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Implementing a competition law system—Three Decades of Polish Experience

Implementing a competition law system—Three Decades of Polish Experience 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 access to that forum. The subcabinet status and the lack of access to the Cabinet meetings, as of right, may also explain why the agency was sometimes perceived as a subordinate institution by the government’s ministers.132 In fact, for similar reasons the framers of the 1987 Act wanted to accord the agency a standing akin to that enjoyed by ministries, although this was ultimately not done due to the costs involved.133 The Cabinet can request the agency’s head to join relevant parts of its meetings. In practice, depending on who was prime minister, agency heads were granted permanent access to the Cabinet’s meetings.134 The majority of agency heads consider access to the Cabinet forum important. For example, in 2008, despite the agency opposition the government pushed for introduction of uniform rules on inspection of firms by state agencies, requiring advance notice,135 thereby threatening to undermine the agency’s investigatory powers (by eliminating unannounced inspections). The agency’s head had no standard access to Cabinet meetings at that time. Krasnodębska-Tomkiel had to use a ruse and joined the Cabinet meeting without a formal invitation in a final—and successful—effort to secure an exception to these new rules for the agency.136 Without access to the Cabinet’s meetings, where the key decisions are taken, it is only more difficult for the agency to promote procompetitive solutions and challenge anticompetitive proposals (especially in the context of the legislative process).137 This raises the question of the actual level of commitment attached to competition policy in such an institutional setting. Access to the Cabinet meetings should not be seen as politicization of the role, but as a pragmatic means of giving the agency more equal footing vis-à-vis government departments in recognition of its uneasy advocacy work. Cabinet meetings aside, the agency is involved in general inter-governmental consultations of legislative proposals. However, this formal and largely bureaucratic process does not ensure that any raised concerns will be addressed. Competition policy is just one of many policies which may need to be considered. It is worth noting that past agency heads had different visions as to the proper role of the agency in shaping the state’s broader economic policy. It seems that the agency did not manage to settle its role in this regard. For example, while some heads perceived competition advocacy as critical, others considered that the agency should focus more narrowly on enforcement. However, when asked about domestic allies, all former agency heads recognized that the agency acts horizontally and that, while the government supports it in abstract terms, such enthusiasm fades when it comes to querying individual projects with potential anticompetitive effects. In this light, the agency’s subcabinet status, suggests it is forced to fight uphill battles. If the agency is not adequately empowered to effectively challenge proposed anticompetitive measures, the question arises whether another entity can do so. This is an important practical question, especially in cases of economies transitioning to a free market with the baggage of significant state intervention in the economy and general market scepticism. In the Polish context it seems the question has been neither seriously entertained nor systemically resolved. Poland’s transition largely benefited from the political imperative that emerged early on in support of swift reforms and eliminating inefficiencies of the previous system. This imperative and the external backing (especially of the USA138) empowered the competition agency, giving it clout beyond that explicitly arising from the law. The first agency head, Fornalczyk (1990–1995), understood that dynamic. She seized the opportunity to give the agency a more prominent say in government economic policy, perhaps best illustrated by her access to Cabinet meetings during most of her tenure. However, the agency’s reasonably high level of initial influence did not become formalized (for example, by elevating the agency’s status), marking an important, but only temporary, win for competition policy. By the early 2000s some observers noted shallower support for competition policy in the administration, as compared to the early 1990s.139 In the first years of the transition to a market economy, the agency was actively involved in the process of restructuring of the economy, although its input was non-binding and generally not public140—making its effects largely non-measurable. In many cases the agency’s views were accepted, but there were instances when they were ignored.141 In 1992 the agency reported that competition policy often had to concede to other considerations.142 In 1993, Fornalczyk observed that ‘it turns out that privatization of an enterprise often involves replacing a state monopoly with a private one’.143 In these early years the agency became a vocal promoter of open markets, actively opposing developing protectionist tendencies.144 It recognized the importance of import competition as a source of market discipline.145 In the late 1990s the agency’s involvement in the privatization process subsided. In the early 2000s, some observers believed that the agency muted its concerns about privatization outcomes with a view to maintain its contact with the policy process.146 The most notable case of a de facto competition policy override was the privatization of the state-owned telecommunications company, Telekomunikacja Polska (TPSA). It was the largest privatization in Eastern Europe.147 Consecutive governments decided to cash in on the monopolist’s premium and privatized a de facto and partly also legal monopoly,148 despite sustained opposition of the agency.149 Following the guidance of US advisors, the agency sought to divide the telecom in the early 1990s however the government successfully opposed it.150 In 1997, before the sale of the government’s minority stake in TPSA, Sopoćko (1995–1997) observed that ‘the government treats TPSA only as a source of big money for the budget … They think that selling it as a monopoly will give a better price’, noting that, ‘TPSA still acts like a lord in the countryside with special rights’.151 Aziewicz (1998–2001)—during whose term the privatization was consummated—recalls that the agency’s decision to fine TPSA on the eve of privatization complicated the agency’s relations with the government, showing how important TPSA revenues were for the government. Both before and after the privatization, TPSA was a frequent addressee of agency decisions finding violations of both competition and consumer legislation.152 Overall, this case is a prime example of competition policy and consumer welfare being trumped by other policy considerations. The most recent controversial contest between competition and broader economic policy was the already discussed prohibition of a the PGE–Energa merger.153 While the agency prevailed, the pressure exerted on it by the government revealed a systemic weakness—the failure to resolve policy clashes through a transparent and reasonable process. It suggests that a narrowly construed right of executive override (a systemic safety valve) may be needed to accommodate these rare instances in which the state’s key strategic interests surmount competition concerns, without undermining the agency’s credibility. To make it transparent, such governmental prerogative could require parliamentary involvement. Polish rules currently do not provide for such a process.154 As regards the broader engagement, the agency has been active mostly by means of regular contacts with media, by organizing conferences and contributing to academic events, bringing together broader, typically specialist audiences. The agency became and continues to be active on the publishing front, disseminating information about its activities, changes in the law, and the general benefits of competition. In the mid-1990s the agency led a large Phare-funded155 publishing project, initiated and organized by Tadeusz Skoczny, a legal academic and an agency advisor. In its framework, in 1995-1996, the agency published nearly 40 volumes, focusing on different aspects of competition law and policy.156 The series helped identify existing and emerging authorities in the field in Poland and encouraged further specialization among them. It also became a core point of reference for the Polish competition community,157 filling a gap in scholarship. Normally the agency reached out to its core specialist audiences, with only more general media contributions reaching the public. However, in 2009, the agency launched its largest campaign—aimed at increasing awareness of entrepreneurs. The campaign focused on price-fixing and promoted the newly created leniency programme. The TV spot, prepared by a leading Polish cartoonist, was witty and attention-grabbing.158 The agency secured free broadcasting in many outlets. The campaign included mailing of leniency-focused materials to the 500 largest firms and over 350 local firms.159 It was the first of many times the agency would avail of such mass communication.160 While it does not seem to have led to a larger number of opened cases, the campaign, which ran until 2011, gave competition issues more visibility and brought the agency’s operations to the attention of entrepreneurs and the wider public. The campaign was followed in 2012 by another more educational effort directed specifically at market participants, which aimed to raise awareness of the effects of anticompetitive agreements.161 No similarly large campaigns have been run since then. In recent years the agency has increasingly used soft measures to guide market participants on the remit of legally permissible conduct. For example, in 2014 the agency published a guidebook targeted at cemetery administrators, explaining in simple terms the applicable rules.162 In 2016 it published a similar guidebook on the water and sanitation services market.163 These efforts have been internationally recognized by the International Competition Network and the World Bank.164 Two other initiatives seeking to galvanize interest in competition law are noteworthy. Firstly in 2006 the agency began awarding journalists for their work focusing on competition and consumer protection (Libertas et Auxilum awards), in collaboration with the Polish Journalists Association and the Adam Smith Centre, a thinktank.165 The competition was run annually until 2013 when, unfortunately, it was discontinued.166 Secondly, in 2008 the agency began running an annual competition for the best master’s thesis devoted to competition protection,167 and from 2010 the Competition Law Society become involved in this venture, with its members co-assessing the submissions and the Society awarding its own distinction.168 The thesis competition has been a good way to promote competition law among students close to graduation and to identify prospective hires for the agency. Enforcement efforts This section analyses competition law enforcement in Poland in three principal areas: abuse of dominant position, anticompetitive agreements, and mergers. It outlines the characteristics and shortcomings of each. The scholarly consensus suggests that developing countries should focus on hard-core cartels and mergers leading to monopoly, that is on challenging conduct whose harmful nature is unquestionable.169 In addition, restraints involving state actors should be prioritized,170 in particular, abuse of dominance by state-owned enterprises.171 However, developing and sustaining such enforcement is challenging. Polish experience shows that capacity building is a long-term project. The data shows a steady increase in the number of infringement decisions in the 1990s followed by a gradual, but sustained decrease in the new millennium. Some of that fall might be the effect of system’s maturing with elimination of most obvious types of violations, development of compliance and shifting of some of the caseload to sectoral regulators. However, the continuing decline in the number of infringement decisions since 2013 (related mainly to decreasing number of dominance cases and inability to detect cartels, discussed below) is worrying (see Fig. 8). Fine levels reflect three phases: (i) a very lenient approach taken by the agency up to 2004, (ii) substantial fines imposed between 2004 and 2012, and (iii) a notable fall since 2012 (see Fig. 9). Figure 8. View largeDownload slide Infringement decisions issued by the agency. Source: Agency annual reports. Pre-2002 data allowing for