The cabinet is working on a draft amendment to the Competition and Consumer Protection Act (hereinafter the “draft” or “the amendment”). It is in implementation of the EU Directive 2019/1 (hereinafter: the “Directive”). The aim of the directive is, inter alia, to provide anti-competitive authorities of EU countries, including the President of the Office for Competition and Consumer Protection, with effective investigative tools.
The Directive takes into account that, for reasons of balance, it is also necessary to ensure an adequate reinforcement of the procedural guarantees of traders in their relations with these authorities. It also underlined the need to respect general principles of EU law, such as the principle of proportionality and the rights enshrined in the Charter of Fundamental Rights, in particular the right of defence. However this balance has not been maintained in the draft and the balance shifts to the President of the Office for Competition and Consumer Protection.
This is reflected in many solutions, including seemingly minor changes to inspections or searches. Some were only introduced “on the occasion” of the performance. Moreover, the changed form (still) raises questions of interpretation. Possibly this means the risk of “disagreement” between the chairman of UOKiK and the entrepreneur, which could lead to the imposition of a fine for the latter for refusing to cooperate with an inspection or search.
UOKiK officials interview the entrepreneur’s employees and other persons
According to the project
At present, the inspectors can only request explanations on the subject of the inspection from the inspected party or a person authorized by him. In practice, the inspectors indicate which specific employees must authorize the inspected party to provide explanations. The granting of such authorization is treated by the inspectors as part of the audited obligation to cooperate with the inspection. Receiving an explanation is in fact an interrogation carried out in the context of inspection activities. It covers circumstances related to anticompetitive practices of which the audited entity is suspected.
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This practice of exercising the right to receive explanations from the inspectors is not without controversy. It involves three aspects. First, whether ‘explanation’ should actually be taken as synonymous with the interview. According to the intention of the legislator, the “declarations” had to cover elements of the entrepreneur’s organization or structure and served to facilitate access to the desired materials for the inspectors. Second, it is questionable whether the inspectors of the inspected body may require to authorize the person they designate. After all, the provision refers to an authorized person by the inspected person and not to a person “selected” by the inspector. Third, the provisions do not specify whether the audited entity is required to ensure the presence of the person from whom the audited entities wish to collect “statements”. Controversial are especially the situations when it comes to an absent employee, who according to the provisions of labor law should not be obliged by the employer to be present at the inspection, for example because the employee is on leave or sick leave .
The proposed change only resolves the interpretive doubts that are problematic for inspectors. It gives them an unambiguous right to an explanation, not only from freely chosen employees of the wanted person, but also from other persons. However, in the amendment we will not find solutions to these issues, which are important from the perspective of the auditee and the disclosures. First, it will still not be clear whether the “statements” are “interrogations”. Second, the draft does not contain any provisions that would ensure the presence of the audited entity when receiving explanations. The inspectors are not obliged to inform the inspected entity that they intend to carry out this activity.
Since the auditee’s authorization will no longer be necessary, there will be no “opportunity” for him to find out that clarifications are planned. This limits his rights of defence. Because he is not present at the activity, he will not know its progress, so he will not be able to respond appropriately. Thirdly, the amendment does not clarify whether, under the obligation to cooperate, the controlled persons must ensure the presence of “desired” persons by the controlling persons, especially when it is not his employee.
Continuation of UOKiK’s activities outside the premises
Under the draft, the controlling parties are also entitled to: “Continuation of control activities with regard to notes, copies or prints of materials and correspondence, information collected on electronic data carriers, in devices or in ICT systems at the seat of the Office (…), if this can facilitate the inspection”. The authority is obliged to notify the auditee of the date of continued audit activities, but its failure to suspend these activities.
The proposed solution may be understood by the chairman of UOKiK as allowing the inspectors to copy virtually all materials at the inspection location and to make the copies made outside the premises of the entrepreneur. The inspectors should not have to check at the seat of the inspected office that the copied information falls within the time and scope of the inspection.
This was the practice of conducting inspections until 2017. It was questioned in the decision of the Court of Competition and Consumer Protection of 7 March 2017 (file no. XVII Amz 15/17). In this ruling, SOKiK stated that “the activities of viewing the contents of hard drive copies and mail are the essence of the search, because this is the moment when the authority confronts the evidence”, thus the necessary guarantee of the right to defense is ensuring the presence of the inspected party during these activities. As a result of this ruling, the inspectors now check at the inspection location which of the copied materials fall within the permitted range. Only those who meet this condition will be placed outside the seat of the inspected party.
The directive allows inspections to continue at the office of the agency, but states that respect for fundamental rights must then be guaranteed. Therefore, this regulation cannot be treated as a license to remove full copies of its hard drives or electronic mailboxes from the inspected office, regardless of their connection to the subject of the inspection. The right should therefore be construed narrowly, ie as “affirming” the admissibility of the current practice of the president of UOKiK. Any other interpretation would amount to a violation of the ban fishing expeditions”, That is, obtaining evidence unrelated to the subject of the inspection. This prohibition stems from the principle of proportionality in EU competition law.
The problem is that the proposed national solution is not clear. If the president of UOKiK wanted to understand them broadly, it would have the following negative consequences for entrepreneurs.
First of all – outside the seat of the inspected party, the inspectors would take a large number of documents containing business secrets. At the same time, there was no legal procedure to protect them from access by third parties, no procedure for the final destruction of documents that would ultimately not be useful as evidence, and no prohibition against using these documents as evidence in other proceedings.
Second – since the non-appearance of the inspected party at the office of the Office does not impede the inspection activities, the inspected party may actually be barred from participating. It will therefore not be able to check whether there is also material under the removed material that may not be copied by the inspectors. The minimum necessary safeguards for the exercise of the rights of defense should include the establishment of the inspected party’s prior notice of the activities at the office of the Office and exclude the admissibility of their performance when the inspected party duly justifies its absence. Failure to comply with these warranties should result in a prohibition to use the materials for which the government has performed work in the absence of the inspected party. There are no such solutions in the Project.
The above comments also apply to the searches.
Continuation of the “after-hours” search at the merchant
Currently, searches can only be performed during the searched person’s working hours. The concept proposes to continue the search already started for a longer period of time with the consent of the entrepreneur or “in particularly justified cases” without that consent. The Directive does not provide for such a solution.
The proposed solution may be beneficial to the one sought. Due to the presence of searchers for a greater number of hours on a given day, the search takes fewer days – searchers leave the company premises faster.
However, the admissibility of continuing the search without the entrepreneur’s consent in “particularly justified cases” raises doubts. The enigmatically formulated criterion leaves the searchers free to judge whether such a case has occurred.
The proposed solution is also disproportionate. Keep in mind that the searches are very intensive and take several days, sometimes longer than a week. They constitute a significant nuisance for the wanted person and disrupt his work process. Continuing the search “after working hours” is an additional obstacle to the current functioning of the entrepreneur and additional costs will arise on his side.
Therefore, it must be postulated that the search can only be continued outside the working hours of the wanted person with his consent. It should also be understood that a refusal to agree to an ‘after office hours’ search should in no way be considered a refusal to cooperate with the searchers.
The project is still being worked on. It is hoped that the solutions finally adopted will take due account of all procedural safeguards deriving from the rule of law.
Author: Marta Urbańska-Arendt, lawyer, doctor of law, from KRK Kieszkowska Rutkowska Kolasiński