Marcin Kulesza

The competition authority is open to negotiations

It is apparent from recent events that competition authorities, both in Poland and at the EU level, are seeking to eliminate violations through “amicable” methods of dispute resolution.

In the recent PGNiG case, Poland’s competition authority, the President of the Office of Competition and Consumer Protection, issued a commitment decision in which the regulator had consulted with the market to determine the wording of the decision. At the same time, the European Commission “amicably” completed a case involving a cartel on the foam market, and was preparing to reach a similar conclusion with Google in the case of abuse of its position. It may be pure coincidence that these three cases were coming down at the same time. But it certainly seems to signal a trend in the practice, particularly in the case of the Polish regulator. In this article I will focus on the commitment decision issued in the PGNiG case. It is particularly interesting because of the new approach taken during the proceeding.

In a 9-month proceeding concerning the probable abuse by PGNiG of its dominant position on the gaseous fuels market in Poland, the President of the Office of Competition and Consumer Protection issued a decision under Art. 12 of the Competition and Consumer Protection Act of 16 February 2007. This provision authorises the regulator to impose obligations on an undertaking which has offered commitments aimed at preventing violations of the prohibition against anti-competitive arrangements or abuse of a dominant position. Such a commitment decision may be issued if a violation is substantiated (not necessarily proved) in an anti-monopoly proceeding. Under the wording of Art. 12, in such situation the regulator may accept a proposal from the undertaking with respect to the measures it will apply (or cease to apply).

The PGNiG case, completed on 31 December 2013 by decision of the President of the Office of Competition and Consumer Protection (No. DOK-8/2013, announced on 27 January 2014), involved the allegation of abuse by PGNiG of its dominant position on Polish markets for sale (wholesale and retail) of gaseous fuels. According to the decision, it was substantiated that PGNiG limited the possibility for some customers to reduce the quantities of gas and reduce their “contract capacity,” as well as their ability to resell the fuel. Wholesale customers were also denied the right to enter into a contract with another seller when reducing their contract capacity purchased from the existing seller.

PGNiG filed an application for issuance of a commitment decision three weeks after commencement of an anti-monopoly proceeding by the regulator. The initial wording of the proposed commitments was subsequently modified through several months of correspondence between the company and the regulator. The final version included a commitment to make a number of changes to the contracts used by PGNiG.

The commitment procedure aimed at issuance of a decision under Art. 12 of the act is not itself new, and is used quite frequently in cases alleging abuse of a dominant position. The new aspect of this case was the use of the “market test” conducted by the competition authority.

In mid-2013, the President of the Office of Competition and Consumer Protection published a notice of filing by PGNiG of its proposals and invited all interested parties to submit comments on the proposals. According to the decision, 14 entities submitted comments. They included Poland’s energy regulator, the President of the Energy Regulatory Office, PGNiG customers and competitors, and industry groups. The remarks addressed various aspects of the commitments proposed by PGNiG. Most of the commenters questioned the time allowed to achieve the commitments, which they regarded as too long. There were also suggestions for editorial changes and proposals for specific changes in the contracts used by PGNiG and the wording of specific provisions of the contracts, as well as the scope of the contractual modifications in the context of a change in gas sellers.

Taking into consideration the proposal from PGNiG and the comments received through the market test, the regulator adopted PGNiG’s final proposal. The regulator found that the commitments, appropriately modified, would be sufficient to eliminate the disputed practices. In determining the final wording of the commitments in the decision, the regulator also specified the time PGNiG would have to perform them (two, four or six months, depending on the commitment), and ordered the company to report closely on its progress.

As mentioned, the most interesting aspect of the case is the use of the “market test” procedure, modelled on procedures used in other countries. This seems to be a step in the right direction. Use of a market test does not diminish the advantages of a commitment decision, which enables the regulator and the undertaking to conclude the proceeding quickly, effectively and relatively cheaply. (For the undertaking, another benefit is avoidance of penalties, although performing the commitments is not necessarily cheaper than the fines would have been.) The prolongation of the proceeding for the time required to obtain the comments (in this case, 24 days) and analyse them may be modest. This also allows the commitments proposed by the undertaking to be adjusted to suit the real conditions affecting operations on the market, thus bringing the decisions issued by the competition authority closer in line with commercial reality.

It should also be mentioned that there is a proposal to amend the Competition and Consumer Protection Act currently working its way through the Parliament which would modify the use of commitment decisions in practice. The possibility of using commitments to cease and desist existing anti-competitive practices would be expressly provided for in Art. 12 of the act. This would resolve doubts on the part of the regulator and some commentators arising out of the current wording of this article, which refers to commitments aimed at “preventing” violations but does not expressly provide for commitments to eliminate the effects of existing infringements.

Marcin Kulesza, Competition Law Practice, Wardyński & Partners