Abstract This article critically analyses the introduction and development of a system of competition law in Poland prior to 2016, a period when the country underwent two fundamental transitions: from a centrally planned economy to free markets and from communism to democracy. In particular, the study focuses on the competition agency’s setup, advocacy and enforcement efforts. It also examines the position and input of the judiciary, practitioners and the broader epistemic community. The study uniquely benefits from in-depth interviews with individuals who shaped the Polish system over nearly 30 years of its existence (inclusive of all former heads of the agency, judges, leading practitioners, and agency advisors) and from analysis of newly gathered data and statistics. It also draws on broader scholarship on new competition regimes. The findings are aimed to inform refinements in Poland and other countries establishing or developing competition law systems. This study will be particularly salient in countries that are undergoing or have undergone similar economic and/or political transitions. I. Introduction The spread of competition legislation internationally in the last three decades has been unprecedented. While initially associated with Western liberal democracies with market economies, competition legislation has now spread to more than 130 countries with a range of economic structures. The new competition law jurisdictions differ greatly with regard to the level of development, type of economy, and broader socio-political and cultural contexts. As a result, each faces unique challenges in implementing competition systems.1 This article critically analyses the introduction and development of a competition law system in Poland. The system took root as Poland shifted from a centrally planned to a free market economy; from communism to democracy; and from isolation to accession to the European Union (EU). This research, while relying on broader scholarship on new competition regimes and doctrinal research, also draws on data and statistics. Moreover, this analysis benefits from nearly 30 in-depth interviews conducted with individuals who shaped the system over nearly 30 years of its existence, including all former heads of the competition agency, judges, leading practitioners, and agency advisors.2 Kovacic and Lopez-Galdos argue that establishment of a well-functioning competition law system is a slow process, requiring between 20 and 25 years before one can gauge its results.3 In this light the Polish regime is ripe for such a broad empirical evaluation, which was undertaken with a focus on some of the key factors determining effective implementation of competition law and policy, drawing on the work of Aydin and Büthe.4 The analysis begins with developments in the early 1980s, leading to the adoption of the first competition statute in 1987. It concludes at the end of 2016. It is the first such study of the Polish competition law system,5 or indeed of a recently matured competition law regime. The findings aim not only to inform refinements in Poland, but also to deepen our understanding of how new systems develop and to influence law and policy reforms in jurisdictions that are developing domestic competition systems. They will be particularly salient in countries that have undergone or are undergoing similar economic and/or political transitions. This article first outlines the broader political and economic context of Polish transition. It then provides an overview of early developments in competition law under the communist regime (pre-1990). This leads to analysis of the competition system post-1990 divided into three sections that focus on the key co-producers of the system. The main section scrutinizes the status and operation of the competition agency. In particular, it first critically examines the agency’s setup, its resources and evolving mandate, allowing further examination of the agency’s advocacy and enforcement efforts across the years. The main section is followed by sections focusing on the contributions and roles played by the judiciary, practitioners, and the broader epistemic competition law community. The conclusions bring together the key policy recommendations. II. Political and economic context of transition Any assessment of the competition system in Poland must consider the broader economic and political context of Poland’s transition to a market economy and the related paradigm shifts. This section offers such an overview. Between 1945 and 1989 Poland was a communist state, subordinate to the Soviet Union. In the late 1940s the economy was nationalized. A system of central planning (a command economy) was introduced. In this framework resource-allocation decisions (in relation to production, investment, and pricing) were made centrally by the government and not independently by firms. Most prices were fixed administratively, often below cost, artificially suppressing inflation. State-owned firms were formally grouped within industries into associations and they were supervised by sectoral ministries. Profits of efficient operators were transferred to cover losses incurred by inefficient ones. There was no real scope for competition. Foreign economic relations were reoriented to meet Soviet needs. Autarkic tendencies and insulation of the Soviet system meant that the economy was not exposed to foreign competition. This grossly inefficient system led to a low living standard and shortage economy, including rationing of basic staples (such as sugar or milk) in the 1980s.6 The dire and worsening state of the economy necessitated changes, which were pressed for by the newly established and free labour union—Solidarity (Solidarność).7 In 1981 a White Paper on the Economic Reform8 called for various far-reaching changes, inclusive of the introduction of competition legislation. The economic reforms of the 1980s indicated movement away from central planning. They included introduction of freedom of economic activities, formal ending of a privileged position of state-owned enterprises,9 and dissolution of conglomerates and sectoral associations (which deprived enterprises of commercial autonomy).10 While themselves insufficient, these reforms heralded a major paradigm shift. At the end of the 1980s Poland experienced a peaceful, yet difficult transition to democracy and capitalism. The first partly free parliamentary elections, in June 1989, led to the creation