Although the Office for Competition and Consumer Protection (OCCP) states that there shall be no mercy for competition law offenders, recidivists will be granted immunity from a fine if they file for leniency.
At the end of last year the OCCP took an unprecedented decision about the amount of fines imposed. After years of investigation that started in 2006, the authority found seven Polish cement producers guilty of having been involved in an illegal market sharing and price fixing cartel for over 11 years. The fines imposed totalled ca EUR 100 mln; individual fines were capped at 10% of the respective undertaking’s turnover. It was the highest fine ever imposed by the Polish competition watchdog. Pursuant to the leniency regulation, the authority granted full immunity from any fine to one of the seven cartel members, who had been the first to disclose its participation in the cartel. Another received a 50% reduction.
The decision in the Tikkurila case, issued in May 2010, was also remarkable. Several companies were found to have engaged in a resale price maintenance scheme regarding the prices of paints and coatings. They were fined a total of ca EUR 10 mln. Again, one of the offenders applied for leniency and received full immunity, while another implicated undertaking was granted a 50% reduction.
Not only the amount of fines imposed by the OCCP in 2010 is impressive but also the number of culprits. In the Sniezka case, the OCCP penalised Sniezka, a manufacturer of paints and varnishes, and 55 of its distributors. In the Gerda case, fines were imposed on 45 distributors and Gerda, the manufacturer.
The leniency programme: Success or failure?
The large number of cases and significant fines have made the leniency application popular amongst entrepreneurs. Since the adoption of the first leniency law in 2004 until the end of 2009, 19 leniency applications have been lodged. After a rather slow start in 2004–2006, the number of leniency applicants reached its peak in 2007 when companies applied for leniency six times. The number of leniency applications in 2008 and 2009 slightly decreased, to five and three respectively. As of mid- October 2010 there have already been six leniency applications. However, it should be noted that these figures include leniency applications for anti-competitive agreements in both vertical and horizontal cases, as it is possible in Poland to apply for leniency for both.
Interestingly, the same company – a retailer with significant market power – applied for leniency in at least three sequential cases concerning illegal price fixing in the same market involving different suppliers. For this applicant, the leniency programme was beneficial because it received a significant fine reduction in 2006, a normal fine reduction in 2008 and full immunity in 2010. Obviously, the granting of leniency is not precluded by former cartel infringements. In the above example, the applicant received full immunity even though it was a three-time recidivist. This actually contradicts the directives of statutory law, which explicitly state that previous infringements of competition law must be taken into consideration and lead to an aggravation of the fine.
It is clear that the leniency programme has boosted the detection of cartels. But one may question whether leniency should really be available to any company irrespective of whether it has infringed competition law in the past. Public perception of this solution may not be entirely positive. One may deem it unjust that a recidivist may still apply for leniency, and it appears fairer if companies with a history of anti-competitive behaviour are not placed on an equal footing with first time offenders, especially in cases of multiple violations.
However, one must not forget that fines are only one of the negative consequences of competition law infringements. Others include significant damage to the reputation of implicated undertakings (including possible drops in share prices of listed companies), damage claims by customers and disqualification from future tenders. If the cartel activity affected other countries besides Poland, directors of the leniency applicant may even face criminal sanctions.
In the final analysis, the Polish leniency programme has proven successful in restoring effective competition in markets where competition was hampered by restrictive practices. The fact that even a repeat offender may benefit from immunity may appear unjust, but is probably necessary to achieve the overall goal of safeguarding consumer welfare by effective competition. In order to enhance legal awareness of competition rules and foster compliance by undertakings, it is paramount that leniency applications be prosecuted swiftly and vigorously. The Polish competition authority has done this so far.
It is clear that the leniency programme has boosted the detection of cartels. But one may question whether leniency should really be available to any company irrespective of whether it has infringed competition law in the past.