entrepreneurs to cease using such clauses as quickly as possible.
It has been predicted that the transfer of competences of being able to recognize that a clause is abusive from the Court to the OCCP should result in the ceasing of the activities of consumer associations and organizations which bring about civil actions against entrepreneurs only in order to contrive of a way of obtaining representation costs in exchange for the withdrawal of an action. The reason for this cessation is that the proceedings will, in the future, only be instigated by the OCCP ex officio. However, it should be expected that before the amendments enter into force, such organisations may intensify their activities in order to gain benefit stemming from the current system.
As a new competence, the OCCP will be entitled to issue interim decisions in proceedings concerning practices which infringe the collective consumers’ interests should the OCCP be able to show that the continuation of an entrepreneur’s commercial practice could cause serious and obstinate threats to the consumers' interests. Such a decision can be adopted by the OCCP in the case of all practices which infringe the collective consumers’ interests, without the prior hearing of an entrepreneur. While the entrepreneur is entitled to appeal the decision to the Court, the lodging of the appeal will not suspend the execution of the interim decision. The Court will have two months in order to issue a judgment on a potential repeal, or to sustain the decision. The interim decision will be valid for no longer than until a decision terminating the case has been issued.
In practice, the subject of an interim decision can be, for example, the cessation of misleading advertising, a change in the distribution of a product, or even the suspension of the distribution of a product (i.e., depriving the entrepreneur of one of its areas of business). Therefore, such a decision can cause far-reaching consequences, in particular financial, reputational, or branding losses. The entrepreneur will need to incur the costs of waiting for the Court’s judgment since lodging an appeal will not suspend the enforcement of such a decision. The new institution, therefore, significantly increases the risk of doing business.
The introduction of the institution referred to as a "mystery client" (an action carried out in the course of an inspection of an entrepreneur’s business activity), is aimed at enabling the verification of whether the consumer was clearly and fairly informed about the product before entering into a contract with the entrepreneur. This action can be recorded by using both video and sound recording equipment. However, the disclosure of the fact that the entrepreneur has been dealing with officials will take place only after the completion of this inspection activity. The purpose of the measure is to verify in what way the goods and services have been offered to consumers rather than entrapping the entrepreneur into commit an infringement. The officials’ authorisation to carry out the above steps is subject to the Court’s previously issued approval.
"Mis-selling" as a new, expressly specified, practice
The amendment also extends non-exhaustive, list of prohibited practices violating the collective interests of consumers in the financial services market. It does so by introducing a prohibition on so-called "mis-selling", i.e., (i) offering financial services inadequate to the consumer's needs, or (ii) offering financial services to consumers in a manner inadequate to the nature of these services, for example, offering complex financial instruments over the telephone. This change is intended to encourage entrepreneurs to consider carefully whether the offered product is adequate in order to meet the needs of the consumers, or whether the manner of its offering reflects the nature of the service.
The amendment introduces a significant number of changes to the law on Competition and Consumer Protection that extends the powers of the OCCP in the field of consumer protection considerably. From the consumers' point of view, the adopted amendments should be assessed somewhat positively; however, from the entrepreneurs’ perspective, the introduced measures increase the risk of doing business. In order to be prepared for this change in the law, companies should first and foremost ensure that their standard contracts and internal procedures regarding their relationships with consumers are in line with the law. The best way to achieve this is to carry out internal audits, or introduce compliance programs. To this end, training programmes for those employees who have direct contact with customers are also recommended.