The leniency program gives participants in anti-competitive agreements a chance to avoid a financial penalty in exchange for cooperation with the President of the Polish Competition Authority and for its assistance in detecting and proving the violation. A leniency applicant can count on completely avoiding a fine (or having it reduced), but must satisfy certain legal requirements. Otherwise, disappointment awaits them. This text presents examples of such disappointments when the President of the Polish Competition Authority turned away a leniency applicant.

Introduction

Much has been said about the benefits that leniency programs bring both to the President of the Office of Competition and Consumer Protection (the ’’Polish Competition Authority”) and to participants in anti-competitive agreements. The essence of leniency is the guarantee of a waiver or reduction of a fine for a participant in an anti-competitive agreement who has agreed to cooperate in detecting and proving an infringement and has provided the President of the Polish Competition Authority with yet unknown, significant evidence of the infringement. From the perspective of the President of the Polish Competition Authority, the benefit is valuable access to reliable sources of information on the most difficult to detect (because most often secret) infringements of competition law – cartels and other anti-competitive agreements. From the perspective of the leniency applicant (these may be entrepreneurs participating in the prohibited practice as well as their managers), participation in the leniency program provides an opportunity to guarantee that a fine will not be imposed (when they are the first participant in the prohibited practice to cooperate with the Polish Competition Authority and meet additional requirements)[1] or to significantly reduce the fine (an option available to the next in line)[2].

Obtaining benefits related to the leniency program is possible provided that the requirements specified in art. 113a et seq. of the Act of 16 February 2007 on the Protection of Competition and Consumers[3] (the “’Act’’) are met. On the Polish version of our website, we have already written about both the benefits of leniency and the criteria that an applicant must meet in order to obtain a waiver or reduction of the penalty[4]. It is worth recalling that a key requirement among these criteria is to provide documents or information about the infringement that are important in the case and that the Polish Competition Authority did not previously have, and that are sufficient to initiate the proceedings or to help significantly in the issuance of a decision. However, the obligations of  leniency applicants do not end there. In addition to providing specific documents or information on their own initiative, they must be ready to cooperate with the authority on an ongoing basis throughout the proceedings. An entrepreneur or an individual planning to submit a leniency application cannot, for example, destroy or conceal evidence of the collusive agreement from the moment they have made up their minds to do so. They also cannot disclose the intention to submit a leniency motion to other participants of the prohibited agreement[5]. Failure to meet all the statutory requirements leads to a rejection of the leniency application .

The applicant must provide significant new evidence

The basic requirement for participation in the leniency programme is to provide the President of the Polish Competition Authority with previously unknown information and documents that will contribute to resolving the case[6]. In the past, however, there have been cases where a leniency application was not accepted due to failure to provide such information.

For example, in the proceedings concluded with the decision of 31 December 2013, No. DOK-6/2013, concerning a collusive  agreement concerning the domestic retail market for the sale of watches, the President of the Polish Competition Authority did not accept the application of the company organising the watch distribution network for a fine reduction. A leniency applicant is required to provide evidence confirming the existence of an illegal agreement, which has a “significant added value” in comparison to the evidence already possessed  by the President of the Polish Competition Authority at the time of filing the application[7]. However, the President of the Polish Competition Authority found that this requirement had not been met. The evidence submitted by the leniency applicant did not constitute  significant added value in relation to the evidence collected before the opening of investigatory  proceedings, including evidence obtained during the search of the applicant’s offices. Moreover, evidence identical to that provided by the applicant had been disclosed to the President of the Polish Competition Authority earlier by another entrepreneur[8].

Importantly, the rejection of a leniency application does not prevent the President of the Polish Competition Authority from using the information and evidence provided by the applicant. This was confirmed by the Supreme Court when it ruled that the President of the Polish Competition Authority may “use the evidence obtained in connection with the submission of an application for a leniency program , even if such an application was returned to the entrepreneur (applicant)” and that “registration for the program is voluntary. According to the Supreme Court, the return of the application by the authority cannot result in the impossibility of using the evidence obtained from the applicant”[9].

Applicants cannot submit joint applications

Applicants should decide whether to cooperate with the President of the Polish Competition Authority under the leniency programme independently, not jointly. The leniency programme provides that only one applicant (the first to submit a motion fulfilling the legal requirements) may obtain a complete waiver of the imposition of a penalty, which is why the President of the Polish Competition Authority must be able to determine the order in which applications are submitted.