of Tadeusz Mazowiecki’s government and initiation of a rapid economic transformation under Deputy Prime Minister and Minister of Finance Leszek Balcerowicz, a PhD economist. A group of experts under his supervision prepared a package of key reforms (the so-called Balcerowicz Plan, later referred to as shock therapy). State monopoly in international trade was abolished. Internal currency convertibility was introduced. Rationing of goods was ended. Subsidies to state-owned firms were slashed and their bankruptcy made possible. The majority of prices were freed, unleashing very high inflation (which, in turn, was curbed within a relatively short period of time).11 In terms of competition, Balcerowicz prioritized introduction of an open trade regime with a view to generating import competition as a source of discipline for often grossly inefficient domestic incumbents. He was a keen believer in privatization and demonopolization.12 Implementation of these early reforms helped establish the foundations of a market economy and reintegrate Poland into the global economy. Poland was the first country from the Soviet bloc to take this path.13 Polish reorientation to the West, especially towards the EU, was unambiguous. By September 1989 Poland had already signed the Trade and Commercial and Economic Cooperation Agreement with the European Community. In December 1991 Poland concluded an Association Agreement with the European Communities,14 signalling ambition and firmly anchoring the country’s future direction of travel. As part of this alignment effort, Poland undertook a commitment to approximate its laws to the EU regime, including in the sphere of competition.15 The formal application to join the EU was submitted in April 1994. The accession process required fulfilment of various conditions (so-called Copenhagen criteria), among them establishing a functioning market economy and developing the capacity to cope with competition and market forces.16 As early as 1997 the European Commission concluded that Poland met these criteria.17 Accession required also acceptance and implementation of the entire body of EU law. Following successful adjustments and negotiations, Poland joined the EU on 1 May 2004. The pro-EU orientation played a major role in the country’s successful development. Market reforms put Poland on a trajectory of strong and sustained economic growth (see Fig. 1 above). Recently FTSE Russell, a leading provider of stock market indices, announced Poland’s reclassification from an ‘emerging’ to a ‘developed’ market, making Poland the first country in the region to reach that status.18 Figure 1. View largeDownload slide GDP growth in Poland (annual percentage rate). Source: World Bank. Figure 1. View largeDownload slide GDP growth in Poland (annual percentage rate). Source: World Bank. III. Pre-1989 developments The creation of a competition system in Poland post-transition did not start with a clean slate. It faced a heavily concentrated economy dominated by largely inefficient state-owned enterprises and a business culture of close collaboration, required by law for decades. Poland’s modern experience19 with competition law goes back to the early 1980s. The work on a statute began in 1982 in the context of pro-market reforms.20 While the draft was prepared relatively quickly by a group of experts,21 Law on Counteracting Monopolistic Practices in the National Economy was adopted only in January 1987 (the 1987 Act).22 Poland was not the first communist state to introduce such legislation.23 The Act’s drafters hoped to see the competition watchdog constituted as an independent, self-standing body, reporting directly to the Parliament. They argued that it was essential to safeguard the watchdog’s independence and put it on an equal footing with government departments.24 However, this solution was abandoned due to cost. The mandate to enforce the Act was vested with the minister of finance. The competition agency sat within the Ministry of Finance’s Department for Counteracting Monopolization of the National Economy. This structure was chosen to keep the competition agency in proximity with the price-control portfolio, which was seen as being closely related. However, that institutional-design choice was problematic given that the finance minister was concurrently representing the interest of the state treasury, responsible for securing appropriate state income.25 The competition agency was responsible for enforcement and advocacy. It could prohibit—by means of cease and desist orders—anticompetitive agreements, abuse of dominance, and instances of exploitation of contractual advantage (inequality of bargaining power between enterprises, regardless of their market position).26 Sanctions in the form of fines were envisaged only in cases where a prohibition decision was violated.27 Provision was also made for an obligatory pre-merger notification.28 The main goal of the statute was to deal with abuse of dominance.29 However, the statute did not empower the agency to effectively influence the market structure.30 Moreover, the scope of the Act’s application was constrained by exclusion of enterprises under authority of the minister of finance and other departments.31 Apart from enforcement, the agency was to engage with other governmental bodies to counter monopolistic practices by highlighting anticompetitive legislation.32 Hence, the advocacy function was explicitly recognized. The Act’s drafters considered subjecting the agency’s decisions to review by courts of general jurisdiction, yet abandoned that idea anticipating the challenges of evaluating market mechanisms. The agency’s decisions were subjected to review by the Supreme Administrative Court. This was meant to be a temporary solution until economic courts were created.33 In practice, the 1987 Act had very limited impact. The agency issued only nine decisions.34 However, these early developments—the law’s drafting and enactment, creation of the first agency, and some enforcement experience—played an important role. Institutionally, the department’s staff constituted the core of the later self-standing agency, giving it a head start.35 Moreover, these developments stimulated the emergence of expert interest in competition law. The 1990 Act, which re-designed the competition regime in a way which continues largely unchanged to date, was drafted by the experts who worked on the 1987 legislation, not the leadership which took over