distinction between categories of cases are unavailable. Figure 8. View largeDownload slide Infringement decisions issued by the agency. Source: Agency annual reports. Pre-2002 data allowing for distinction between categories of cases are unavailable. Figure 9. View largeDownload slide Amount of fines imposed by the agency in competition cases (in million PLN). Source: Agency data. Figure 9. View largeDownload slide Amount of fines imposed by the agency in competition cases (in million PLN). Source: Agency data. Abuse of dominant position The enforcement of competition law in Poland is characterized by a significant focus on abuse of dominance throughout the entire period.172 Even in the past 15 years the number of infringement decisions in this area was up to three times higher than the number of infringement decisions concerning anticompetitive agreements (see Fig. 8 above). Active enforcement in the dominance field, in particular on natural monopoly markets,173 was informed for many years by the zeitgeist of the transformation with the populace at large despising dominant state-owned firms and their behaviour.174 Dominant incumbents were exploiting their market power by means of both exclusionary and exploitative conduct.175 These practices sometimes caused direct harm to the end consumer.176 Hence, the agency often focused its resources on exploitative practices. In terms of sanctions, state-owned firms or their successors were the recipients of the highest fines (see Table 1 above). The fact that such fines were indeed imposed shows that state-related anticompetitive conduct did not benefit from any special or lenient treatment.177 Table 1. Top fines imposed in abuse of dominance cases (in mln PLN) Amount Case Year 75 Telekomunikacja Polska (TPSA) 2007 60 PKP Cargo 2009 60 Polskie Górnictwo Naftowe i Gazownictwo 2012 50 PZU Życie 2007 40 PKP Cargo 2004 Amount Case Year 75 Telekomunikacja Polska (TPSA) 2007 60 PKP Cargo 2009 60 Polskie Górnictwo Naftowe i Gazownictwo 2012 50 PZU Życie 2007 40 PKP Cargo 2004 Source: Agency’s data. View Large Table 1. Top fines imposed in abuse of dominance cases (in mln PLN) Amount Case Year 75 Telekomunikacja Polska (TPSA) 2007 60 PKP Cargo 2009 60 Polskie Górnictwo Naftowe i Gazownictwo 2012 50 PZU Życie 2007 40 PKP Cargo 2004 Amount Case Year 75 Telekomunikacja Polska (TPSA) 2007 60 PKP Cargo 2009 60 Polskie Górnictwo Naftowe i Gazownictwo 2012 50 PZU Życie 2007 40 PKP Cargo 2004 Source: Agency’s data. View Large The agency’s regional offices were responsible for the bulk of enforcement in this area (see Fig. 10 above). Data shows the agency’s predominant focus on local and regional practices. In fact, between 2001 and 2016 regional offices issued 92 per cent of all agency decisions in the dominance field. Figure 10. View largeDownload slide Overall number of decisions concerning abuse of dominance. Note: The number of decisions is not limited to infringement decisions. It includes also other types of decisions (such as decisions dismissing complaints). Source: Analysis on the basis of <https://decyzje.uokik.gov.pl/bp/dec_prez.nsf>. Figure 10. View largeDownload slide Overall number of decisions concerning abuse of dominance. Note: The number of decisions is not limited to infringement decisions. It includes also other types of decisions (such as decisions dismissing complaints). Source: Analysis on the basis of <https://decyzje.uokik.gov.pl/bp/dec_prez.nsf>. Overall, the enforcement in the abuse-of-dominance field has been vigorous. The cases brought against dominant firms helped to lower barriers to entry and to eliminate numerous exploitative practices. However, the sanctioned violations were usually neither difficult to prove nor difficult to detect (more of a low-hanging fruit). Moreover, data shows a gradual and very significant drop in the overall number of decisions issued in this area. Headquarters averaged less than one decision per year for the four years ended 2016. The number of decisions fell after 2007, partly due to elimination of motion-based investigations. Until then the agency was compelled to take formal action whenever it received a complaint notice. The motion-based system was very laborious for the agency.178 The agency justified its abandonment by a willingness to focus on the most harmful violations of competition law,179 such as cartels. However, this change carried a risk of complacency. The virtually non-existent record of cartel enforcement suggests that risk has materialized. Cartels and other agreements restricting competition Throughout the investigated period the agency focused on unilateral practices. The number of decisions issued in cases involving anti-competitive agreements was significantly lower (see Fig. 8 above). The agency statistics do not clarify to what extent the agency focused on cartel conduct. While in its reporting the agency distinguishes between cases concerning horizontal and vertical agreements (see Fig. 11 above), it is unclear how many of the former decisions involved cartels. Figure 11. View largeDownload slide Infringement decisions in the area of restrictive agreements. Source: Agency annual reports. Figure 11. View largeDownload slide Infringement decisions in the area of restrictive agreements. Source: Agency annual reports. Poland’s early cartel cases did not pose significant evidentiary challenges.180 The first cartel181 to be investigated was detected thanks to minutes from the cartelists meeting.182 The cartel of billboard leases was announced by its members at a press conference, with direct inculpatory evidence being contained in the written agreement signed by the parties.183 These easier cases aside, the agency track record of uncovering nation-wide cartels is poor. For a long time the cement cartel was the only large country-wide and secret cartel successfully investigated by the agency. The agency found that seven major producers of grey cement had been colluding for 11 years.184 Although the case received considerable media attention, it did not constitute an enforcement breakthrough. In fact, setting aside bid-rigging, in the period 2010–2016 the agency managed to sanction only one large cartel.185 Instead of cartels, the agency went after the low-hanging fruit and focused, after 2007 in particular,186 on retail price maintenance (RPM), which it tends to equate with cartels in its rhetoric. This approach was compounded by imposing very large fines in the most serious cases (See Table 2 above). Table 2. Ten highest fines (per case) for anticompetitive agreements, per case (in mln PLN) Amount Case Year 411 Lafarge Cement and others (cement cartel) 2009 164 Bank Millenium and others (interchange fee) 2006 113 Polkomtel and others (Mobile TV) 2011 108.6 Polifarb Cieszyn-Wrocław and others (RPM)* 2006 56 PZU and Maximus Broker 2011 48.3 Tikkurila and others (RPM) 2010 25 Akzo and others (RPM)* 2010 18 Minova Ekochem and others 2013 9 ICI and others (RPM) 2008 8 PZPN and Canal+ 2006 Amount Case Year 411 Lafarge Cement and others (cement cartel) 2009 164 Bank Millenium and others (interchange fee) 2006 113 Polkomtel and others (Mobile TV) 2011 108.6 Polifarb Cieszyn-Wrocław and others (RPM)* 2006 56 PZU and Maximus Broker 2011 48.3 Tikkurila and others (RPM) 2010 25 Akzo and others (RPM)* 2010 18 Minova Ekochem and others 2013 9 ICI and others (RPM) 2008 8 PZPN and Canal+ 2006 Source: Agency data. Original amount of fines as imposed by the agency. * These cases had some hub-and-spoke characteristics (involving communications between retailers via a common wholesaler). View Large Table 2. Ten highest fines (per case) for anticompetitive agreements, per case (in mln PLN) Amount Case Year 411 Lafarge Cement and others (cement cartel) 2009 164 Bank Millenium and others (interchange fee) 2006 113 Polkomtel and others (Mobile TV) 2011 108.6 Polifarb Cieszyn-Wrocław and others (RPM)* 2006 56 PZU and Maximus Broker 2011 48.3 Tikkurila and others (RPM) 2010 25 Akzo and others (RPM)* 2010 18 Minova Ekochem and others 2013 9 ICI and others (RPM) 2008 8 PZPN and Canal+ 2006 Amount Case Year 411 Lafarge Cement and others (cement cartel) 2009 164 Bank Millenium and others (interchange fee) 2006 113 Polkomtel and others (Mobile TV) 2011 108.6 Polifarb Cieszyn-Wrocław and others (RPM)* 2006 56 PZU and Maximus Broker 2011 48.3 Tikkurila and others (RPM) 2010 25 Akzo and others (RPM)* 2010 18 Minova Ekochem and others 2013 9 ICI and others (RPM) 2008 8 PZPN and Canal+ 2006 Source: Agency data. Original amount of fines as imposed by the agency. * These cases had some hub-and-spoke characteristics (involving communications between retailers via a common wholesaler). View Large The low cartel-detection rate and rare instances of imposition of high fines for cartel conduct undermined the deterrent effect of the Polish system. Lacking deterrence from detection and enforcement is likely to adversely affect compliance.187 There are two key interrelated factors explaining the lack of cartel enforcement in Poland. The first one relates to the agency’s lacking capacity to detect cartels. The second relates to the failure of the leniency programme. So far the agency has not developed sufficient skills to proactively uncover and sanction cartel conduct.188 Although from 2007 it had full investigative discretion, the agency focused on abuse of dominance and vertical agreements. Moreover, it seems it may not be opening proceedings when informed of non-trivial violations, even cartels.189 Enforcement shortcomings cannot be explained by insufficient investigatory tools (such as eavesdropping), since the agency is not using the tools at its disposal (eg it has never searched a private premise190). Moreover, the agency still seems not to have developed good working relationships with other state authorities, such as police and the prosecutor’s office. The agency’s relative success cooperating with such authorities on bid rigging191 might be related to the fact that they are responsible for criminal enforcement in this field. The same does not apply in other cases, leaving the agency on its own. The situation is not aided by resource limitations.192 The agency’s key cartel-busting unit—the Department of Competition Protection—has fewer than 30 staff. In addition, it suffers from high staff turnover193 and its staff has often only limited experience.194 Lack of case-teams is yet another agency weakness. Moreover, the Polish system has not provided a sufficient deterrent, partly by not presenting a credible threat of detection. The time gap between the fines imposition and collection of fines undermines deterrence further.195 Poland has a complex system of judicial review.196 It normally takes years before the decision becomes final and fines become due. For example, the 2009 cement cartel decision became final only in 2018. In addition, courts have tendency to significantly reduce fines, especially after 2010 when decisions imposing severe fines reached the court.197 The failure of businesses coming forward to claim leniency is a second key reason explaining low cartel detection in Poland. This comes as no surprise given the limited ability of the agency to uncover cartels through its own investigations, which is linked to social norms permissive of cartel practices.198 In Poland businesses do not consider detection as a high risk and so they do not have incentives to apply for leniency.199 Unlike in virtually all other jurisdictions, Polish leniency programme (introduced in 2004) applies to all types of anticompetitive agreements (including vertical arrangements).200 However, even with its broad applicability, the number of received applications has been very low (see Fig. 12 above). Overall, the programme did not meet expectations, despite its fine-tuning201 and media campaigns.202 Figure 12. View largeDownload slide Leniency-related statistics. Source: Agency data. Figure 12. View largeDownload slide Leniency-related statistics. Source: Agency data. The broad nature of leniency had somewhat perverse consequences. Only six out of 26 leniency-related decisions concerned horizontal agreements and only two of them related to country-wide secret cartels (the cement cartel and the wood-based panels cartel203). Even in these two cases leniency did not play its primarily role—cartel detection. The applications were filed after the agency conducted dawn raids. Culture or even history of non-cooperation with state authorities against the interests of other individuals/firms is often recognized as a reason for leniency’s failure in Poland.204 Businesspersons may be afraid of being considered informers by their peers.205 Programme design and agency practice also matter. For example, the interviewed practitioners noted the unsatisfactory position vis-à-vis legal certainty.206 Furthermore, the firms may be discouraged by the duration