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30 June 2016
EU competition law consists of the relevant provisions of the Treaty on the Functioning of the European Union, numerous EU regulations and the European Commission's communications, guidelines and notices in that regard. In general, applicable regulations and non-binding legal acts can be differentiated under competition law. The European Commission's communications, guidelines and notices are defined as 'soft law' and serve to explain how the commission uses its powers and interprets generally applicable provisions (ie, 'hard law').
Regarding the division of EU law, the question arises as to whether soft law provisions should be considered in the judicial practice of national competition authorities and the courts of EU member states.
The Warsaw Court of Appeal provided an answer to this question in its interpretation of the Guidelines on Vertical Restraints(1) in a judgment concerning an alleged anti-competitive agreement between Polskie Składy Budowlane Group SA (PSB) and Fabryka Farb i Lakierów Śnieżka SA.(2)
The guidelines regulate agreements between undertakings operating at different levels of a production or distribution chain and the assessment of agency agreements regarding competition law. According to the guidelines, agency agreements do not fall under the scope of anti-competitive agreements and a decisive criterion for an entity to be defined as an 'agent' is a lack of financial and commercial risk regarding the activities under the agreement with the principal.
Polish law does not clarify whether agency agreements are anti-competitive and the issue had not previously been covered in case law. As a result, the judgment should be of interest to entrepreneurs and competition law practitioners.
Through Decision RKT-43/2009, the Office of Competition and Consumer Protection (OCCP) found that the agreement between Śnieżka and its 55 distributors (including PSB), fixed the minimum resale price of products manufactured and supplied by Śnieżka and therefore restricted competition.
Following PSB's appeal, the Warsaw District Court (Competition and Consumer Protection Court) overturned the OCCP's decision in part regarding:
The Warsaw Court of Appeal dismissed the OCCP's appeal setting aside the district court judgment.(4)
The Warsaw Court of Appeal noted that PSB was a purchasing group that negotiated purchase and sale conditions for goods and then sold them to shareholders. It had never sold Śnieżka's products on the retail market; instead, it sold them exclusively to its members (shareholders), which then set the retail price of Śnieżka's products independently.
The court underlined that although Polish law does not cover the issue of the anti-competitive nature of agency agreements, in practice national provisions in this respect should not be more restrictive than EU law.
According to the court, an assessment of whether PSB acted as an agent should have been carried out on the basis of the Guidelines on Vertical Restraints. The judgment emphasised that the guidelines are not binding, but may have legal effect, and the president of the OCCP and the national courts should consider them, especially when they are intended to supplement the binding provisions of EU law.
After analysing PSB's operations, the Court of Appeal noted that it did not incur "financial and commercial risks" or the risk of financing stock or investments required for its activity, but instead bore the costs relating to providing products and advertising for the benefit of its members and shareholders.
The court of appeal found that PSB's activity had "a character similar to an agency agreement", as the company acted as a commercial agent for its members. As a result, the price agreement that it concluded with Śnieżka should be excluded from the prohibition on anti-competitive agreements set out in Article 6 of the Act on Competition and Consumer Protection.(5)
The Warsaw Court of Appeal judgment unequivocally expressed its support for applying the Guidelines on Vertical Restraints' approach to the assessment of agency agreements under Polish competition law. According to the court, in the absence of national provisions in this regard, the OCCP and the national courts should consider the European Commission's interpretation of soft law when deciding on specific cases.
This means that undertakings that are self-assessing agency agreements for compliance with competition law should also take the guidelines into account. It also seems legitimate to use this approach regarding other issues set out in the guidelines, but not directly regulated under national law and for which there is no well-established judicial practice in the national courts. Further, in its decisions concerning anti-competitive practices, the OCCP regularly refers to various European Commission guidelines, thereby applying soft law instruments in practice.
For further information on this topic please contact Katarzyna Terlecka or Pawel Kulak at Schoenherr Attorneys at Law by telephone (+48 22 223 09 00) or email (firstname.lastname@example.org or email@example.com). The Schoenherr website can be accessed at www.schoenherr.eu.
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