Anti-Crisis Shield and UOKiK proposals for (temporary) tough times
The amendment to the Anti-Crisis Act includes proposals drafted by the Office of Competition and Consumer Protection (UOKiK), intended to increase the financial security of households, ensure access to vital goods and services, and combat price speculation and unjustified increases.
The “Anti-Crisis Shield,” a package of changes drafted by the Council of Minister to the Anti-Crisis Act (Act on Special Solutions for Preventing, Countering and Combating COVID-19, Other Infectious Diseases, and Crises Caused by Them of 2 March 2020) was published on 31 March 2020 following a brief legislative process (Act of 31 March 2020 amending the Anti-Crisis Act). The changes entered into force on the date of publication.
The changes in the amendment proposed by UOKiK (Art. 1(6) of the amending act) involve:
- Authorising the Minister of Development and the Minister of Health to set maximum prices as well as maximum wholesale and retail margins on selected products
- Setting maximum non-interest costs of consumer credit
- Monitoring and inspection of compliance with the new solutions by state inspectorates and other state authorities
- The ability to impose significant financial penalties on businesses for failure to comply with the newly introduced regulations.
The Anti-Crisis Shield is designed to provide support for the economy and businesses, particularly SMEs, as well as employees, during the crisis caused by the coronavirus epidemic (as well as helping prevent and combat the epidemic itself).
UOKiK’s proposals are mainly intended to increase the financial security of consumers and households during this time, difficult for all, and also to ensure access to goods and services important for protecting human health and safety. The aim is also to avoid price speculation and unjustified increases. This is to be achieved by introducing price controls on certain goods and holding down the costs of consumer loans.
Administrative setting of maximum prices on selected goods and services
The amendment provides for the possibility of issuing a regulation setting maximum prices or maximum wholesale or retail margins for goods and services (the regulation would be issued by the Minister of Development in agreement with the Minister of Health and the Minister of Agriculture and Rural Development). The act refers to goods and services of particular importance for protection of human health and safety, as well as costs of maintaining households (according to the justification for the bill, this should mean only basic products of exceptional importance for protection of persons and households).
According to the amendment, the Minister of Health may:
- Set maximum prices for various levels of trade in goods (introduction onto the market—wholesale—retail)
- Specify the scale of sales of goods or services (rationing)
- Establish regional conditions.
The point of reference in setting maximum prices is to be the prices during the period preceding introduction of a state of epidemiological threat as well as justified changes in costs of production and delivery.
In terms of permitted profits, the minister is to specify in the regulation the basis for calculation of maximum margins. The minister may also indicate maximum margins for certain types of goods or set margins based on the wholesale price.
Ban on charging of prices or margins outside of established range
The regulation is to contain a prohibition, provided for in the adopted act, on application in trading in Poland of prices or margins higher than those specified in the provisions, and also indicate the duration of these provisions.
Monitoring of prices and terms of sale
UOKiK has already taken action to review prices, unfair terms of sale, and misleading practices, without waiting for amendment of the Anti-Crisis Act. As announced by the president of UOKiK, a team has been appointed at the office and tasked with monitoring prices of foods and hygiene products. Staff of UOKiK and the Trade Inspectorate will be checking price levels in online and brick-and-mortar stores, including retail chains. In the area of e-commerce, the office has already established cooperation with Allegro, helping take down a number of offers misleading to consumers on how to combat the coronavirus epidemic.
The office has also announced that it will examine trade in the agri-food sector and does not rule out intervention if it finds unfair exploitation of a contractual advantage with respect to SMEs whose contracts for supply of products may not be respected by their customers.
Price monitoring already conducted by UOKiK is also being used to prepare price analyses, which will then serve as the basis for setting maximum prices.
Inspection of businesses
Oversight of whether businesses are complying with the proposed ban on charging prices or margins higher than the maximum will be exercised by the Pharmaceutical Inspectorate, the Agricultural and Food Quality Inspectorate, and the Sanitary Inspectorate within the scope of their jurisdiction, and otherwise by the Trade Inspectorate.
Inspections at businesses by these authorities will be conducted under the greatly simplified provisions of Chapter 5 of the Business Law of 6 March 2018. As stated in the justification for the bill, the point is to ensure quick and effective inspections under far-from-normal circumstances. Consequently, the following rules for conducting inspections of business operations are excluded:
- The need for prior notice to the business of the intention to launch an inspection
- The need to identify the business subject to inspection in the authorisation to conduct the inspection
- The ban on launching and conducting more than one inspection of a given business at the same time
- The ban on conducting repeated inspections on the same subject matter.
Moreover, inspection activities can also be conducted in the absence of the business operator or authorised person, and the duration of inspections during the calendar year will not be limited. The business operator’s right to object to taking up and conducting inspection activities is also eliminated.