of cartel investigations. For example, the decision in the wood-panel cartel was issued six years after the leniency application was filed. Merger control Under the 1990 Act, the concentration control focused primarily on de-monopolization, especially on transformation of state-enterprises into single shareholder companies owned by State Treasury. For example, in 1992, 52 per cent of agency decisions concerned such transformations.207 The 1995 amendment changed the system.208 It introduced quantitative thresholds over which the notification of a planned concentration was required. It also added procedural rules. The awareness of the merger notification regime increased due to agency initiatives, such as the 1996 market study, which revealed a high number of transactions that were not notified to the agency despite the obligation prescribed in the 1995 regime.209 In addition, sanctions for non-notification of mergers were frequently imposed.210 Between 1997 and 2000 the agency received a significant number of notifications (more than 1000 per year, see Table 3 above). The number of notified transactions grew in comparison to 1995–1996 because of growing awareness among firms that concentrations have to be notified.211 The 2000 Act introduced a higher quantitative threshold (50 million EUR), leading to a significant drop in notified transactions. Since 2002 the number of notified transactions was relatively stable (on average 209 transactions a year). A decisive majority of concentrations were cleared unconditionally. Since 2002 only 27 conditional clearances and eight prohibitions were issued.212 No prohibition decision has been issued since 2011. Table 3. Merger control 1995–2016 Year Number of scrutinized cases Clearance Conditional clearance Prohibition 1995 333 261 n/a 0 1996 469 377 n/a 2 1997 1387 1225 n/a 2 1998 1872 1510 n/a 1 1999 1079 917 n/a 0 2000 1107 911 n/a 0 2001 542 no data no data no data 2002 180 168 1 0 2003 194 149 2 0 2004 218 175 1 2 2005 329 265 2 0 2006 263 215 1 1 2007 310 205 2 0 2008 177 153 2 0 2009 123 97 1 3 2010 188 147 2 0 2011 187 166 3 2 2012 155 136 1 0 2013 177 156 2 0 2014 190 169 4 0 2015 235 218 1 0 2016 215 194 2 0 Year Number of scrutinized cases Clearance Conditional clearance Prohibition 1995 333 261 n/a 0 1996 469 377 n/a 2 1997 1387 1225 n/a 2 1998 1872 1510 n/a 1 1999 1079 917 n/a 0 2000 1107 911 n/a 0 2001 542 no data no data no data 2002 180 168 1 0 2003 194 149 2 0 2004 218 175 1 2 2005 329 265 2 0 2006 263 215 1 1 2007 310 205 2 0 2008 177 153 2 0 2009 123 97 1 3 2010 188 147 2 0 2011 187 166 3 2 2012 155 136 1 0 2013 177 156 2 0 2014 190 169 4 0 2015 235 218 1 0 2016 215 194 2 0 Source: Agency annual reports. Note: The overall number of cases for 2002 is approximate, based on the agency 2003 annual report (no exact data provided); the overall number of notifications the agency dealt with in 2007 is provided (no information about the number of cases concluded in 2007). View Large Table 3. Merger control 1995–2016 Year Number of scrutinized cases Clearance Conditional clearance Prohibition 1995 333 261 n/a 0 1996 469 377 n/a 2 1997 1387 1225 n/a 2 1998 1872 1510 n/a 1 1999 1079 917 n/a 0 2000 1107 911 n/a 0 2001 542 no data no data no data 2002 180 168 1 0 2003 194 149 2 0 2004 218 175 1 2 2005 329 265 2 0 2006 263 215 1 1 2007 310 205 2 0 2008 177 153 2 0 2009 123 97 1 3 2010 188 147 2 0 2011 187 166 3 2 2012 155 136 1 0 2013 177 156 2 0 2014 190 169 4 0 2015 235 218 1 0 2016 215 194 2 0 Year Number of scrutinized cases Clearance Conditional clearance Prohibition 1995 333 261 n/a 0 1996 469 377 n/a 2 1997 1387 1225 n/a 2 1998 1872 1510 n/a 1 1999 1079 917 n/a 0 2000 1107 911 n/a 0 2001 542 no data no data no data 2002 180 168 1 0 2003 194 149 2 0 2004 218 175 1 2 2005 329 265 2 0 2006 263 215 1 1 2007 310 205 2 0 2008 177 153 2 0 2009 123 97 1 3 2010 188 147 2 0 2011 187 166 3 2 2012 155 136 1 0 2013 177 156 2 0 2014 190 169 4 0 2015 235 218 1 0 2016 215 194 2 0 Source: Agency annual reports. Note: The overall number of cases for 2002 is approximate, based on the agency 2003 annual report (no exact data provided); the overall number of notifications the agency dealt with in 2007 is provided (no information about the number of cases concluded in 2007). View Large Employment stability in the agency’s Department of Concentration Control contributed to growing agency experience after 2004.213 The transparency of the reviews also increased. In 2010 the agency issued merger guidelines. However, the review system had a key deficiency: there was no point during the proceedings at which the agency was to formulate its concerns (that is, express its reasoned doubts about the transaction).214 Length of proceedings was a problem too. The 2014 amendment of the 2007 Act aimed to address these shortcomings with the introduction of the two-stage review and the issuance of a list of concerns at the stage II. These legal changes shortened the stand-still period for non-problematic concentrations. In 2014 the merger review proceedings lasted on average 57 days.215 In 2015, the first year during which the new rules were in force, the average time decreased to 34 days and to 38 days in 2016.216 Shorter merger reviews is clearly a positive development. Another positive change in the merger review system recently is the agency’s greater openness. The interviewed practitioners note that since 2014 the agency became more open for direct, informal discussion of notified transactions.217 This change was reinforced by the introduction of the possibility of pre-notification meetings with agency staff.218 Another issue concerning merger review relates to the role of economic analysis, which gained greater prominence at the agency219 and indeed drove some of its decisions.220 Yet, the agency has been criticized for being overly dependent on quantitative rather than qualitative analysis of relevant markets (with a focus on market share)221 and attaching too much attention to stakeholder responses to its inquiries.222 However, any such flaws in agency decision-making go unchecked because only the notifying firm is a party to the merger proceedings,223 and so it alone is entitled to challenge agency findings. The exclusion of third parties from the proceedings leads to a situation in which merger clearance decisions, as well as conditional ones, even if possibly deficient, are never appealed.224 Judiciary Having explored the evolution of the agency and its activities, we now turn to the judiciary and its contribution to the broader competition law system in Poland. The primary focus is on the competition court hearing appeals from agency decisions. In the first decade of its operation, the court played a very constructive role. However, over time its substantive contribution became rather limited—largely due to its having to cope with the tsunami of cases caused by a misguided expansion of its jurisdiction. It came under criticism for an overly formalistic approach and increasing delays. While it seems that some of the key institutional problems have now been addressed, its workings offer valuable lessons on system design. Under the 1987 Act the agency’s decisions were subject to legality review by the Supreme Administrative Court.225 The 1990 Act introduced a different system. A specialized civil Antimonopoly Court was created within the structure of the district court in Warsaw,226 hence within the system of common courts. In 2002 it was given its current name—Court of Competition and Consumer Protection (‘Są?>d Ochrony Konkurencji i Konsumentów’, hereinafter the competition court).227 It is the only court competent to hear appeals against the agency’s decisions. It is empowered to issue substantive judgments, take evidence (inclusive of new evidence not presented to the agency), oblige the agency to re-examine decisions, and reverse or quash agency findings.228 Hence, it is to engage in full review on merits. Initially, the court’s judgments were final, subject only to extraordinary revision by the Supreme Court. However, the nature of judicial review in competition cases evolved over time.229 The creation of the present two-tiered review system was triggered by a judgment of the Constitutional Tribunal, which held that lack of appeal from the judgments of the Antimonopoly Court—which in view of the Tribunal is a first instance court—was unconstitutional.230 The necessary changes provided for appeal from the competition court to the Court of Appeal.231 Judgments of the Court of Appeal, in turn, may be challenged before the Supreme Court by means of an extraordinary cassation complaint. Since competition cases often involve novel legal issues, the Supreme Court often accepted complaints and issued judgments on merits. In the period 2001–2016, the Supreme Court issued 124 judgments in competition cases.232 Neither the Court of Appeal, nor the Supreme Court established specialized units to deal exclusively with competition matters.233 Creation of a new court necessitated its staffing. Stanisław Gronowski became Poland’s first competition judge and presided over the court until 2000. Although he had no background in competition law, he had a sound understanding of commerce having served for nearly 30 years as an arbiter (a de facto judge) of the state economic arbitration process—a compulsory system of resolving commercial disputes in communist Poland.234 He proved to be an extremely capable individual, immersing himself in studying comparative competition law and contributing to the system’s development through off-bench writings. Most significantly, in 1996 Judge Gronowski published a commentary on the 1990 Act.235 This was effectively the first book comprehensively analysing the Act and its application, which became the key point of reference in the Polish system. It was of great practical importance also because, at that time, access to court judgments was not easy. Judge Gronowski considered it important to engage other judges and support them in developing their expertise in competition law. While initially he was the only judge in the court, other judges were delegated to hear cases, as they were presented before three-judge courts until 1999.236 Judge Gronowski strived to involve colleagues with similar considerable experience in commercial matters. For example, in 1993 Judge Andrzej Turliński—who also had a background in state economic arbitration—started hearing competition cases as a delegated judge, before joining the court permanently in 1998. In July 2000 Judge Turliński took over from Judge Gronowski as the judge president of the court. When recommending colleagues to join his court, Judge Turliński was following Judge Gronowski’s approach of recommending judges with considerable expertise in commercial law.237 In the 1990s judges were largely self-educated in competition law, which was challenging due to the scarcity of sources in Polish and the judges’ lack of foreign language skills. Poland’s accession to the EU brought with it voluntary judicial trainings, including in competition law. It later enabled judges, conversant in foreign languages, to immerse themselves in international judicial networks in the field, creating opportunities to exchange knowhow and share insights.238 However, the issue of judicial training has not been addressed to date. A judge can begin hearing competition cases without having received any training in this area of law. Further or ongoing judicial trainings are not obligatory. In fact, judges of the competition court and the Court of Appeal did not benefit from any specific or regular training.239 A recent report reveals that the last training organized for specialized judges took place in 2011.240 Furthermore, due to judicial turnover, in 2000 Judge Turliński was the only judge on the competition court with relevant expertise,241 requiring the court to essentially re-establish itself. In effect, calling the competition court a specialized one reflected more on its scope of jurisdiction than the possessed expertise, with judges learning intricacies of competition law and economics on the job. In mid-2000, as outlined below, the court was flooded with non-competition cases. During that period, judges new to the court quite likely could not have devoted the necessary time and effort to training. Originally, the sole purpose of the competition court was to hear appeals from the decisions of the competition agency. Only 97 appeals reached the court in the first four years of its operation.242 In fact, Judge Gronowski, who was permanently assigned to the court, was asked to help adjudicate disputes in the Patent Office.243 While the number of cases annually reaching the court steadily increased, it remained within the double-digit territory at the turn of the new millennium.244 The light caseload effectively gave Judge Gronowski time