In today's alert, we discuss the penalties that the President of the Office of Competition and Consumer Protection ("UOKiK") may impose if a developer is found to be using prohibited clauses or practices that violate the collective interests of consumers. While the penalties are primarily monetary, the decision may also require the developer to take or refrain from taking certain actions.
Let's start with fines. Pursuant to Article 106 of the Act on Competition and Consumer Protection (the "Act"), the President of the Office of Competition and Consumer Protection (UOKiK) may impose on an entrepreneur, by decision, a fine of no more than 10% of the turnover achieved in the financial year preceding the year in which the fine is imposed , if the entrepreneur, even unintentionally, used prohibited clauses in standard contracts or engaged in practices that violate the collective interests of consumers. Turnover is calculated as the sum of revenues reported in the profit and loss account, and if no such account is kept, then in the annual financial statement equivalent to the profit and loss account prepared pursuant to accounting regulations or in another document summarizing revenues in the financial year, including the budget implementation report.
Moreover, if a managing person, in the exercise of his or her function during the period of the established infringement, has intentionally committed, through his or her action or omission, a breach of the prohibition of using prohibited clauses or practices infringing the collective interests of consumers, the President of the Office of Competition and Consumer Protection, in the decision to impose a fine on the developer, may impose a fine on such managing person of up to PLN 2,000,000 .
The provision of Article 111, paragraph 1 of the Act also applies to fines for the aforementioned violations. According to this provision, the President of the Office of Competition and Consumer Protection (UOKiK), when determining the amount of the fine imposed, takes into account, in particular, the circumstances of the violation and the prior violation. Pursuant to the remainder of this provision, the period, degree, and market impact of the violation are taken into account when determining the amount of the fine. When determining the amount of the fine, the President of the UOKiK also takes into account mitigating or aggravating circumstances.
Mitigating circumstances include: (i) voluntary removal of the effects of the infringement; (ii) discontinuation of the prohibited practice before or immediately after the initiation of the proceedings; (iii) taking action on one’s own initiative to stop the infringement or remove its effects; (iv) cooperation with the President of the Office of Competition and Consumer Protection during the proceedings, in particular contributing to the quick and efficient conduct of the proceedings.
On the other hand, when it comes to aggravating circumstances , the following are indicated: (i) a significant territorial scope of the infringement or its effects; (ii) significant benefits obtained by the undertaking in connection with the infringement; (iii) taking actions on its own initiative to stop the infringement or remove its effects; (iv) cooperation with the President of the Office of Competition and Consumer Protection during the proceedings, (v) committing a similar infringement previously and (vi) intentional nature of the infringement.
It's worth remembering that the fine must be paid within 14 days of the President's decision becoming final. Failure to pay will result in collection under the provisions on administrative enforcement proceedings. At the developer's request, the President of the Office of Competition and Consumer Protection may also defer payment of the fine or arrange for it to be paid in instalments, considering the applicant's important interests.
Turning to non-monetary obligations imposed on developers , if the use of prohibited clauses is found, the President of the Office of Competition and Consumer Protection (UOKiK) prohibits their use and may prescribe remedies for the ongoing effects of the violation . This may involve an obligation to inform customers that specific provisions of their agreements with the developer have been deemed prohibited or to submit a single or multiple declarations with the content and form specified in the decision. Very often, the UOKiK requires that these declarations be published on the developer's website and in national or local press (depending on the territorial scope of the developer's operations). Furthermore, the developer may be charged for the costs of publishing the decision, in whole or in part.
If a decision is issued regarding practices that violate the collective interests of consumers, the President of the Office of Competition and Consumer Protection (UOKiK) primarily orders the cessation of such practices . The President of the UOKiK may also specify measures to remove the ongoing effects of the violation, which should be proportionate to the severity and type of violation and necessary to eliminate its effects . Very often, these measures include announcements in the press and on the developer's website. Previous UOKiK decisions indicate that, for example, if a developer has failed to implement measures to protect buyers' payments, the President imposes an obligation to open an escrow account or return the funds paid to buyers. If the entrepreneur has discontinued the practices by the date of the decision, the President deems the practices to violate the collective interests of consumers and declares the cessation of such practices. The developer bears the burden of proof that such practices have been discontinued.
A review of decisions published on the Office of Competition and Consumer Protection (UOKiK) website concerning developers over the last three years reveals that fines imposed for the use of prohibited clauses range from several thousand to tens of thousands of zlotys per violation, with the total amount reaching up to several hundred thousand zlotys. Furthermore, when practices violating collective consumer interests are identified, decisions primarily require the developer to take specific actions to remedy the violations, and penalties are not always imposed.
In summary, fines imposed by the President of the Office of Competition and Consumer Protection (UOKiK) can be severe and amount to very high amounts . It is worth remembering, however, that an appeal is possible to the District Court in Warsaw – the Court of Competition and Consumer Protection, which verifies the amount of the fine imposed by the UOKiK and the validity of the compliance with the mandated obligations.
Next week we would like to discuss the possibility of applying contractual provisions that allow for a change in the final price of the premises after the investment is completed, in particular due to changes in the post-construction area, VAT rates or other objective factors.
Legal status as of December 6, 2021
This article is for informational purposes only and does not constitute legal advice.
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