in 1990.36 The creation of the competition system in Poland originated from within the country. It was not a legal transplant. It was also not a by-product of imported international commitments, or an element of any externally imposed conditionality. IV. Competition system post-1990 The transition to a market economy necessitated new competition legislation, which was adopted in 1990 (the 1990 Act).37 Poland was the first nation from the former Soviet bloc to enact competition law after the fall of communism. Since 1990 the legislation was amended numerous times. The 1990 Act was replaced with the 2000 Act,38 which was in turn replaced by the 2007 Act.39 The major reforms were agency-driven, with the legislative drafts prepared by its staff. The institutional design and the goals of Polish competition law did not change substantially. The 1990 Act, in its preamble, outlined the goals of the legislation: (i) securing the development of competition, (ii) protecting firms against monopolistic practices, and (iii) protecting consumer interests. The first of these goals was widely accepted as the principal one, especially in the context of moving away from a command-and-control economy towards the free-market.40 The acts adopted in 2000 and 2007 no longer contained a preamble that explicitly named the goals. While the relevant jurisprudence is incoherent,41 the law has been primarily understood as aiming to enhance efficiency and consumer welfare.42 The 1990 Act introduced a new institutional model with a free-standing agency and a specialized competition court. The agency was vested with investigatory and decision-making powers (an integrated agency model) and full decisional autonomy. The chosen design placed the agency in the centre of the competition law system. The scope for contribution of the system’s key co-producers—the judiciary and the practitioners—became dependent on the agency’s activity. Agency inaction would limit the scope for co-producers’ input. This section first analyses the institutional set-up and operation of the agency. It then moves to outline the contribution of the judiciary and the practitioners. The agency While initially constituted as the Anti-Monopoly Office (Urzą?>d Antymonopolowy), the agency evolved into the Office of Competition and Consumer Protection (Urzą?>d Ochrony Konkurencji i Konsumentów; UOKiK), gradually being entrusted with wider responsibilities, especially along the broadly-construed consumer protection spectrum.43 Its head (the president) became singly responsible for managing the agency, overseeing investigations and issuing decisions. Effectively the position became the most important one in the entire competition system. The agency is headquartered in Warsaw. Its head was empowered to establish regional offices. By the end of 1990 six such offices were established. The ninth and final one was created in 1995 in Warsaw.44 The following subsections investigate different aspects of the agency operation. First, the analysis focuses on key aspects of the agency’s set-up and mandate. Attention then moves to advocacy efforts undertaken by the agency. The final part of this section examines competition law enforcement. Set-up and mandate This subsection starts by examining the set-up and development of Poland’s competition agency through the lens of independence. Independence is essential if an agency is to safeguard competition as a public good, which often requires taking on powerful industrial lobbies, state-owned enterprises, or the state itself, which may pursue anticompetitive behaviours that influence markets or legislation, sometimes in pursuit of short-term political gains. Moreover, independence presupposes that the agency’s commitment to competition and safeguarding the level playing field in the marketplace will not be easily overturned by future majorities.45 Hence, for a state, it is a matter of making a credible commitment to a particular economic regime.46 The notion of independence is more complex than it appears on the surface. The narrow, formal understanding of independence focuses on organizational aspects, especially the rules on appointment and dismissal of an agency’s head. A broader reading includes functional perspectives, raising the question of sufficiency of resources. The following analysis provides a holistic evaluation of such different features of this notion. Formal independence also increases the perceived effectiveness of a system.47 However, Aydin and Büthe argue convincingly that it may be more productive to think, instead, of an agency’s embedded autonomy, which reflects an agency’s long-term dependence on political and social support.48 While adopting the language of independence, this piece recognizes the value of a more nuanced understanding of agencies’ interdependencies. At the outset it should be noted that the Polish legislature did not decide to explicitly recognize the independence of the agency in the law. In organizational terms, the agency’s head reports to the prime minister (PM). However, the PM has no competence to interfere in the ongoing work of the agency, preserving its decisional autonomy. Moreover, the government has no tools to change the agency’s decisions. There is no scope for an executive override. The agency’s head The chosen institutional design entrusts the Polish agency’s head with considerable powers, placing her at the very centre of the competition system. In turn, her personality and integrity (given the lack of protection by means of a term of office, discussed below) continue to significantly influence the agency’s operations.49 From a systemic perspective, this is unsatisfactory as it makes the agency prone to overreliance on individual characteristics of appointed leaders.50 This feature leads to a perception that the agency lacks continuity, with a new head setting priorities afresh, possibly undermining the agency’s long-term credibility. Proposals have been made to entrust decision-marking to specially appointed panels, removing this function from the portfolio of the agency’s head,51 but they have not been embraced. The material impact of its leader on the functioning of the agency is well-illustrated by the changing expectations towards the agency’s regional offices. While initially the regional offices were tasked with dealing with local and regional matters,52 in 1998 the agency announced a de facto assumption of enforcement responsibility by regional offices, with