to establish the court and develop its expertise in this new area.245 In his view the role of the court was twofold: (i) to help the agency find its appropriate focus and (ii) to help the agency enforce new laws by clarifying potentially ambiguous provisions.246 For example, in 1990 the agency found that FSO, the dominant car-maker, had violated the law by illegally increasing prices and ceasing production of certain cars.247 On appeal the case was overturned, effectively disallowing the agency from engaging in price-setting.248 This result was later upheld by the Supreme Court, which concluded that competition law should not be a hidden mechanism for price control.249 In a similar fashion in the early years the court helped the agency to find an appropriate enforcement focus. Initially the agency was tempted to investigate cases concerning minor contractual disputes (typically involving unequal bargaining power) of marginal market importance. For example, in 1990 the agency brought a case against a lessor for imposition of onerous terms (excessive rent) on the lessee, finding in favour of the latter. On appeal the court held that the agency did not have jurisdiction, underlining a distinction between protection of competition and protection of individual interests.250 The court also did not shy away from criticizing the agency on policy grounds, for example in relation to a very soft-hearted sanctioning approach.251 In its early years the court also contributed to the process of harmonization of domestic law with the law of the EU. In fact, in his judgments Judge Gronowski used an EU-friendly interpretation of law and referred to relevant EU case law.252 However, over time the court’s competence began expanding. Some of that expansion reflected the growing mandate of the agency, especially its development of broad consumer protection responsibilities. The court began hearing also appeals from decisions of sectoral regulators, in the areas of energy (since 1997253), telecommunication (since 2000254), railway (since 2001255), postal service (since 2003256), and water management (since 2018257). Moreover, in 2000 the court was vested with jurisdiction over consumer contracts of adhesion.258 The court’s expanding jurisdiction, growing professionalization of the practitioners market and the increasing rate of appeals (for example, in 1999 about one-third of all agency decisions was challenged259) began creating a backlog of cases and delays.260 The addition of jurisdiction over standard form contracts overwhelmed the court in the later years. The judicial traffic jam arose when the legislature expanded the court’s scope to implement the EU Directive on Unfair Terms in Consumer Contracts.261 In essence, any person who could conclude a contract containing an unfair clause could sue the supplier or seller. The competition court became solely competent in these matters. Such a wide opening of court’s doors led to unanticipated large-scale system abuse and the emergence of law firms specialising in such cases. They held businesses to ransom if they found contracts with prohibited clauses—not filing suit if the ransom were paid.262 Whether legitimate or abusive, a tsunami of such suits hit the court, reaching its apex in 2013, when over 41,000 such suits were brought, constituting nearly 99 per cent of all matters brought before the court that year (see Fig. 13 above). While waiting for a legislative fix, the court sought a practical solution. In 2010 three additional judges joined the court, forming a special unit focusing solely on these cases. Further judges were being delegated to assist. At the crisis’s peak 11 judges were adjudicating in the competition court.263 The system was overhauled in 2016, shifting towards an administrative regime within the competition agency. The enforcers began issuing decisions in such cases, thereby freeing the court of that caseload.264 However, for about a decade the court had to focus on simply staying afloat. In fact, the court carried a backlog of 2500 cases in 2017 (including 2000 cases involving standard form contracts).265 Figure 13. View largeDownload slide Cases reaching the competition court: division into categories of cases. Source: Data of the Polish Ministry of Justice. Figure 13. View largeDownload slide Cases reaching the competition court: division into categories of cases. Source: Data of the Polish Ministry of Justice. An unsurprising consequence of the consumer-related backlog was significant delays in competition cases. In the late 1990s it took the court typically three to four months since the case was filed to issue a decision.266 In the new millennium the situation gradually worsened. The period between case filing and the first hearing lengthened (see Fig. 14 below). In 2013 it took about two years to have the first hearing of a case,267 and this continues, despite up to eight judges hearing competition cases.268 Figure 14. View largeDownload slide Competition cases: period between case filing and the first hearing. Source: Data of the Ministry of Justice. Figure 14. View largeDownload slide Competition cases: period between case filing and the first hearing. Source: Data of the Ministry of Justice. Another factor hindering the court’s work, especially its intellectual capability and focus, is the general system used for evaluation of judicial work. Judges are appraised using a crude system of monitoring the number of cases handled.269 Hence, whether a judge deals with a small contractual matter or a complex abuse-of-dominance case—her ‘statistics’ will go up by one. Hence, judges are facing extremely skewed incentives. It is rational to stay away from competition cases (potentially disincentivising talented judges from serving on or permanently joining the competition court). Alternatively, judges are implicitly encouraged to expeditiously adjudicate by reviewing merits superficially. Another challenge facing the competition court relates to judicial turnover. Judicial salaries in Poland reflect the court’s position in the hierarchy. Judges of the competition court, formally a section of the district court,270 are commonly interested in seeking higher-ranked and better-remunerated judicial appointments. Already in 1996 Judge Gronowski noted that ‘unfortunately, a common phenomenon is that, after several years of work and after gaining valuable experience, judges leave the bench to pursue higher-paying legal positions. A limited budget is not sufficient for gathering a qualified group of judges’.271 Judge Gronowski himself moved a rung up the ladder, in 2000, when he was appointed a judge of the Supreme Administrative Court. It is of no surprise that, from the start of the new millennium, the court was criticized for focusing excessively on procedural aspects instead of merits. Similar tendencies have been observed in other civil law jurisdictions where judges without competition law expertise were called upon to hear such cases.272 However, it prompted the Supreme Court, in 2004, to clarify the role of the court, effectively suggesting that procedural issues should not be a competition court’s focus.273 This clarification moved the court to another extreme—to stop reviewing procedural objections.274 This changed in 2013 when the Supreme Court acknowledged the competition court’s obligation to deal with such matters.275 However, no significant improvement in review on merits has been noted and the court continues to be criticized for the superficiality of its assessment on merits.276 This is reflected in judgments being annulled and remanded for further proceedings, further extending the length of the proceeding (Fig. 15 above).277 Figure 15. View largeDownload slide First instance judgments in competition cases: division into key categories of cases. Source: Agency annual reports. Figure 15. View largeDownload slide First instance judgments in competition cases: division into key categories of cases. Source: Agency annual reports. Figure 16. View largeDownload slide Judgments in competition cases across courts. Source: Agency annual reports. Figure 16. View largeDownload slide Judgments in competition cases across courts. Source: Agency annual reports. The holistic assessment of Poland’s competition court is mixed. In the first 10 years of its operation the court was an important contributor to the competition system. Since the start of the new millennium that has changed, largely due to various systemic design flows. Due to delays and superficiality of review, the court might now be perceived as a liability rather than an asset to the system. Successful addressing of the consumer-related caseload brings hope that the court will now be able to devote the necessary focus to competition matters and that the delays will shorten. However, if judges are not properly supported with training and if appraisal system remains in place, it may be overly optimistic to hope that the court will play a more prominent and constructive role as the system co-producer. Competition law practitioners and broader epistemic community This part analyses the development of the practitioners market and of the broader epistemic competition community.278 These areas tend to be under-researched, probably due to difficulties in identifying relevant dynamics. However, they warrant attention and directly reflect on the evolution of the competition system. In fact, analysis of the growth of the practitioners market allows us to distinguish distinct phases in that process. Practitioners collectively constitute an important co-producer of the system. They interact with the agency and the judiciary, representing clients who face charges, are affected by conduct of other market players, or want to merge. With the unveiling of private enforcement, their role may increase further, due to competition-law-related bargaining in the shadow of the law (for example, in relation to out-of-court settlements) and litigation. Moreover, as the system developed, practitioners contributed to advocacy by offering advisory and compliance services. They have a self-interest in violations’ prophylaxis, which serves the system and the economy by increasing market participants’ awareness of competition law. They also provide input to legislative reforms and help shape competition policy. From the practitioners’ perspective, it does not matter what the agency does (that is, whether it reaches ‘right’ or ‘wrong’ decisions) as long as it is active. In such an agency-centred regime, with initially non-existent private enforcement, the scope for co-producers’ contributions (both the practitioners and the judiciary) is a function of the agency’s operation. The agency effectively feeds or starves the co-producers. At the point of system transformation, in 1989, there were only a few practitioners in Poland knowledgeable about competition law (typically thanks to studying or researching in the West). In the mid-1990s the new generation of practitioners with an interest in competition law began emerging. At that stage competition law was not taught in law schools in Poland and many of them continued studies in Western Europe. These first competition aficionados, interviewed in the scope of this project, all recognized the scarcity of Polish competition law sources at that time (except for the Phare-sponsored series279 and, later, Judge Gronowski’s commentary280) and acknowledged reaching for EU jurisprudence to learn. They also noted the importance of foreign-language fluency in their learning. These practitioners currently top the Chambers list for competition law in Poland,281 showing that the risks taken and effort invested in the then-fledgling area paid off. One of the lessons for new competition agencies is to facilitate competition law and policy learning early on, for example, by liaising with universities, to start developing knowledge and understanding of this field as soon as possible. The fact that initially only two domestic law firms (Wardyński i Wspólnicy and Sołtysiński, Kawecki & Szlęzak) saw the potential of competition law as a practice area shows how little demand there was for such services at the time. Originally it was not considered an attractive field. There are indications that, unlike in the West,282 it was perceived as a feminine field, lacking prestige, offering limited career prospects, and requiring considerable investment in learning, with men typically selecting more-established areas.283 That initial misperception may explain today’s strong female representation at the head-of-practice level. The introduction of modern merger control in 1995 stimulated development of the practitioners market. The relatively low threshold for merger notifications generated an increased workload. That coincided with the inflow of foreign capital, with large Western corporations buying