Sanctions for charging excessive prices or margins
For violating the ban on applying prices or margins above the maximum, undertakings will be subject to a fine of PLN 5,000 to 5,000,000, imposed through an administrative decision. Decisions will be issued by province pharmaceutical inspectors, province agricultural and food quality inspectors, province sanitary inspectors, or province trade inspectors, depending on their jurisdiction.
In addition, the president of UOKiK may impose fines of up to 10% of the annual turnover of a business (in the financial year preceding the year when the sanction is imposed), but only for repeat violations of the ban by a business or when its actions affect numerous goods or services or a large scale of operations.
Under the amendment, the president of UOKiK can impose additional fines if the undertaking, even unintentionally:
- Fails to provide information demanded by UOKiK or provides false or misleading information
- Prevents or hinders the office in launching or conducting inspections.
The maximum level of this sanction will be 5% of the undertaking’s turnover in the financial year preceding imposition of the fine, but no more than PLN 50 million.
In the procedure for imposition of fines, the act introduces the possibility of expedited execution of imposed sanctions (brief time limits, the possibility of ordering immediate enforceability, and barring the right to seek judicial stay of enforcement).
Special authority of Minister of Health to set maximum official sale prices and maximum official wholesale and retail margins
Under the Act Amending Certain Acts on the Healthcare System for Preventing, Countering and Combating COVID-19, most of the provisions of which entered into force on 1 April 2020, the Minister of Health has been vested with special authority to regulate prices for the following strictly defined goods:
- Prescription and non-prescription medicinal products
- Medical devices
- Foods for special medical purposes
- Biocidal products
- Pharmaceutical raw materials.
But among these products, this authority applies only to those that can be used for combatting COVID-19 or at risk of shortage in Poland due to the coronavirus epidemic. Price controls will not apply to products, devices and foods whose prices have already been set via an administrative decision issued under the Act on Reimbursement for Medicinal Products, Foods for Special Medical Purposes, and Medical Devices of 12 May 2011.
The Minister of Health is authorised to set, by decree, maximum official sale prices (including VAT) as well as maximum official wholesale and retail margins (effective prices) for these goods.
Monitoring of prices and margins set by the Minister of Health is to be exercised by the Pharmaceutical Inspectorate, the Office for Registration of Medicinal Products, Medical Devices and Biocidal Products, and the State Sanitary Inspectorate, according to their jurisdiction.
The sanctions for violation of the ban on charging prices and margins higher than those fixed by the Minister of Health, as well as the procedure for imposing sanctions on undertakings, will be the same as for the price-fixing measures by the Minister of Development (with the same role also played by UOKiK).
Cheaper consumer loans
Within the Anti-Crisis Shield, UOKiK also proposed to provide additional protection for borrowers by introducing maximum levels of non-interest costs of consumer credit (generally defined as loans or credit up to PLN 255,550). According to UOKiK’s assumptions, the proposals should reduce by half the costs of consumer borrowing.
The recently adopted act provides accordingly that:
- For loans with a repayment term of less than 30 days, the non-interest costs must not exceed 5% of the total principal
- For credit products with a repayment term of 30 days or more, the non-interest costs may be up to 15% plus an additional 6% for each year of the loan/credit term (in other words, no more than 21% of the total principal of credit/loan granted for one year).
But regardless of the term of the loan or credit, the non-interest costs must not exceed 45% of the total principal.
These restrictions on costs of consumer credit are temporary and are to remain in force for 365 days following entry into force of the act (i.e. from 31 March 2020). The justification for the bill states that this period is dictated by the need for these solutions to remain in force not only during the state of epidemiological threat or epidemic, but also for some time after it is lifted. It is argued that only then will the economy return to normal operation, and according to UOKiK, that may take up to six months after the highest wave of infections. After that time, lenders will be able to charge non-interest costs of credit in an amount set by the previous limits, with respect to the remaining term of the credit agreements.
Sanctions for violating regulations
The amendment provides that violation of the regulations on setting consumer credit costs may constitute a practice infringing the collective interests of consumers (under the Competition and Consumer Protection Act). Such practices are subject to fines of up 10% of the undertaking’s turnover in the financial year preceding imposition of the fine.
Changes in UOKiK operations
According to information obtained from UOKiK, most of the office’s staff are working remotely. For now, there is no indication that this form of work has caused any significant delays in ongoing proceedings (although all meetings with businesses have been suspended, as well as, for example, the possibility of reviewing the case files). The bureau and reception at UOKiK continue to function normally for now. But depending on how the situation evolves, it cannot be ruled out that restrictions will be imposed on operation of the office, leadings to delays in consideration of matters, as is occurring in the case of competition authorities in other countries.
It should be pointed out that the amendment of the Anti-Crisis Act contains provisions halting the commencement or suspending the running of certain time limits under administrative law for the duration of the state of epidemiological threat or epidemic.
Andrzej Madała, Competition and Consumer Protection practice, Wardyński & Partners