headquarters focusing on merger control.53 Over time those roles have shifted. For example in 2004 the agency decided that the regional offices would focus primarily on local matters.54 Such organizational swings do not help to develop and sustain knowhow and capacity. Appointment and dismissal The agency’s head is appointed by the PM for an indefinite period of time. There is no term of office. It was in place from 2000 until 2006. This practice was externally perceived as giving the agency an independent status.55 One agency head—Cezary Banasiński—was appointed under that regime. Yet, after a political swing to the right, in 2006, the tenure as well as a competition for the post were abolished as part of a broader reform of appointments to key offices in the public administration. Later a competitive appointment was reintroduced, but there was no attempt to re-instate the tenure. When it comes to a dismissal, but for the term-of-office interlude, the PM had and continues to have full discretion in this regard. Hence, the agency head’s independence is not formally safeguarded. In fact, the current rules represent a step-back as compared to the 2000 Act. Given that heads of numerous other central authorities in Poland enjoy tenure of office,56 it is notable that the head of the competition watchdog lacks any such security of appointment. Up until 2001 the PM had full discretion in selecting the agency’s head. There were no formal criteria which a candidate had to meet. The first rules on selection of the agency head were introduced in the 2000 Act, which obliged the PM to appoint a selection committee that would hold an open competition to select the agency’s leader.57 A candidate for the post was to: (i) have a degree in law, economics, or management and (ii) be distinguished by theoretical knowledge of and experience in protecting competition and consumers.58 Therefore, the criteria were rather loose and imprecise. The selection committee was to analyse applications, conduct interviews with eligible candidates, and present the PM its choice.59 The vetting of candidates was not public. This process of appointment was abandoned in 2006 and then re-introduced in a watered-down form in 2009. Since 2009, the selection is conducted by a committee nominated by the head of the Chancellery of the Prime Minister.60 The committee members need not meet any formal requirements. The committee selects the three best candidates of whom one is appointed by the PM. A candidate must have (i) managerial competences, (ii) at least six years of work experience (including three years in a managerial post), and (iii) ‘education and knowledge in relation to matters falling within the remits of the operation of the agency’s head’.61 Therefore, the selection process is less rigorous and the criteria facing candidates even less demanding than under the 2000 Act. Given the appointment process, this is an open competition more in name than in fact. It does not, in any practical manner, limit the scope for discretion and it does not adequately safeguard that the appointee will have the necessary skills. However, despite candidates facing broad or no criteria, four out of seven persons who served as the agency’s head held a doctoral degree in law or economics, with only one person—Adam Jasser—not having a degree in either discipline. The legality of the latter appointment received media coverage62 and was questioned in the Parliament.63 Political involvement Polish rules never required a candidate for the post of the agency head to be, in any manner, detached from politics.64 The first two agency heads were academics and they were not politically active. However, four out of five later agency heads have been politically engaged prior to assuming the post. Tadeusz Aziewicz (1998–2001) was a full-time researcher and an active politician. When queried shortly before his appointment he noted that the position was to be assigned to the political party he co-managed (at the national level) and that he was its only candidate for the job.65 Cezary Banasiński (2001–2007), Marek Niechciał (2007–2008, since 2016), and Adam Jasser (2014–2016) were all senior government officials. It would be difficult to argue that they benefited from any sort of non-partisan support. Małgorzata Krasnodębska-Tomkiel (2008–2014) stands out as the only agency head without prior political involvement, having developed her career in the agency. In fact, she became the agency’s deputy head under Niechciał, during a right-wing government, and became appointed its head after Niechciał’s departure, following another political swing, demonstrating her detachment from politics. The appointments of politically engaged individuals indicate that the position has been politicized or, at least, perceived as politically not neutral for the majority of the analysed period. Leadership tenure Between 1990 and 2016 the agency’s head changed eight times. However, within the same period Poland had 16 different prime ministers and 17 governments. The period in office of the agency’s head ranged from just over a year to nearly six years. The data shows that the change of the country’s ruling majority led to a change of the agency’s head within a reasonably short period of time. The only possible exception is the first agency head—Anna Fornalczyk (1990–1995), who headed the agency for more than a year after the political swing from right to left in 1993.66 Banasiński (2001–2007), the only head with a five-year term, was dismissed within a period of six months after his term ended. Therefore, the agency’s head is directly vulnerable to political swings. It is a position of power but it is not detached from party politics. The only two dismissals outside a change in political control were those of Aziewicz and Krasnodębska-Tomkiel. The first case did not attract much media attention67 but Krasnodębska-Tomkiel’s dismissal was controversial. The media speculated that it was retribution for a prohibition of a merger between state-owned PGE and Energa68—the first and fourth player on the Polish energy market, in January 2011 (three years earlier).69 This flagship project of the Tusk government was presented as a done deal, although no clearance was secured from the competition watchdog. The agency, on its own initiative, publicly raised objections early on in the planning stage.70 Nevertheless, the government was determined to push ahead. Krasnodębska-Tomkiel was put under