shares in or taking over existing firms. Coming from typically more-established regimes, they were accustomed to competition watchdogs’ scrutiny and to a compliance culture. They contributed to the Polish system’s development by importing such knowhow and expectations. The ‘mergers’ phase characterized Polish competition system until the first years of the new millennium. This phase not only effectively created competition practitioners market, but it also taught them and the agency how to, for example, define markets.284 The recession of the early 2000s (the dot-com bubble) caused a slowdown in Poland and weakened merger activity. It also marked the beginning of the next stage in the system’s development—the confident enforcement phase, with the first large-scale investigations and sizable fines. The Polifarb case can be seen as the symbolic end of that phase, with the agency imposing, in 2006, the first-ever fines of more than one hundred millions PLN in a single case (in fact, the office had never before imposed fines even in the range of tens of millions PLN for anticompetitive behaviour).285 As the agency’s enforcement intensified, most large law firms would have added at least one lawyer with expertise in competition law (Fig. 17 above). Figure 17. View largeDownload slide Juxtaposition of merger activity and GDP growth in Poland. Source: Agency and World Bank data. See also Table 3 above. Figure 17. View largeDownload slide Juxtaposition of merger activity and GDP growth in Poland. Source: Agency and World Bank data. See also Table 3 above. One can speak of the system’s maturing during Krasnodębska-Tomkiel’s tenure (2008–2014). While the number of decisions plateaued at a lower level than in preceding years, the agency began more-assertive enforcement, with fines reaching new levels. In fact, six out of the 10 highest fines for anticompetitive agreements were imposed during her tenure (see Table 2 above). The more-expansive enforcement increased interest in compliance, stimulating the practitioners market.286 During this period competition teams began to emerge in the law firms, reflecting the increased activity of the agency and the growing diversity of cases (especially the increasing number of RPM cases). Around that time in-house competition lawyers and boutique law firms began to emerge. Krasnodębska-Tomkiel’s departure in 2014 marks the start of the enforcement stagnation phase, with a fall in the number of decisions to levels unseen before. Recent years witnessed a noticeable fall in the demand for practitioners services, also those related to compliance. However, practitioners acknowledge that the business community’s awareness of competition law has not been lost, with firms not betting on the agency’s apathy to continue indefinitely (Fig. 18 above). Figure 18. View largeDownload slide Phases in the development of the Polish competition system. Source: Own illustration. Figure 18. View largeDownload slide Phases in the development of the Polish competition system. Source: Own illustration. The growth of the practitioners market, and indeed the Polish competition community itself, can be inferred also from the growth in the membership of the Competition Law Society (see Fig. 19 above). The society is primarily practitioner-driven. Apart from being a networking platform, it organizes workshops and makes submissions during legislative consultations or when the agency seeks external input.287 The society was established in 1994 to promote competition law. For nearly a decade its membership was modest, but since 2004 it expanded considerably, exceeding 300 members in 2015. This expansion reflects both a sustained membership drive and increased interest in competition law following Poland’s accession to the EU in 2004. Figure 19. View largeDownload slide Membership of the Competition Law Society (total number of Society’s members). Source: Competition Law Society data. Figure 19. View largeDownload slide Membership of the Competition Law Society (total number of Society’s members). Source: Competition Law Society data. Today’s broader competition community in Poland finds its roots primarily in academia. Drafters of the first competition statutes, the first heads of the agency, many of its staff and advisors were academics.288 In the first decades, academic interest in this area developed organically. The first impactful competition law research centre in Poland was the Centre for Antitrust and Regulatory Studies (CARS), established by Tadeusz Skoczny in 2007, at the University of Warsaw. CARS publishes its own monographs289 and two peer-reviewed journals (the Yearbook of Antitrust and Regulatory Studies, YARS, Poland’s first competition law journal, published in English,290 and the Antimonopoly and Regulatory Quarterly, iKAR291). YARS and iKAR remain the only two competition law journals in Poland. The growing interest in competition law was also reflected in the launch, in 2011, of the first postgraduate course in competition law in Poland by the Institute of Law Studies of the Polish Academy of Science. This year-long programme, delivered by judges, enforcers, practitioners, and academics runs annually, attracting more than 30 participants each year.292 Over time, other institutions began offering similar courses,293 indicating the expanding demand for knowledge in this area of law. Poland now has a well-developed practitioners market and a vibrant broader competition law community. The agency should draw more heavily on this community to benefit from different perspectives and experiences. In some jurisdictions agencies benefit from such input automatically through the job market’s revolving doors (with practitioners moving to work in the agencies).294 In Poland, however, that way of expertise channelling and cross- fertilization does not work, largely due to unattractive salaries.295 This shortcoming magnifies the importance of all other platforms and processes for dialogue between the agency and the broader community, inclusive of practitioners. V. Conclusions Unlike many competition systems created in the past two decades, Poland did not have the benefit of learning from its peers because, at that time, no other country had undergone similarly far-reaching economic transformation. Poland was a leader of a group of former communist countries entering the uncharted territory of competition law. That is the lens through which one should assess the system’s success in its first decade. However, with the passage of time and the development of a market economy the rationale for making allowances in the system’s assessment has faded. Institutionally, Poland opted for an integrated agency model with a specialized competition court. Despite system’s maturing, the issue of the agency’s independence remains largely unresolved. Moreover, due to the considerable power vested with its leader, operations of the agency remain excessively dependent on her personality. The agency’s head should not be responsible for decision-making. That task should be discharged by a separate body, drawing from relevant international good practice. A take-home lesson for other new regimes is that, by design, an agency—while being accountable—should enjoy considerable autonomy. One should also avoid systemic overreliance on a single individual’s input. In terms of resources the agency is not an attractive employer. Its staff is inadequately remunerated, resulting in elevated turnover and reduced effectiveness. The issue of underfunding must be addressed if the agency is to fulfil its mandate. Agency operations to date must be assessed in light of this underlying and long-lasting deficiency. A broader conclusion for other jurisdictions is that to attract and retain capable individuals the remuneration should be set, at a minimum, near the top of the civil service pay scales. The Polish agency’s position vis-à-vis government department is weak, hindering its input into policy-making and curtailing its competition advocacy role. To be a more effective advocate, the head of the agency need to be in a stronger position, for example, by participating in Cabinet meetings to make her voice heard. A take-away for new regimes is that one should seriously entertain the question of who is to be made responsible for competition advocacy within the state. If it is to be the competition watchdog, it must have the standing allowing it to effectively discharge that duty. In such a case, agency’s autonomy needs to be strengthened further. Overall competition law and policy in Poland suffers from unwise mission creep. The agency’s remit has continually expanded without sufficient increases in budgetary appropriation. The same applies to the competition court. In a somewhat different context Kovacic and Lopez-Galdos noted that ‘doing a lot of things is not the same as doing the right things, or doing them the right way’.296 This valuable thought should inform future determinations of competence. The agency’s enforcement record is mixed. It did very well in challenging unilateral practices. It brought about largely vigorous and sustained enforcement, challenging violators—both private and state-owned enterprises in local, regional, and national markets. Given the broader context of the economic transformation it is impressive, proving that it can be done. The agency experience with multi-party conduct is very different. While the agency’s regional offices proved their usefulness by challenging local and regional agreements, including cartels, cases involving secret and country-wide cartels are virtually absent. The agency lacks ability to detect. Cartelists do not face a credible threat of enforcement. The situation is worsened by the poorly designed leniency programme, which has been used mainly in non-cartel cases. In effect, Poland suffers from a significant yet peculiar enforcement gap. The regional offices tackle local and regional violations. Global violations are dealt with by the European Commission. However, large, country-wide arrangements are the lacuna in Polish competition law. They have largely escaped scrutiny, suggesting that Poland may be a cartel paradise. This experience shows that cartel enforcement requires a serious, long-term commitment and sustained effort, and constitutes the most difficult task for new agencies. Poland’s competition court shows that a sustained long-term investment in judicial training is needed, particularly if competition law is to be embraced as part of a broader paradigm shift in the way the state’s economic affairs are organized. Moreover, the judicial work allocation models should provide judges the space and time necessary to invest themselves in adjudication of competition matters, rather than forcing them to provide just a cursory review. Poland’s practitioners market is well-developed and vibrant. The agency should be encouraged to embrace practitioners as valuable system co-producers and a source of market insight. Polish experience shows that establishing a new system requires a considerable educational effort. New agencies may wish to liaise with local educational providers to stimulate and facilitate such learning early on, thereby planting seeds of a wider domestic competition community. The critical nature of this analysis should not obscure the broader picture. Over the past three decades Poland managed to introduce and develop a sophisticated, robust, and quite dynamic system of competition law, making it a leader in Central and Eastern Europe. While various mishaps were not avoided and there are areas needing improvement, the nearly three decades of Poland’s experience with competition law provided solid foundations for the system’s future refinement and should be a source of satisfaction for all those who shaped it. Acknowledgement This article has been adapted from a more detailed report available at https://ssrn.com/abstract=3391298. Thanks to all interviewees and other persons and institutions who facilitated this work. Special thanks to anonymous reviewers of the JAE for helpful comments and to Casey Aspin and Nina Łazarczyk for editing and research assistance. Earlier versions of this work were presented at the 2017 Workshop of the Competition Law Scholars Forum (Warsaw, Poland), the 2017 Annual Conference of the Academic Society for Competition Law (Stockholm, Sweden), the 2018 Annual Conference of the Socio-Legal Studies Association (Bristol, UK), the 2018 Annual Conference of the Society of Legal Scholars (London, UK), the 2018 Competition Law Forum at the University of Zagreb (Croatia), and the project’s closing seminar in Warsaw (Poland)—in November 2018. The usual disclaimers apply. The underlying research, conducted in the period 2017–2018, was funded by the Oxford Noble Foundation, within the framework of its Programme on Modern Poland, by means of a competitive grant award to Dr Marek Martyniszyn in July 2016. The support of the Foundation is gratefully acknowledged. Marek Martyniszyn and Maciej Bernatt declare no conflict of interest. Footnotes 1 For analysis of the phenomenon and the reasons behind it see Umut Aydin, ‘The International Diffusion of Competition Laws’ (APSA Annual Meeting Paper 2010), <https://papers.ssrn.com/abstract=1657456> accessed 1 May 2019; Eleanor M Fox, ‘Antitrust in No One’s World' (2012) 27 (Fall) Antitrust 73. 