The above principle cannot be bypassed – as practice has shown – by a simultaneous (in one envelope) submission of leniency applications by several participants in a prohibited agreement. Such a situation occurred in the proceedings concluded with the decision of 31.12.2010 No. DOK-11/2010 concerning an agreement restricting competition on the domestic market for wholesale trade in gardening products. This investigation was initiated as a result of information obtained by the President of the Polish Competition Authority from the content of leniency applications submitted by two entrepreneurs simultaneously (i.e., in one envelope sent by post to the address of the Polish Competition Authority. The President did not take these applications into account, arguing that submitting them in one envelope made it impossible to determine the order in which applications from individual entrepreneurs were received, while “only one participant in a given agreement may effectively apply for complete immunity from a fine”. According to the President of the Polish Competition Authority, this position results from the objectives of the leniency programme, which include breaking the solidarity of the members of a collusive agreement. One cannot claim that the collusion was terminated if its participants jointly attempt to avoid financial liability for a breach of competition law[10].

The above-described rule does not apply to a situation in which entrepreneurs belonging to the same capital group participate in an anti-competitive agreement. The President of the  Polish Competition Authority considers that although these are formally separate entrepreneurs, in reality they pursue the same economic goal and it is practically impossible for them to act as competitors towards each other. Therefore, in the proceedings regarding a collusive agreement in the Warsaw heating market, concluded with the decision of 3 December 2020, No. DOK-5/2020, the President of the Polish Competition Authority accepted the leniency application submitted by PGNiG Termika SA in such a way that he refrained from imposing a fine on this company, as well as on its parent company (PGNiG SA), which was also recognized as a participant in the agreement. In the justification of the decision, the President explained that “the application to refrain from imposing or to reduce the fine submitted by the subsidiary, due to its belonging to the same capital group, also covers the parent company”[11]. Later, this approach was confirmed by an amendment to the Act, which entered into force on 20 May 2023[12]. Pursuant to its Article 113j, the leniency application submitted by the entrepreneur also covers: (1) entrepreneurs exercising a decisive influence on that entrepreneur; (2) entrepreneurs on whom that entrepreneur exercises a decisive influence[13] and their managers.

The applicant must cease its participation in the illegal conduct

A leniency applicant is expected to meet include discontinuing participation in the agreement before filing an application for a reduction of the fine or immediately after filing it [14]. Importantly, the discontinuation must be complete and concern the entire agreement that is the subject of the proceedings, not just some of its aspects.

The above requirement was not met by a leniency applicant in a case that concluded with a decision of the Polish Competition Authority of 20 December 2023, No. DOK-5/2023. The leniency applicant was found to have failed to cease its participation in the infringement leading to the eventual rejection of its application.

In the cited decision, the President of the Polish Competition Authority charged several companies, a manufacturer of products used for monitoring, access control and security systems ( Dahua Technology Poland) and several of its distributors, with vertical price fixing. The President of the Polish Competition Authority identified two violations: (1) a vertical pricing  agreement[15], and  (2) a market division agreement [16]. As it results from a reading of the decision, the leniency applicant had no problem in demonstrating the abandonment of the price aspect of the agreement, but appeared to have misinterpreted what actions would ensure the cessation of the market division charge.

As explained by the President of the Polish Competition Authority, the violation of the ban on agreements on market sharing occurred because “in the case of a transaction for a large amount concerning the installation of products, Dahua granted the first distributor who reported such a transaction a higher discount, as well as the so-called project protection. Another distributor could not then offer the same customer, within the scope of the same transaction, the same offer at a competitive price. Dahua employees also took actions aimed at discouraging distributors from competing for the same project” [17].

In order to discontinue the divisional practice, the leniency applicant ensured that its employees would stop discouraging distributors who were not covered by design protection from competing with those who had a registered design. However, the President of the Polish Competition Authority found that this was not sufficient. According to the Antitrust Authority, the practice was not discontinued because the principle of allocating transactions exclusively to one distributor who was the first to report it to Dahua was still being used [18]. According to the Polish Competition Authority, the leniency applicant discontinued the contested practice only when it also “ceased to allocate transactions prepared from the outset on Dahua products exclusively to one distributor who was the first” to report about such project [19].