intense pressure. Tusk publicly did not rule out Krasnodębska-Tomkiel’s dismissal in case of a prohibition.71 He was quoted saying he would try to convince her to reconsider.72 This led to various reactions. For example, Balcerowicz, former deputy prime minister and the mastermind of the Polish economic transformation, called on the government to refrain from attempts to influence the agency and to abandon the anticompetitive merger.73 At the time, Krasnodębska-Tomkiel was not dismissed. Following the decision’s challenge, the competition court upheld it in its entirety, causing further reputational damage to the government, but proving—at the same time—the credibility of the competition system. Noteworthy, it was not the first agency decision, under Krasnodębska-Tomkiel’s watch, to hinder government plans.74 In 2014, the year of Krasnodębska-Tomkiel’s dismissal, the Treasury had further plans to consolidate the energy sector. These were also expected to meet with resistance from the agency, possibly informing the PM’s decision to dismiss its leader.75 The perception of Krasnodębska-Tomkiel’s dismissal was unambiguous. Forbes magazine noted that ‘Poles will remember her as a defiant, tough and principled warrior for economic freedom, who successfully opposed top state officials in the interest of businesses and consumers’.76 An expert of the Polish Business Centre Club opined that only ‘a person with a strong political backing can fulfil that role’.77 This again points to at least a perception of politicization of the post. However, to be fair, Krasnodębska-Tomkiel was dismissed in 2014, well after controversial decisions in 2009 and 2011. She served as the agency’s head for nearly six years, becoming the longest-serving head of the competition agency in Poland to date. In a system with no term of office an agency head’s dismissal is always an option. However, the way this prerogative is used and the way the government interacts with the agency is critical. The government’s conduct can support extensive agency independence or it can undermine its credibility. The government’s handling of the PGE-Energa case falls into the latter category. Future agency heads will remember that the PM’s prerogative of dismissing at will is a tool which has already been used. The case presented a clash between meritocratic enforcement of competition legislation and important economic policy choices made by the government, pointing to an institutional design flaw—a lack of a narrowly construed right of executive override.78 A number of former agency heads believe that the current rules do not adequately secure agency independence. The lack of security of tenure is often mentioned as the key issue. This view is shared by practitioners, some of who consider it equivalent to actual political control.79 However, Banasiński (2001–2007), who benefited from tenure, notes that the Act can always be changed so any independence written into the law may be more apparent than real. In a similar fashion, Aziewicz (1998–2001) called independence ‘a state of mind’. Two other former agency heads, independent of each other, similarly remarked on the contingent nature of independence. It transpires that throughout the investigated period, the government has attempted to influence the work of the agency, especially, but not only, when it comes to mergers involving state-owned firms. These issues point to the importance of embedding and strengthening the agency’s position. Setting a term of office for the agency’s head would be helpful, but insufficient and prone to capture. Agency resources Staff Staff is the most precious resource of any organization and this is certainly true in the case of competition agencies. Building an organization from a scratch is a challenge. Doing so in a hostile environment raises the stakes further. Poland’s first competition agency came into existence as a department in the Ministry of Finance in 1987 in the final years of the communist regime.80 At that stage, market competition was an entirely foreign concept. Given that competition law deals with matters such as price-fixing and exploitative pricing, it was seen a reasonable step to locate this new competence within a ministry that formerly oversaw prices.81 The ministry’s department was headed by Jerzy Chabros, former Pricing Policy Director of the Office of Prices. His deputy, Ryszard Jacyno, was one of few Polish specialists in competition matters.82 The majority of the department’s staff had no pre-existing competition law and policy knowledge. Some had a background in price regulation.83 Others were newly hired or recent graduates.84 After the 1990 Act created a self-standing agency, Anna Fornalczyk, an academic PhD economist, was appointed the agency’s head. One of her first tasks was establishing the agency as a separate organization. All staff of the pre-existing department was able to join the new agency and most did so. For example, Jacyno became the agency’s first Director General. In staffing decisions at higher levels, Fornalczyk tapped into the pool of academics.85 The number of staff grew steadily (see Fig. 2 above). Some of that growth was determined by the agency’s expanding mandate. Most notably, in 2009 the agency took on over 200 staff from the liquidated Trade Inspection, tasked with market surveillance and monitoring of products’ safety. However, the ever-increasing competences86 were not matched by appropriate increases in budget and staff numbers. In 2016 the agency employed nearly 500 members of staff (in its headquarter and regional offices), who were discharging the agency’s responsibilities across all areas of its competence (inclusive of the very broadly construed consumer protection). In February 2018, the agency’s Department of Competition Protection (which handles competition law cases brought at agency headquarter) had only 26 staff, whereas the Consumer Protection Department had 46 staff.87 Figure 2. View largeDownload slide Agency staff (in numbers). Source: Agency annual reports and reports to the OECD. Figure 2. View largeDownload slide Agency staff (in numbers). Source: Agency annual reports and reports to the OECD. In terms of staff educational background, the agency employed more economists than lawyers in the early years. From 1997 onwards that relationship changed (see Fig. 3 above). In fact, there often have been over twice as many lawyers as economists in the agency. A ‘lawyer’ would be a law