2 See Annex I: Interviewees list in the full report <https://ssrn.com/abstract=3391298> accessed 1 May 2019. The interviewees informed this project and served as sources, providing directly attributable comments and some observations on a not-for-attribution basis. In the case of attributable comments interviewees initials were used to identify them. Annex I provides a key to the initials’ listing. 3 William E Kovacic and Marianela Lopez-Galdos, ‘Lifecycles of Competition Systems: Explaining Variation in the Implementation of New Regimes’ (2016) 79(4) Law and Contemporary Problems 85, 94–97. 4 Umut Aydin and Tim Büthe, ‘Competition Law & Policy in Developing Countries: Explaining Variations in Outcomes; Exploring Possibilities and Limits’ (2016) 79(4) Law and Contemporary Problems 1. 5 The scholarship devoted considerable attention to the Polish competition system in its early years, typically alongside other new systems that emerged after the collapse of the Soviet Union. See, eg Russell Pittman, ‘Some Critical Provisions in the Antimonopoly Laws of Central and Eastern Europe’ (1992) 26 The International Lawyer 485; Roger W Mastalir, ‘Regulation of Competition in the New Free Markets of Eastern Europe: A Comparative Study of Antitrust Laws in Poland, Hungary, Czech and Slovak Republics, and Their Models’ (1993) 19 North Carolina Journal of International Law and Commercial Regulation 61; John Fingleton and others, Competition Policy and the Transformation of Central Europe (Centre for Economic Policy Research 1996); William E Kovacic, ‘The Competition Policy Entrepreneur and Law Reform in Formerly Communist and Socialist Countries’ (1996) 11(3) American University International Law Journal of Law and Policy 437; Ben Slay (ed), De-Monopolization and Competition Policy in Post-Communist Economies (Westview 1996); Robert H Lande, ‘Creating Competition Policy for Transition Economies: Introduction’ (1997) 23 Brooklyn Journal of International Law 339; Russell Pittman, ‘Competition law in central and eastern europe: five years later’ (1998) 43 Antitrust Bulletin 179. Probably the last attempt to offer a broad analysis of the system’s development was the OECD study. Michael Wise, ‘Review of Competition Law and Policy in Poland’ (2003) 5(2) OECD Journal: Competition Law and Policy 83. 6 See further Glenn Eldon Curtis, Poland: A Country Study (Federal Research Division, Library of Congress 1994). 7 See further Jan Kubik, Power of Symbols Against the Symbols of Power: The Rise of Solidarity and the Fall of State Socialism in Poland (Pennsylvania State University Press 1994). 8 Komisja do Spraw Reformy Gospodarczej, Podstawowe Założenia Reformy Gospodarczej: Projekt (Książka i Wiedza 1981). 9 Law on Business Activities of 23 December 1988, OJ No 41, item 324. 10 Law on Various Conditions of Consolidation of the National Economy of 24 February 1989, OJ No 10, item 57. See further Hubert Izdebski, ‘Legal Aspects of Economic Reforms in Socialist Countries’ (1989) 37(4) American Journal of Comparative Law 703, at 714–18. 11 See, eg Marek Belka, ‘Lessons from the Polish Transition’ in Ryszard Rapacki and George Blazyca (eds), Poland into the new millennium (Edward Elgar 2001). 12 Interview with LB. 13 Jeffrey Sachs and David Lipton, ‘Poland’s Economic Reform’ (1990) 69(3) Foreign Affairs 47, 48. 14 Europe Agreement Establishing an Association between the Republic of Poland and the European Communities and Their Member States, signed on 16 December 1991, effective on 1 February 1994. 15 art 69 of the Europe Agreement. 16 For Conclusions of the Presidency, outlining the criteria see 26(6) Bulletin of the European Communities Commission (1993), 13. 17 European Commission, Agenda 2000 - Commission Opinion on Poland’s Application for Membership of the European Union, DOC/97/16 (15 July 1997), 111–14. 18 ‘Poland to Switch from Emerging to Developed Market by September 2018’, Emerging Europe, 2017, <https://emerging-europe.com/in-brief/poland-switch-emerging-developed-market-september-2018/> accessed 1 May 2019. 19 Poland’s first competition law was the Cartel Act of 28 March 1933, OJ No 21, item 270, which was later replaced by Act of 13 July 1939, OJ No 63, item 418. The Act has not been formally repealed, but it was not applied after 1945. Zbigniew Landau, ‘The Extent of Cartelization of Industries in Poland, 1918-1939’ (1978) 38 Acta Poloniae Historica 147. 20 See notes 6–10 and accompanying text. 21 Irena Wiszniewska, ‘On the Draft on Antimonopoly Legislation in Poland’ (1984) 22 Swiss Review of International Competition Law 7, 9. 22 Law on Counteracting Monopolistic Practices in the National Economy of 28 January 1987, which came into force on 1 January 1988. 23 Yugoslavia did so in 1974 and Hungary in 1984. Tibor Varady, ‘The Emergence of Competition Law in (Former) Socialist Countries’ (1999) 47(2) American Journal of Comparative Law 229, 233–41. 24 Jacek Trojanek, ‘Ustawa Antymonopolowa z 1987 roku. Próba oceny podstawowych rozwią?>zań’ (1987) 4 Ruch Prawniczy 1, 18–19. 25 Mateusz Błachucki, Polish Competition Law: Commentary, Case Law and Texts (Office of Competition and Consumer Protection 2013) 13. 26 See further Eugeniusz Piontek, ‘Polish Antimonopoly Law’ (1988) 12 World Competition 41. 27 art 20 of the Act. 28 arts 17–19 of the Act. 29 Wiszniewska (n 21) 11. 30 arts 21 and 22 of the Act. See also Trojanek (n 24) 4. 31 art 3(1) of the Act. 32 art 4(4) of the Act. 33 Wiszniewska (n 21) 18–19. 34 Błachucki (n 25) 13. 35 See also nn 80–85 accompanying text. 36 Interviews with AF, TS, WM, and RJ. 37 Act on Counteracting Monopolistic Practices of 24 February 1990, OJ No 14, item 88, in force from 11 April 1990. The draft law was prepared in the ministry of finance, which incorporated the competition agency under the pre-1989 regime. See section Pre-1989 developments. 38 Act on Competition and Consumers Protection of 15 December 2000, OJ No 122, item 1319. 39 Act on Competition and Consumers Protection of 16 February 2007, OJ No 50, item 331. 40 For discussion see Dawid Mią?>sik, ‘Controlled Chaos with Consumer Welfare as the Winner–a Study of the Goals of Polish Antitrust Law’ (2008) 8(1) Yearbook of Antitrust and Regulatory Studies 33, 39. 41 ibid 37. 42 ibid 33. 43 For the sake of simplicity this piece consistently uses the generic term ‘agency’ to refer to the Polish competition watchdog. For discussion of the agency’s expanding mandate see section Evolving mandate. 44 With time, the regional set-up—originally determined by the agency’s head—became embedded in the Act itself, per art 18(1) of the 1990 Act, as amended per the Act of 22 October 1998, OJ No 145, item 938. 45 See further Mattia Guidi, ‘The Impact of Independence on Regulatory Outcomes: The Case of EU Competition Policy’ (2015) 53(6) Journal of Common Market Studies 1195, 1198. 46 Giorgio Monti, ‘Independence, Interdependence and Legitimacy: The EU Commission, National Competition Authorities, and the European Competition Network’ (EUI Working Paper Series No 01, 2014), 3. Monti notes that such a commitment is particularly important in the case of states which had tolerated anticompetitive conduct in the past as it reassures markets that the change has occurred and will be of a lasting nature. 47 Tay-Cheng Ma, ‘Competition Authority Independence, Antitrust Effectiveness, and Institutions’ (2010) 30(3) International Review of Law and Economics 226, 231. 48 Aydin and Büthe (n 4) 31–32. 49 Majority of interviewed practitioners, esp. AS2, RG, MS2, and MMD. 50 In a similar vein also Kovacic and Lopez-Galdos, n 3, 108. 51 See, eg Tadeusz Skoczny, ‘Polish Competition Law in the 1990s – on the Way to Higher Effectiveness and Deeper Conformity with EC Competition Rules’ (2001) 2(3–4) European Business Organization Law Review 777, 791. 52 Poland’s 1991 annual report to the OECD, DAFEE/CLP/WD(92)2, 4. 53 Agency 1997 annual report, 16. 54 Agency 2003 annual report, 11. 55 European Commission, Regular Report from the Commission on Poland's Progress Towards Accession (2001), 49. 56 For example, the head of the Energy Regulatory Office enjoys a term of five years. See, art 21(2l) of the Energy Law Act of 10 April 1997, as amended. Same term applies to the heads of the Office of Electronic Communications (see, art 190(4) of the Telecommunications Act of 16 July 2004, as amended) and the Office of Rail Transport (see, art 11b(1) of the Railway Transport Act of 28 March 2003, as amended). 57 art 24(4). 58 art 24(2) of the 2000 Act. 59 See the Ordinance of 29 June 2001 on the rules governing selection of the Head of the Office for the Protection of Competition and Consumers, OJ 2001, No 69, item 720. 60 art 29(3d) of the 2007 Act, as amended. 61 art 29(3b) of the 2007 Act, as amended. 62 For example, Jarosaw Królak, ‘Szef UOKiK mógł zostać wybrany wbrew prawu’ Puls Biznesu (Warsaw, 23 March 2014). 63 Parliamentary Question No 26004 of Grzegorz Napieralski, 23 April 2004. 64 Although, for example, the head of the central bank and the members of the monetary policy council are prevented from being members of political parties. See, art 227(4) of the Polish Constitution and art 14(2) of the Act of 29 August 1997 on the National Central Bank, as amended. Similar rules apply to the leadership of the Personal Data Protection Office. See, art 37(2) of the Act of 10 May 2018 on the Protection of Personal Data. 65 ‘Aziewicz na monopole?’, Gazeta Wyborcza, 5 January 1998. 66 When resigning, Fornalczyk pointed to differences of opinions between her, the prime minister, and other ministers, especially in relation to the slowing down of privatization and the growing protectionist tendency to create centrally-managed industrial structures. ‘Rzą?>d czekania i gadania’, Gazeta Wyborcza (Warsaw, 12 January 1995). 67 However, Aziewicz’s dismissal occurred during controversial takeover proceedings. In June 2001 the agency, on his watch, for the second time, prohibited a takeover in the cable and wire production market (takeover of Elektrim Kable by Tele-Fonika), which would have led to the merged entity controlling 63 percent of the relevant domestic market. The prohibition was challenged. Following Aziewicz’s dismissal and after Banasiński’s appointment, in November 2001 the decision was changed. The agency redefined the relevant market—from domestic to European—and granted the transaction an unconditional green light. At the time the media speculated about the political influence of Tele-Fonika’s owner. These proceedings coincided with dismissal, in December 2001, of the agency’s long-serving deputy head—Modzelewska-Wą?>chal, who reportedly opposed granting a clearance in that case and was removed from working on it. See Krzysztof Trębski and Sergius Sachno, ‘Kabel u szyi’ Wprost (Poznań,19 October 2003). 68 Decision of 13 January 2011, DKK 1/2011. 69 Maciej Bednarek and Renata Grochal, ‘Premier wietrzy ochronę’, Gazeta Wyborcza (Warsaw, 11 February 2014). 70 Konrad Niklewicz, ‘UOKiK nie zgadza się na przejęcie Energi przez PGE’ Gazeta Wyborcza (Warsaw, 18 August 2010). 71 ‘Energy merger’, Business Europe, 1 September 2010. 72 ‘Przejęcie Energi przez PGE już w są?>dzie ’ (TVN24bis, 16 February 2011). 73 Leszek Balcerowicz, ‘Balcerowicz w obronie niezależności UOKiK’ Dziennik.pl (Warsaw, 17 September 2010). 74 In 2009, the agency prohibited a takeover of Koltram by Cogifer. The three-to-two merger would led to Cogifer enjoying 70% market share of the rail turnouts market. Decision No DKK 67/09 of 8 October 2009. Koltram was a state-owned firm. This was the first Polish privatization attempt of selling a firm’s shares in a single step by means of an auction. The auction, considered successful by the government, took place six months before the agency issued its decision. Konrad Niklewicz, ‘Aukcja prywatyzacja: 96 milionów w trzy minuty’ Gazeta Wyborcza (Warsaw, 23 April 2009). On appeal the decision was upheld. Judgment of 14 May 2012, XVii AmA 41/11. 75 Wojciech Surmacz, ‘Dymisja prezesa UOKiK, czyli czas “trzaskania statystyk”’ Forbes (Warsaw, 11 February 2014). However, no such consolidation took place following the Krasnodębska-Tomkiel’s dismissal. 76 ibid. 77 ‘Prawnik czy ekonomista? Kim powinien być nowy prezes UOKiK?’ TVN24bis (Warsaw, 13 February 2014). 78 See further nn 153–54 and accompanying text. 79 Interviewed practitioners, for example, ASB, MS2, MMD, and JS. 80 See above section ‘Pre-1989 developments’. 