In this case, the leniency applicant’s incorrect interpretation of the conditions for abandoning the infringement resulted in a fine of over PLN 22 million [20]. Financial penalties were also imposed on two managers of the company (PLN 245,000 and PLN 75,000).

Conclusion

The examples provided show that participants in anti-competitive agreements wishing to benefit from the leniency programme must demonstrate not only their willingness to cooperate with the President of the Polish Competition Authority, but also to realistically fulfil all statutory requirements, starting with collecting and presenting information and documents that may constitute significant evidence for the President of the Polish Competition Authority, and ending with meeting detailed formal requirements, not forgetting to… cease violating the law.

Footnotes

[1] Art. 113b of the Act.

[2] Art. 113c of the Act.

[3] Consolidated text: Journal of Laws of 2024, item 594.

[4] “Leniency – szansa dla skruszonych kartelistów“. We also wrote about how the leniency program works in practice, using the example of the case law of the President of the Polish Competition Authority in cases of anti-competitive vertical agreements (“Porozumienia wertykalne w orzecznictwie Prezesa UOKiK w latach 2019-2021“) and about recent legal changes aimed at increasing the chances of effective operation of the leniency program in cases involving tender collusion (“Najnowsze zmiany w prawie konkurencji – perspektywa biznesu (cz. 2)“).

[5] Article 113a, section 6 of the Act.

[6] The applicant for the waiver of a fine must be the first to present: (a) evidence or information allowing for the submission to the Court of Competition and Consumer Protection (SOKiK) of an application for consent to conduct a search, unless at the time of submission of such evidence or information the President of the Polish Competition Authority had no evidence or information allowing for the conduct of a search or had not yet commenced a search concerning the agreement, or (b) evidence which, in the opinion of the President of the Polish Competition Authority, is sufficient to establish a breach of the prohibition of restrictive agreements, unless at the time of submission of the application the President of the Polish Competition Authority had no evidence sufficient to establish such a breach, and no other applicant met the condition specified in letter a at the same time (Article 113b paragraph 1 item 2 of the Act). The party applying for a reduction of the fine is obliged to present evidence confirming the existence of the agreement that has significant added value for the purposes of proving a breach of the prohibition of anti-competitive agreements – in comparison to the evidence possessed by the President of the Polish Competition Authority at the time of filing the leniency application (Article 113c paragraph 1 item 2 of the Act).

[7] Art. 113c section 1 point 2 of the Act.

[8] Decision No. DOK-6/2013, points 174-184.

[9] Judgment of the Supreme Court of 15 February 2019 (I NSK 11/18).

[10] Decision No. DOK-11/2010, points 2-3.

[11] Decision No. DOK-5/2020, items 541-543.

[12] Journal of Laws of 2023, item 852.

[13] According to art. 6b sec. 2 and 3 of the Act, exerting decisive influence “occurs in a situation where there are such economic, legal or organizational links between entrepreneurs that result in the entrepreneur on whom decisive influence is exerted carrying out or adapting to instructions given to him by the entrepreneur exercising decisive influence, in a way that limits or prevents his independent conduct on the market”. At the same time, it is presumed that the entrepreneur exercises decisive influence “if his share in the capital of the entrepreneur on whom he exercises decisive influence exceeds 90%”.

[14] Article 113a, paragraph 9 and Article 113c, paragraph 1, point 5 and paragraph 2 of the Act. The applicant may, however, continue the actions which, in the opinion of the President of the Polish Competition Authority, are necessary to ensure the effectiveness of the proceedings conducted by the President of the Polish Competition Authority (Article 113a, paragraph 9 of the Act).

[15] Infringement of Article 6 paragraph 1 point 1 of the Act and Article 101 paragraph 1 of the Treaty on the Functioning of the European Union (TFEU).

[16] Infringement of Article 6 paragraph 1 point 3 of the Act and Article 101 paragraph 1 letter c TFEU.

[17] UOKiK announcement “Collusion in selling monitoring equipment – President of UOKiK has imposed more than pln 37 million fine”, 10 January 2024, https://uokik.gov.pl/en/collusion-in-selling-monitoring-equipment-president-of-uokik-has-imposed-more-than-pln-37-million-fine

[18] Decision No. DOK-5/2023, item 256.

[19] Decision No. DOK-5/2023, paragraph 261, see also paragraph 347.

[20] If the application were accepted, the President of the Polish Competition Authority would reduce the fine by a maximum of 50%.