graduate, not necessarily a qualified lawyer. The term ‘economist’ includes also graduates of business schools with degrees in, for example, finance, management, and marketing. Neither lawyers nor economists would have necessarily studied any competition law or economics prior to joining the agency. In the first decade of the agency’s operation that was certainly not the case—no such courses were part of university curricula in Poland. The significant percentage of staff with a background in neither law nor economics, especially, chemists, reflects incorporation of Trade Inspection staff in 2009. Figure 3. View largeDownload slide Agency staff educational background. Source: Agency annual reports. Figure 3. View largeDownload slide Agency staff educational background. Source: Agency annual reports. In terms of staff profile by age, the agency is very young (see Fig. 4 above). In the period 2001–2016, staff under 30 constituted, on average, 34 per cent of the overall staff, in some years reaching the level of 50 per cent. Prior to 2000, the profile of the new agency was very different. In fact, at the end of 1999 only a quarter of the staff had less than five years’ experience with the agency.88 Figure 4. View largeDownload slide Agency staff profile by age. Source: Agency annual reports. Figure 4. View largeDownload slide Agency staff profile by age. Source: Agency annual reports. The agency’s subcabinet status (of a central authority of the state administration89 and not a supreme administrative body, such as ministries)90 is reflected in staff salaries.91 The average monthly staff salaries in the period 2014–2016 amounted to 5950 PLN (1402 EURO), inclusive of bonuses, gross.92 Remuneration offered by leading law firms in Warsaw would be, at least, twice higher.93 Moreover, in the period 2012–2016 staff salaries in the agency were, on average, 20 per cent lower than salaries of ministries’ staff and generally on par with average for all central authorities (see Fig. 5 above). In the period 2007–2016 (10 years) they were, on average, 18 per cent lower than salaries in the Energy Regulatory Office (URE), a sectoral regulator. In the preceding five years (2001–2005) that difference was even greater. This indicates that the agency is not treated as a specialized body requiring additional resources to develop expertise and retain experienced staff. Figure 5. View largeDownload slide Salaries comparison (average monthly salaries, inc. bonuses, gross, in PLN). Source: Chancellery of the Prime Minister. Figure 5. View largeDownload slide Salaries comparison (average monthly salaries, inc. bonuses, gross, in PLN). Source: Chancellery of the Prime Minister. Unsatisfactory salaries is a long-standing, systemic problem.94 Historically the agency has offered remuneration near the bottom of the scale when compared with other central authorities, and considerably lower than that paid by other sectoral regulators created in the late 1990s.95 The pay issue is a major factor undermining the agency’s capacity, making it a rather unattractive long-term employer relative to private employment or other opportunities in Polish civil service. If the agency is to deliver robust advocacy and enforcement, this issue needs to be remedied.96 Agency leadership has frequently boosted staff salaries by keeping some allocated posts vacant. This, in turn, enabled redistribution of ‘saved’ salaries to staff by means of bonuses.97 This practice is not agency-specific. It continues to be used in public administration in Poland.98 Effectively, it gives the agency head discretion to award staff and perhaps discourage some from leaving. Another way of retaining staff was to emphasize non-pay benefits. This includes facilitating employees’ continued professional development, for example by granting paid study leaves or financing pursuit of professional legal qualifications.99 Subpar staff remuneration creates challenges in hiring and staff attrition. Historically, the agency’s attrition rate was noticeably higher than the average in the Polish civil service, often exceeding 20 per cent per annum.100 The problem intensified around 2000, when the practitioner market picked up and the law firms began poaching the agency’s junior staff.101 In 2007 the attrition rate peaked at 29.1 per cent,102 more than doubling the rate of 13.9 per cent for all central authorities that year. These were very high rates in comparison with international standards.103 However, since 2010 the attrition rate fell to an average of 7.5 per cent, on par with other central authorities in Poland.104 Staff turnover concerns predominantly more-junior positions, such as case handlers,105 who often move to private practice upon gaining some professional experience. The work in the agency would often be their first job, following graduation in their mid-20s. Effectively, the agency is forced to keep investing its scarce resources in educating new hires and can be seen as providing paid traineeships to future employees of the private sector, especially the law firms. While there is some value in a revolving door policy—with staff moving from the agency to the private sector and vice-versa—in the Polish context, revolving doors work in one direction only. Until staff remuneration improves, the situation is unlikely to change. In effect, it makes it more difficult for the agency to develop sophisticated approaches to its caseload, given that a significant share of its staff is inexperienced and on a steep learning curve. Budget Since its creation, the agency’s budget was determined directly by the Parliament in the state’s annual budget. This helps to safeguard the agency’s autonomy, making it much more difficult for government officials to undermine the agency’s day-to-day operation. Any cut requires an amendment of the state’s budget—it is not merely a discretionary decision. The agency has no additional sources of income. In particular, it does not retain any of the imposed fines or revenue from merger notification fees. The budget act also fixes the number of agency staff. The agency’s budget has grown steadily in absolute terms.106 On average the budget increased by 9 per cent annually in the period 2001–2016, hence after a period of very high inflation in Poland.107 However, the budget increases differed considerably and they do not easily correlate with the agency’s growing mandate.108Figure 6, above, illustrates the growth of the agency’s budget. From 2009 