81 See nn 24–25 and accompanying text. 82 In 1986 Jacyno completed a doctoral dissertation entitled ‘Legal Aspects of Competition Protection in Poland in Light of International Practice’ (manuscript on file with the authors). 83 For example, Elżbieta Modzelewska-Wą?>chal, who later became the Deputy Head of the agency. 84 Interview with RJ. 85 For example, Andrzej Cylwik, the agency’s deputy head under Fornalczyk, prior to assuming that role worked in the Institute of Organisation Management and Managerial Staff Training. Edward Stawicki was a faculty member at Adam Mickiewicz University prior to establishing and then directing the agency’s regional office in Poznań. 86 See section Evolving mandate. 87 Agency’s data (on file with the authors). 88 Agency information per Wise (n 5) 117. 89 This category embraces bodies whose scope of operation covers the entire country and which report directly to the cabinet, the prime minister or individual ministers. Heads of such authorities are not members of the cabinet. 90 See also n 132 and accompanying text on the status consequences in relation to advocacy. 91 A fact noted by the European Commission in its pre-accession reports. See, eg European Commission, Regular Report from the Commission on Poland's Progress Towards Accession (2000), 43. 92 Compilation based on data from (i) the Annual Reports on Employment and Salaries in Civil Service published by the Chancellery of the Prime Minister, Civil Service Department, and (ii) provided by the Chancellery in response to a right-to-information request. Value in euro relies on an average exchange rate as published by the Polish National Bank. 93 2016 Antal’s report provides that average salaries of lawyers in Poland (with at least two years’ experience) amounted to 13,906 PLN, gross. Raport Płacowy Antal, <http://bpcc.org.pl/uploads/ckeditor/attachments/11814/Antal_Salary_Report_2016.pdf> accessed 1 May 2019. 2016 Report of Hays and Kozminski University provides that the most common remuneration for lawyers ranged from 12,000 to 15,000 PLN, gross. Raport Płacowy 2016, <http://www.hrtrendy.pl/wp-content/uploads/2016/01/Raport_-placowy_2016_v3.pdf> accessed 1 May 2019. 94 The issue has been noted also by external bodies. See, eg the 2003 OECD study. Wise (n 5) 117. 95 Interviewed enforcers, in particular AS, TA, and CB. 96 This is a view widely shared by interviewed practitioners who see the agency’s underfunding as a major issue constraining its operations. 97 For example, in 2005 the agency employed 422 staff despite being allocated 489 posts. However, it used 99.1% of its salary allocation. See Supreme Audit Office Report on State Budget Execution in 2005. 98 See the Supreme Audit Office Reports on State Budget Execution. 99 Interview with CB. 100 In its 1997 annual report, the agency called attrition a ‘worrying phenomenon’ for the first time. At that stage, over a third of agency staff had less than a year’s experience with the agency. Agency 1997 annual report, 5. 101 Interview with CB. Poaching is more of a problem at the agency’s headquarters. The agency’s regional offices are still relatively attractive, given more-limited employment options in the private legal sector in the regions. Interview with MKT. 102 Chancellery of the Prime Minister, Civil Service Department, 2007 Report on Employment and Salaries in Civil Service, 9. 103 Aydin and Büthe show that similarly high attrition rates characterize some of the developing countries, such as South Africa, Mexico, and Russia. For comparison, attrition rates in Australia and Germany were 14 and 5%, respectively. Aydin and Büthe, n 4, 18, fn 58. In past, the European Commission recognised high turnover of staff due to low remuneration as a significant constraint on the Polish agency’s effective functioning. See, eg European Commission, Regular Report from the Commission on Poland's Progress Towards Accession (1998) 42; European Commission, Regular Report from the Commission on Poland's Progress Towards Accession (2000) 43. 104 Author’s calculation based on data from the Chancellery of the Prime Minister, Civil Service Department. 105 Interviews with practitioners, in particular MS2 and KK. 106 ‘Budget’ denotes the actual expenditure by the agency as per the ex-post annual reports of the Supreme Audit Office on the state budget execution. The relevant part 53 embraces all activities under the agency head’s supervision (hence, including also resources devoted to Trade Inspection). 107 2000 was the last time inflation in Poland exceeded 10%. In the 2001–2016 period the average inflation rate was just over 2%. See Statistical Offices, <https://stat.gov.pl/obszary-tematyczne/ceny-handel/wskazniki-cen/wskazniki-cen-towarow-i-uslug-konsumpcyjnych-pot-inflacja-/roczne-wskazniki-cen-towarow-i-uslug-konsumpcyjnych/> accessed 1 May 2019. 108 Interviewed enforcers, in particular EM and BKS (commenting, respectively, on inadequate additional budgetary appropriation following addition of the consumer protection portfolio, and vesting of the enforcement obligations in relation to the law on unfair use of contractual advantage). See also Evolving mandate section. 109 Supreme Audit Office, State Budget Execution in 2015: Part 53—Office of Competition and Consumer Protection (2016) 9. 110 See nn 68–75 and accompanying text. 111 See further nn 132–33 and accompanying text. 112 Authors’ own computation based on the annual ex-post reports by the Supreme Audit Office on state budget execution for the relevant period. 113 As per art 19 of the 1990 Act. 114 See nn 140–46 and accompanying text. 115 In 1996 the Anti-Monopoly Office became the Office of Competition and Consumer Protection. 116 Interviews with WM, AS, and SS. 117 In 1995 the agency was made responsible for preparing groundwork for a system of monitoring of state aid, in the framework of Poland’s engagement with the EU. See the agency 1995 annual report, 35. However, in 1996 the ministry of economy became responsible for all state aid monitoring. Agency 1996 annual report, 26. In 1998 the agency reclaimed that portfolio, seeing itself as the best-placed body to deal with such matters, in light of the process of accession to the EU. Agency 1999 annual report, 8–9. This was possible thanks to the direct support of Deputy Prime Minister Balcerowicz. Interviews with TA and EM. In 2000 a new state aid law was adopted, making the agency responsible for monitoring and approving of state aid. Agency 2000 annual report, 6. From May 2004, when Poland joined the EU, the European Commission became the sole body responsible for approving of state aid, with the agency retaining only an advisory function. 118 See agency 2016 annual report. 119 Per art 7b of the Polish Language Act of 7 October 1999, as amended, OJ 1999, No 90, item 1999. 120 Act of 15 December 2016 on Counteracting the Unfair Use of Contractual Advantage in Trade in Agricultural and Food Products, OJ 2017, item 67. 121 In this vein BKS. 122 In fact, in 2007 the agency commissioned research on synergies between competition policy and consumer protection. Agency 2007 annual report, 54. 123 This is also the prevailing view of the interviewed practitioners. 124 An interviewed practitioner (not for attribution). 125 In this vein also MKT. 126 PM Tusk was quoted saying: ‘[the agency’s] mission is also to protect the interests of consumers, not only to [ensure] competition … It's not acceptable that this institution of public trust deemed Amber Gold's advertisements … fair.’ Jan Cienski, ‘Poland’s Amber Gold to liquidate’ Financial Times (London, 18 August 2012). 127 In the past two decades such a merger occurred in at least seven jurisdictions. Frederic Jenny, ‘The Institutional Design of Competition Authorities: Debates and Trends’ in Frederic Jenny and Yannis Katsoulacos (eds), Competition Law Enforcement in the BRICS and in Developing Countries: Legal and Economic Aspects (Springer 2016) 9–17. 128 International Competition Network, Advocacy Working Group, ‘Advocacy and Competition Policy: Report’ (2002), i, <http://internationalcompetitionnetwork.org/uploads/library/doc358.pdf> accessed 1 May 2019. 129 Armando E Rodriguez and Malcolm B Coate, ‘Competition Policy in Transition Economies: The Role of Competition Advocacy’ (1997) 23 Brooklyn Journal of International Law 365. In a similar vein Aydin and Büthe (n 4) 10–11. 130 The popular misperception of the role of the competition agency, then called Anti-Monopoly Office, illustrated the scale of the challenge for the agency’s advocacy efforts. Given that the Polish term for ‘monopoly’ denotes stores selling alcohol in popular parlance, many individuals thought the agency’s aim was to promote sobriety. 131 Such distinction is made in numerous acts (eg art 18 of the Code of Administrative Procedure) and it is recognized by the doctrine. In the past, only two non-ministries were established as supreme administrative bodies (the State Committee for Scientific Research and the Committee for European Integration, both committees no longer exist). 132 Interviews with enforcers, in particular AF, CB, and MKT. 133 See n 24 and accompanying text. 134 That was so in case of Fornalczyk (since Bielecki’s government, 1991–1995) and Banasiński (during the terms of Buzek and Belka, 2001, 2004–2005). 135 Introduced per Act of 19 December 2009, amending the Act on Freedom of Economic Activity, OJ 2009, No 19, item 97. 136 Interview with MKT. See also agency 2008 annual report, 12. 137 An interviewed enforcer (not for attribution). 138 In 1990 the US government began funding technical assistance projects in the area of competition law and policy in countries undergoing transition. From 1990 until mid-1990s, the Polish agency benefited from short-term visits and resident advisors from the Antitrust Division of the Department of Justice and the Federal Trade Commission. For a US advisors perspective see James Langenfeld and Marsha W Blitzer, ‘Is Competition Policy the Last Thing Central and Eastern Europe Need’ (1990) 6 American University International Law Journal of Law and Policy 347. 139 Wise (n 5) 127. The US advisors who worked with the agency in the early 1990s are of the view that the agency benefited from strong political backing at the time. Interviews with DHB and JL. 140 Fingleton and others (n 5) 155. 141 ibid. 142 Emphasis in the original. Agency 1992 annual report, 13. 143 Życie Warszawy, 11 February 1993, translated in Polish News Bulletin, 28 February 1993. 144 Agency 1992 annual report, 2. 145 ibid 13. 146 In this vein Wise (n 50 127. 147 For statistics on privatization see the portal of the Polish Ministry of Treasury at <https://www.msp.gov.pl/en/privatisation/statistics?page=0> accessed 1 May 2019. 148 OECD, Regulatory Reform in the Telecommunications Industry: Poland; Background Report (2002), 13–14. The privatization was ultimately completed in 2000, but the telecom retained legal monopoly in international telephone market until January 2003. 149 Interviews with enforcers, in particular AF, AS, and TA. 150 Interview with AF. 151 Daniel Michaels, ‘Poland’s Phone Monopoly is Still Seen as a Dinosaur that Focuses on Power' Wall Street Journal (New York, 19 May 1997). 152 For example, decisions of 20 December 2007, DOK-98/07; of 29 December 2006, DOK-166/06; and of 5 June 2006, DOK-53/2006. 153 See nn 68–77 and accompanying text. 154 Should the rules facilitate it, we do not imply that such an override should have been used in the PGE-Energa case. 155 Poland and Hungary: Assistance for Restructuring their Economies (Phare) programme was one of the EU instruments helping countries of Central and Eastern Europe in preparations for joining the Union. David Bailey and Lisa De Propris, 'A Bridge Too Phare? EU Pre‐Accession Aid and Capacity‐Building in the Candidate Countries’ (2004) 42(1) Journal of Common Market Studies 77. 156 For the listing see Tadeusz Skoczny (ed), Harmonisation of the Polish Competition Legislation with Competition Rules of the European Communities: Summary and Recommendations (Elipsa 1997). 157 This fact was corroborated by virtually all of the interviewees active in that period (judiciary, enforcers, and practitioners). 158 <https://uokik.gov.pl/komentarze_wyjasnienia_i_stanowiska.php?news_id=2422> accessed 1 May 2019. 159 Agency 2009 annual report, 51. 160 Interview with MKT. 161 Agency 2012 annual report, 35. 162 The Guidebook, in Polish, <https://uokik.gov.pl/download.php?plik=15793> accessed 1 May 2019. 163 The Guidebook, in Polish, <https://uokik.gov.pl/download.php?plik=18155> accessed 1 May 2019. 164 See <http://www.worldbank.org/en/events/2015/10/30/the-2015—2016-competition-advocacy-contest-how-to-build-a-culture-of-competition-for-private-sector-development-and-economic-growth#5> and <http://www.worldbank.org/en/events/2016/10/24/the-2016—2017-competition-advocacy-contest#1> accessed 1 May 2019. 