Last week (on June 5, 2017) the President of Poland signed the Act on actions for damages for infringements of competition law (the “Act”). The Act will enter into force 14 days from its announcement in the Journal of Laws (i.e. on June 27, 2017).
The Act constitutes a transposition of Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014. The main aim of the Act is to ensure full compensation for a party that has suffered harm caused by an infringement of competition law. The Act introduces a number of instruments facilitating the claiming and obtaining of compensation from competition law infringers.
Infringement of competition law is understood as an infringement of the prohibition to enter into anticompetitive agreements or abuse of a dominant position laid down in Polish or European competition law (respectively Art. 6 and 9 of the Act on competition and consumer protection or Art. 101 and 102 of the Treaty on the functioning of the European Union). The right to compensation is recognized for any natural or legal person — consumers, undertakings and public authorities alike — irrespective of the existence of a direct contractual relationship with the infringing undertaking.
The injured parties can claim damages regardless of whether or not there has been a prior finding of an infringement in a decision of a competition authority. An earlier final decision of the President of the Office of Competition and Consumer Protection (the “President of the OCCP”) identifying the infringement will, however, increase the chances of success in the proceedings, because it is binding on the court in determining the violation of competition law and as a result also the liability of entities against which the decision is addressed.
An action for damages should be brought before the district courts of competent jurisdiction irrespective of the amount of compensation claimed. A lawsuit, with the consent of injured parties, may also be filed by organizations that are associated with entrepreneurs or consumers.
Facilitation of proving the infringement
Presumption of harm
Under the Act it is presumed that competition law infringements cause harm. The presumption is meant to facilitate the proof of the liability of the infringer. According to the general principle of civil procedure, the alleged presumption may be rebutted by the infringer. However, to achieve this, the defendant will have to prove that his violation did not cause any harm.
Presumption of culpability
A condition for compensation under Polish law is the culpability of the infringer. The Act introduces a presumption also in this regard and transfers the burden of proof to the infringer. As a result, the injured party will not have to prove the infringer’s fault, but the infringer will have to prove that he is not guilty.
Presumption of passing on overcharges
The Act introduces also a presumption of passing on of overcharges which is meant to facilitate the claiming and obtaining of damages by the indirect purchaser. This presumption applies to situations in which the infringement of competition law has resulted in an overcharge for the direct purchaser of the defendant and the indirect purchaser has purchased the goods or services that were the object of the infringement of competition law. In order to avoid liability, the defendant will have to demonstrate credibly to the satisfaction of the court that the overcharge was not, or was not entirely, passed on to the indirect purchaser.
Access to evidence
A novelty introduced by the Act is the possibility for the claimant to file a request for disclosure of the evidence. The court in the proceedings relating to an action for damages, upon request of a claimant who has presented a reasoned justification of plausibility of his claim for damages, and has undertaken to use the evidence obtained solely for the purposes of the pending proceedings, may order the defendant to disclose the evidence in his possession. If it is not executed, the court may order the defendant to reimburse the costs of the legal proceedings regardless of the outcome of the case or may even consider as established facts which were to be proved by the evidence requested.
The court will also have the right to order the disclosure of evidence by a third party, including the competition authority. The President of the OCCP will be obliged to disclose the evidence if obtaining it in any other way is practically impossible or excessively difficult. The court cannot however at any time order the disclosure of the leniency statements and settlement submissions voluntary presented by an undertaking to a competition authority describing the undertaking's acknowledgement of its participation in an infringement of competition law. The disclosure of other categories of evidence included in the file of a competition authority is not possible until the competition authority has closed its proceedings in a case.
Joint and several liability of the infringers
The undertakings which have infringed competition law through joint behavior are jointly and severally liable for the harm caused by the infringement of competition law, which means that the injured party has the right to require full compensation from any of them.
The Act introduces two exceptions to this rule. Firstly, if the infringer is a small or medium-sized enterprise (SME), it is liable only to its own direct and indirect purchasers and providers. This limitation of liability applies to SMEs whose market share in the relevant market was below 5 % at any time during the infringement and the application of the normal rules of joint and several liability would irretrievably jeopardize their economic viability and cause their assets to lose all their value, the SME has not led the infringement or has not coerced other undertakings to participate therein, or if the SME has not previously been found to have infringed competition law.
Secondly, an undertaking that has been granted immunity under a leniency program is jointly and severally liable only to its direct or indirect purchasers or providers. To other injured parties it is jointly and severally liable only if full compensation cannot be obtained from the other undertakings that were involved in the same infringement of competition law.
Extended limitation period
The act modifies the general limitation period for bringing an action for damages for the benefit of the injured parties and extends it from 3 to 5 years from the date when the claimant learns or could be reasonably expected to learn of the fact that the infringement of competition law caused harm as well as the identity of the infringer. Limitation periods will not begin to run before the infringement of competition law has ceased (relevant is the date of termination of the infringement by the given infringer). The limitation period is suspended if the President of the OCCP commences its proceedings in respect of an infringement of competition law to which the action for damages relates.
Quantification of harm
The act provides that, in determining the quantum of damages caused by a breach of competition law, the court may use the relevant European Commission guidelines. In addition, the court may ask the President of the OCCP or the competition authority of another EU country to assist the court in quantification of the harm if the evidence and information possessed by this authority allows it. In practice, however, the leading role in determining the amount of damage should be attributed to the claimant.
When will the new law apply?
The new law will apply to claims for damages caused by breaches of competition law that occurred after the Act enters into force. The rules governing the enforcement of claims in the court proceedings (i.e. the principles of disclosure of evidence, including statements made under the leniency program or settlement submissions, the jurisdiction of the courts, binding the court by the decisions of the President of the OCCP or guidelines on determining the amount of damage), will apply to all the proceedings initiated after the Act enters into force, irrespective of when the violation occurred.
What does the new law mean in practice for entrepreneurs and how should they prepare for it?
The new rules facilitating the private enforcement of claims for infringement of competition law are aimed at strengthening the protection of competition in Polish law. Entrepreneurs committing violations will have to take into account not only the possibility of the imposition of fines in administrative proceedings by the President of the OCCP but also actions for damages before civil courts brought by parties harmed by unlawful practice. International experience in this field shows that the amount of compensation may exceed the penalties imposed in antitrust proceedings.
One of the most recognizable private enforcement cases concerns the so-called interchange fees imposed by the banks and payment organizations (VISA, MasterCard). This practice has been found by the European (EC) and Polish (President of the OCCP) antitrust authority as an illegal agreement violating competition law.
As a consequence, some entities affected by this practice have decided to pursue civil claims. The first spectacular win was last year’s judgment of the UK’s Competition Appeal Tribunal awarding Sainsbury’s Supermarkets Ltd £68.6 million in damages from MasterCard.
K&L Gates constantly provides competition law training to companies and their senior management to ensure that they comply with Polish and European competition laws and avoid incurring fines or other punitive measures that may be enforced in the event of a breach under national or EU laws.
In the new legal environment it is important that, depending on the role of the entity (injured or infringing), any potential risk or basis for a claim for infringement of competition law are taken into account at the earliest possible stage, even at the stage where there is only a suspicion of a breach of competition law, before commencement of any formal proceedings in this respect. This will enable preparation of an appropriate defense strategy for those who have committed a breach of competition law or against whom antitrust proceedings are being conducted. In the case of injured parties, an early analysis of the potential claim will enable a stronger position in the court and will increase the chances of success in future court proceedings.
For more detailed information, please contact our competition law lawyers.