the Trade Inspection division (tasked with market surveillance and monitoring of products’ safety) was formally incorporated into the agency. Prior to that, in the period 2000–2008, the head of the competition agency oversaw Trade Inspection and its budget was separated in agency reports. On average, Trade Inspection accounted for 40 per cent of the agency’s overall budget and that most likely continues. Hence, only about 60 per cent of the reported budget is devoted to the agency’s pre-existing activities straddling both competition and consumer protection. This funding is shown as the agency ‘proper’ budget in Fig. 6 above. As in many agencies around the world, the largest portion of the agency budget covers staff salaries. For example, in 2015 salaries amounted to 70 per cent of the budget.109 Figure 6. View largeDownload slide Agency budget (in millions PLN). Source: Agency annual reports. Agency proper excludes funding for Trade Inspection. Figure 6. View largeDownload slide Agency budget (in millions PLN). Source: Agency annual reports. Agency proper excludes funding for Trade Inspection. The budget increases could reflect the relationship of the agency’s head with the political powers in charge, pointing to politicization of the budgetary allocation. Through this lens, in the period 2009–2014, during the leadership of Krasnodębska-Tomkiel, budget growth plummeted to just 1 per cent on average (see Fig. 7 above). She was the only head of the agency since 1998 without pre-existing governmental involvement and she publicly challenged the government’s strategic plans.110 During Aziewicz time (1998–2001) the agency’s budget grew on average 18 per cent a year. Under Banasiński (2001–2007) it grew by 20 per cent, up to the point of the major political swing to the right—when the agency’s budget actually fell, in absolute terms, in 2006. Budget growth returned to two-digit increases after Niechciał’s appointment (2007–2008). The arrival of Jasser, following Krasnodębska-Tomkiel’s dismissal, coincided with budget growth of 11 per cent in 2015. The differences in budget growth under different agency heads point, at a minimum, to some dynamic between the agency’s leadership and the government and the need of at least some agency embeddedness in broader economic policy. Figure 7. View largeDownload slide Growth in annual agency budget (in percentage) distinguishing changes in the agency leadership. Source: Agency annual reports. Figure 7. View largeDownload slide Growth in annual agency budget (in percentage) distinguishing changes in the agency leadership. Source: Agency annual reports. The agency’s budgetary position reflects path dependence and the importance of the agency’s original formal setup.111 While the agency continues to be underfunded, its leader has to compete against other agency heads for additional resources. Had it been on a par with government departments (that is, ministries), its staff would have been remunerated at a similar level, making the budget appropriation considerably larger. In the 10-year period 2007–2016, the agency’s budget amounted to 53.7 million PLN on average. The collected net fines for violations of competition law amounted to 59.6 million PLN per annum.112 This means that Poland’s competition and consumer rights watchdog was effectively financed by violators of competition law. While consumers enjoyed increased welfare due to the agency’s operation across all its areas of competence, the data show that the agency’s operation was effectively costless to Polish taxpayers. While this should not be an aim in itself, or an indicator of an agency’s effectiveness, the agency may consider using these statistics in bidding for a larger budget appropriation to further develop its capacity and start adequately paying its staff. Evolving mandate At its inception, the agency’s mandate was reasonably clear. The body was established as the country’s competition watchdog, responsible for enforcing competition law and contributing to the state’s broader economic policy.113 The first few years of its operation were characterized by active involvement in post-transition restructuring and privatization processes.114 However, over time the agency’s mandate expanded significantly. Some of the mission creep was agency-driven. That was certainly the case in 1996, when the agency assumed responsibility for the consumer protection portfolio.115 In fact, some of the key individuals behind Poland’s first antimonopoly law believed that the consumer protection role could help the agency prove its usefulness, facilitating its operations across the entire spectrum of competences.116 The agency also succeeded in taking over the state aid portfolio from the Ministry of Economy.117 Various other prerogatives were imposed on the agency, possibly as an unintended consequence of it being in charge of all consumer-related matters, while not having enough political clout to oppose competence amalgamation. As of 2016, apart from its role on the competition law and policy side, the agency was also responsible for addressing practices that infringe collective consumer interests, dealing with prohibited clauses in standard contracts, and ensuring surveillance over general product safety (inclusive of supervision of eight laboratories and monitoring of fuel quality control).118 The agency is also co-responsible for enforcement of the Polish Language Act (ensuring that goods and services descriptions, ads, instructions and guarantees are in Polish).119 The most recent significant addition to the agency’s mandate concerns enforcement of the new law on unfair use of contractual advantage, which aims to eliminate unfair trade practices on behalf of stronger parties to a contract.120 While the enforcement expectations are considerable, the agency received only minimal additional funds to meet them.121 In effect, the agency ended up saddled with considerable responsibilities, especially along the very broadly construed consumer protection spectrum. Inadequate increases in budget only stretched this already underfunded and possibly understaffed body further. The mandate expansions also meant that the agency management’s attention had to be spread more thinly—diluting focus on the agency’s original core competition portfolio. Moreover there is no evidence of any positive impact arising from the supposed synergies between competition and consumer protection, beyond the obvious cost savings (by means of