165 Agency 2006 annual report, 42. 166 See <https://uokik.gov.pl/aktualnosci.php?news_id=10389> accessed 1 May 2019. 167 Agency 2008 annual report, 54. In 2016 the competition was expanded to encompass doctoral thesis. Agency 2016 annual report, 60. 168 Agency 2010 annual report, 55. 169 Aditya Bhattachajea, ‘Who Needs Antitrust? Or, Is Developing-Country Antitrust Diferent? A Historical-Comparative Analysis’ in Daniel D Sokol and others (eds), Competition Law and Development (Stanford University Press 2013) 61–62; William E Kovacic, ‘Institutional Foundations for Economic Legal Reform in Transition Economies: The Case of Competition Policy and Antitrust Enforcement’ (2001) 77 Chicago-Kent Law Review 265, 93–95. 170 Michal Gal and Eleanor Fox, ‘Drafting Competition Law for Developing Jurisdictions: Learning from Experience’ in Michal Gal and others (eds), The Economic Characteristics of Developing Jurisdictions: Their Implications for Competition Law (2015), 319; Kovacic, ibid 284. 171 Philippe Brusick and Simon J Evenett, ‘Should Developing Countries Worry About Abuse of Dominant Power?’ (2008) Wisconsin Law Review 269. 172 No exact data is available for the early years, however, the agency’s annual reports show a primary focus on abuse-of-dominance cases. 173 Interviews with MM, RG, JS, AS2. See also Tadeusz Skoczny, Polish Antimonopoly Case Law (ELIPSA 1995) 83–84. 174 Slay (n 4) 135. 175 See, eg decisions of 17 June 2004, DOK-50/2004; 31 December 2004, DOK-140/2004; 9 August 2005, DOK-91/2005. 176 For example, decision of 30 July 1993, DO-III-500-25/93/ZW; judgment of 31 May 1995, XVII Amr 9/95, decisions of 7 August 2002, DDI–63/2002 and 30 September 2008, RPZ-34/2008. 177 This view is also widely shared by the interviewed practitioners. 178 80% of complaints did not lead to a finding of a breach. Agency 2007 annual report, 5. 179 The explanation attached to the Draft Proposal of the 2007 Act, 17, 20. 180 Interviews with AS, CB and AF. 181 Agency 1992 annual report, 6, upheld on appeal, judgment of 1 March 1993, XVII Amr 37/92. 182 Interview with AF. 183 See decision of 22 October 2002, RPZ-21/2002. 184 Decision of 8 December 2009, DOK-7/2009. 185 Decision of 16 December 2013, RKT-46/2013. 186 See, in particular, decisions of 7 April 2008, DOK-1/2008; 24 May 2010, DOK-4/2010; 31 December 2010, DOK-12/2010, 21 August 2013, DOK-2/2013; 30 December 2016, DOK-2/2016. 187 Caron Beaton-Wells and Christine Parker, ‘Justifying Criminal Sanctions for Cartel Conduct: A Hard Case’ (2013) 1(1) JAE 198, 205–206. 188 In this vein also interviewees MS, AS2, AF. 189 The opinion of two interviewed practitioners. 190 Agency data arising from public information request. 191 The interviews with AJ and BKS. For example, in Minova Ekochem bid-rigging case, the agency cooperated with the Internal Security Agency. See decision of 16 December 2013, RKT-46/2013. 192 See section Agency resources. 193 The interviews with AJ and BKS. 194 See n 88 and accompanying text. 195 Rajmund Molski, ‘Polish Antitrust Law in its Fight Against Cartels – Awaiting a Breakthrough’ (2009) 2(2) Yearbook of Antitrust and Regulatory Studies 49, 74. 196 See nn 229–33 and accompanying text. 197 Maciej Bernatt, ‘Między pełną kontrolą są?>dową a poszanowaniem polityki karania organu administracji – o są?>dowej kontroli kar nakładanych w sprawach konkurencji’ (2016) 9 Europejski Przeglą?>d Są?>dowy 18, 23–24. 198 Andreas Stephan, ‘Cartel Laws Undermined: Corruption, Social Norms, and Collectivist Business Cultures’ (2010) 37(2) Journal of Law and Society 345, 56. 199 Interviews with RG, MMD, and MS. 200 art 113a of the 2007 Act. 201 See Marek Martyniszyn and Maciej Bernatt, ‘On Convergence with Hiccups. Recent Amendments to Poland’s Competition Law' (2015) 36(1) European Competition Law Review 8. 202 See nn 158–61 and accompanying text. 203 Decision of 28 December 2017, DOK-3/2017. 204 Interviews with MMD, BKS, and MS. 205 Interviews with RG, MMD, and MS. 206 Interviews with RG, KK, MMD, and MS. 207 Agency 1992 annual report, 9. 208 Ustawa z 3 lutego 1995 r. o zmianie ustawy o przeciwdziałaniu praktykom monopolistycznym, OJ 1995, No 41, item 208. 209 Agency 1997 annual report, 21–22. 210 For example, 132 such fines were imposed in 1998. Agency 1998 annual report, 9. 211 Agency 1997 annual report, 21–22. 212 Two of these decisions (PGE/Energa and Cogifer Polska/Koltram) were highly political. See nn 68–75 and accompanying text. 213 Interviews with BKS, KK, and MS2. 214 Tadeusz Skoczny, ‘Polskie prawo kontroli koncentracji – ewolucja, model, wybrane problemy’ (2010) 5 Europejski Przeglą?>d Są?>dowy 15, 21. 215 Agency 2014 annual report, 35. 216 ibid 38. 217 Interviews with RG, AS2, MS, MS2, and ASB. 218 Rules for Contact with Enterprises of 23 January 2015, available in English at <https://uokik.gov.pl/download.php?plik=16154> accessed 1 May 2019. 219 See agency 2016 annual report, 37. 220 For example, the conditional merger clearance decision in Auchan/Real, decision of 21 January 2014. See also decisions of 6 February 2014, DKK-11/2014 and of 6 September 2011, DKK-101/2011. 221 Interviews with AS2, RG, and MS2. 222 Interview with KK. 223 See art 94(1) of the 2007 Act. 224 Skoczny (n 214) at 20. 225 See n 33 and accompanying text. 226 Ordinance of the Minister of Justice of 13 April 1990 on the Creation of the Antimonopoly Court, OJ No 27, item 157, replaced by Ordinance of the Minister of Justice of 30 December 1998 on the Establishment of Antimonopoly Court, OJ No 166, item 1254. 227 Act of 5 July 2002 amending the Act on Competition and Consumer Protection, OJ No 129, item 1102. 228 As established by the Constitutional Tribunal in its judgment of 31 January 2005, SK 27/03, OJ 2005 No 22, item 185. 229 Stanisław Gronowski, ‘Competition Judiciary in Poland’ in Małgorzata Krasnodębska-Tomkiel (ed), Changes in Competition Policy Over the Last Two Decades (UOKiK 2010). 230 Judgment of 12 June 2002, P 13/01, OJ 2002 No 84, item 764. 231 Act of 2 July 2004 amending Code of Civil Procedure, OJ 2004 No 182, item 1804. 232 However, a downward trend is noticeable. Per agency annual reports, in the period 2005–2010 (six years), the Supreme Court issued annually, on average, 7.3 judgments in competition cases. In the period 2011–2016 (six years), it issued only 2.7 such judgments. See also Fig. 16 below. 233 However, at least two Supreme Court judges were not strangers to competition law. Judge Andrzej Wróbel, who joined the court in 2004, is a leading EU and administrative law scholar. Judge Dawid, Mią?>sik a leading competition law expert, joined the court in 2014 after serving as a référendaire at the court from 2006. Both were actively involved in competition cases, often acting as judge rapporteurs (as per the court judgments database <http://www.sn.pl/orzecznictwo/SitePages/Baza_orzeczen.aspx> accessed 1 May 2019). 234 Jan K Grodecki, ‘State Economic Arbitration in Poland’ (1960) 9(2) International and Comparative Law Quarterly 177. 235 Stanisław Gronowski, Ustawa Antymonopolowa w Orzecznictwie (CH Beck 1996). 236 Interviews with AT and SG. 237 Interview with AT. 238 ibid. 239 European Commission, Study on judges’ training needs in the field of European competition law (2016), 216. 240 ibid 216–17. 241 Interview with AT. 242 Poland’s 1994 annual report to the OECD, DAFFE/CLP(94)4, 9. 243 Interview with SG. 244 57 appeal in 1994, 56 in 1995, 62 in 1996, 57 in 1997, 81 in 1998, 87 in 1999, 81 in 2000, as per agency annual reports and Poland annual reports to the OECD. 245 Interview with SG. 246 ibid. 247 Decision of 24 October 1990, DO-I-644/37/90/HS. 248 Judgment of 18 December 1990, XV Amr 7/90. 249 Supreme Court judgment of 29 May 1991, III CRN 120/91, 13. 250 Judgment of 6 December 1990, XV Amr 5/90. 251 Poland’s 1994 annual report to the OECD, DAFFE/CLP(94)4, 21. 252 For examples see Stanisław Gronowski, ‘Contribution’ in Judicial Enforcement of Competition Law, OCDE/GD(97)200 (OECD 1996) 31-32. 253 The Energy Law Act of 10 April 1997, OJ 1997, No 54, item 348. 254 The Telecommunications Act of 21 July 2000, OJ 2000, No 73, item 852. 255 Act of 8 December 2000 amending numerous acts, OJ 2000, No 122, item 1314. 256 The Postal Law of 12 June 2003, OJ 2003, No 130, item 1188. 257 The Water Law Act of 20 July 2017, OJ 2017, item 1566. 258 Act of 2 March 2000 on the Protection of Certain Consumer Rights and on the Liability for Damage Caused by a Dangerous Products, OJ 2000, No 22, item 271. 259 Wise (n 5) 114. 260 ibid 114–15, 28. 261 Council Directive 93/12/EEC of 5 April 1993 on Unfair Terms in Consumer Contracts, OJ 1993 L 95, p 95. 262 Anna Oponowicz, ‘Niedozwolone postanowienia wzorców umów zawieranych z konsumentami–zmienne tendencje w polskim orzecznictwie’ są?>dowym (2014) 3(4) IKAR 21, 22. 263 Interview with AT. 264 Act of 5 August 2015 amending the Act on Competition and Consumer Protection and other Acts, OJ 2015, item 1635. 265 Competition court 2016 annual report to the Ministry of Justice. 266 Wise (n 5) 128. 267 Błachucki (n 25) 77. 268 Interview with AT. 269 ibid. 270 District courts are courts of common jurisdiction, which are the courts of first instance in commercial cases where the claim has a value greater than 75,000 PLN. Claims of a lesser value are brought before regional courts. See the Judicial System in Poland <http://bip.warszawa.so.gov.pl/artykuly/436/the-judicial-system-in-poland> accessed 1 May 2019. 271 Gronowski (n 252) 33. 272 Kovacic and Lopez-Galdos (n 3) 107. 273 Judgment of 13 May 2004, III SK 44/04. 274 See, eg judgment of 14 May 2012, XVII Ama 41/11. 275 Supreme Court judgment of 3 October 2013, III SK 67/12. 276 Such critique was expressed by both the Court of Appeal and the Supreme Court. See, eg Court of Appeal judgment of 16 December 2015, VI ACa 1799/14; Supreme Court judgment of 25 October 2017, III SK 38/16. Maciej Bernatt, ‘Effectiveness of Judicial Review in the Polish Competition Law System and the Place for Judicial Deference’ (2016) 9(14) Yearbook of Antitrust and Regulatory Studies 97, 103–06. 277 For example, proceedings in the cement cartel case (n 184), and in the abuse-of-dominance case involving Marquard Media (decision of 2 June 2006, RKT-35/2006) took seven years. In the interchange fee case, 11 years have passed and the case is ongoing. 278 Epistemic community is a knowledge-based network of professionals who have a shared set of beliefs and common policy goals. Such communities are able to impact policy debates, especially in so far as expert input is required. See further, Peter M Haas, ‘Introduction: Epistemic Communities and International Policy Coordination’ (1992) 46(1) International Organization 1, 3. 279 See nn 155–56 and accompanying text. 280 See n 235 and accompanying text. 281 For the current listing see <https://www.chambersandpartners.com/173/26/editorial/7/1> accessed 1 May 2019. 282 Cynthia Fuchs Epstein, Women in Law (University of Illinois Press 1993) 233; Ulrike Schultz and Gisela Shaw, Women in the World's Legal Professions (Hart 2003). 283 In this vein, for example, MS2. 284 Interview with ASB. 285 Decision of 18 September 2006, DOK-107/2006. 286 Interview with MS2. 287 For more on the society’s activities see <http://www.spk.com.pl/en/news-2> accessed 1 May 2019. 288 See n 65, 85 and accompanying text. 289 For listing see <https://www.cars.wz.uw.edu.pl/ksiazki_gb-monografie.html> accessed 1 May 2019. 290 See <http://www.yars.wz.uw.edu.pl/> accessed 1 May 2019. 291 See <http://ikar.wz.uw.edu.pl/ikar.php?ikar=501> accessed 1 May 2019. 292 Communications with Małgorzata Król-Bogomilska and Grzegorz Materna, the former and current programme directors, respectively (on file with the authors). See further <http://www.inp.pan.pl/dydaktyka/studia-podyplomowe/studia-podyplomowe-prawo-konkurencji-ix-edycja/> accessed 1 May 2019. 293 For example, Jagiellonian University and the University of Wrocław. 294 On the benefits of revolving doors see William E Kovacic, ‘Competition Policy in the European Union and the United States: Convergence or Divergence?’ (Bates White Fifth Annual Antitrust Conference, 2 June 2008) 16. 295 See nn 90–104 and accompanying text. 296 Kovacic and Lopez-Galdos (n 3) 95. © The Author(s) 2019. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Antitrust Enforcement Oxford University Press

Implementing a competition law system—Three Decades of Polish Experience

Journal of Antitrust Enforcement , Volume Advance Article – Apr 1, 2020

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Oxford University Press
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© The Author(s) 2019. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com
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2050-0688
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Abstract

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