having a single body instead of two separate bodies). In fact, both portfolios (competition and consumer protection) have always been perceived, managed, and implemented separately, without any real cross- fertilization or any actual synergies being identified in the agency’s ongoing work.122 On the contrary, it is quite likely that this ever-broadening mandate only weakened the competition regime in Poland. More worryingly, in an agency with limited resources, complex competition law cases are likely to lose out to efforts in the consumer sphere. Fighting the most egregious competition law violations, such as hardcore cartels, is resource-intensive, often factually and legally complex, and prone to prolonged appeals. Challenging the conduct of dominant firms, often state-owned, or government policy proposals with anticompetitive effects often means taking on powerful interests with significant lobbying power. Those who benefit from the agency’s actions—consumers and potential competitors—are often poorly organized, dispersed, and do not speak with a single voice. There is no evidence that the beneficiaries of the agency’s actions on the competition side offered the agency any appreciable political backing to strengthen its position. By contrast, the agency’s work on behalf of consumers need not present similar political risks and is better perceived by the general public and the media. The general public can often more easily relate to consumer cases and understand the direct benefits. Moreover, efforts on the consumer protection side offer better returns for the agency (in terms of faster, favourable outcomes and positive media coverage). Even if the agency exceeds its remit, it is likely to enjoy public backing, unlike the powerful opposition it faces in many competition cases. Therefore, having both competition and consumer portfolios in one agency creates the risk that the agency, for a variety of reasons, may—consciously or not—favour the less problematic and easier actions on the consumer side. Hence, the amalgamation of competences is problematic by design. In Poland the growing emphasis on consumer protection and declining focus on competition law enforcement indicate that these temptations have been yielded to in different periods.123 This became visible in a mundane way. The agency’s annual report for 2014 was the first one in which the first substantive chapter focused on consumer protection, not competition enforcement or policy, as was the norm until then. Moving the enforcement lever towards consumer protection means that earlier accumulated knowhow and skills may be disappearing in line with the use-it-or-lose-it axiom,124 making it more difficult to readjust priorities later. Moreover, the agency is a useful scapegoat for any problems arising in the market due to its: broad mandate; considerable sanctioning powers; peculiar status (below the ministries whose anticompetitive ideas it may need to challenge); and general detachment from politics.125 The agency is important enough to be blamed, but not politicized enough to constitute liability for key politicians. An underlying misunderstanding of market mechanisms feeds the potential for this blame game. For example, every summer the agency tends to get blamed for not addressing alleged speculation that depresses prices for soft fruits. Producers could instead acknowledge the problem of oversupply or take steps to increase their bargaining power. Other cases carry more significance for the agency. For example, after the 2012 collapse of Amber Gold, effectively a large Ponzi scheme, the agency was publicly accused—including by the prime minister—of not taking adequate steps to protect consumers. However other state agencies, such as the Financial Supervision Authority, were equally well placed to act.126 Stronger status would better shield the agency from similar scapegoating, which undermines the trust vested in it and earned over time. The Polish experience highlights the impossibility of having it all. The agency has done a good job, given the framework and constraints within which it operates. But mission creep has stymied the competition system by stretching the agency’s resources and creating a design flaw—allowing for focus to shift away from more difficult tasks on the competition end of the spectrum. Hence, the Polish experience raises questions about the soundness of an emerging international trend towards connecting competition and consumer protection watchdogs.127 Competition advocacy Competition advocacy promotes a competitive environment by means of non-enforcement mechanisms, mainly through interactions with governmental entities and increasing public awareness of the benefits of competition.128 Advocacy vis-à-vis the state boils down to: (i) feeding into the legislative process and (ii) contributing to any economic restructuring (such as privatization or consolidation plans). Such activities are undertaken to promote procompetitive solutions. Public awareness efforts may involve educating and, more fundamentally, shaping social norms. Advocacy is particularly salient in economies transitioning towards a market economy, where the normative embrace of free markets would often face hurdles. These include the lack of a competitive culture and little awareness among policy-makers and the populace of the benefits of market competition.129 Poland illustrated these challenges.130 This section analyses the key institutional aspects affecting advocacy and outlines some of the efforts undertaken. In the case of advocacy vis-à-vis the state, the agency’s formal status matters. Being established as a central authority of the state administration, the agency has a second-best status in Polish administrative law, below the supreme administrative bodies (typically the ministries).131 The accorded status means that the agency’s head is a member of the Standing Committee of the Council of Ministers (a subcabinet auxiliary body), which feeds into the meetings of the Council of Ministers (the Cabinet). In effect, the Standing Committee is the key forum available for formal advocacy vis-à-vis the government. During the Committee’s meetings the agency can challenge any proposed legislation or government’s plans with anticompetitive potential, or else seek support for its own initiatives. However, any issues, not resolved by the Committee, are addressed by the Cabinet itself and the agency’s status does not provide it with direct
