Shops Act set for the chop from Brussels
The new Unfair Competition bill banning loyalty voucher schemes should be in force from November 10. Or will it? Thanks to the eleventh-hour intervention from the EU, it will need amendment to comply with the Union's laws on the free movement of goods, which it presently contradicts according to European Commission officials in Brussels.
The bill which Polish legislators will be told to amend has come under heavy fire from lawyers as well as government organisations, such as the Office for Competition and Consumer Protection (UOKiK).
"The law reminds me of sabotage," said Jarosław Sroczyński, partner at the Sołtysiński, Kawecki & Szlęzak law firm and an expert on antimonopoly and competition law. "It represents the philosophy of 'if something is working right and developing well, we should break it'," he said.
Sroczyński criticised the law for being too vague and being possibly applicable to any type of economic activity, while it is clearly aimed at one group of entrepreneurs.
"It is a propaganda law, and it is obvious that whoever constructed it simply had supermarkets in mind," he said. "An influential lobby basically decided to hammer at the hypermarkets under the false pretence of social justice."
The bill stipulates, for instance, that sale of a product or a service combined with a free gift different in its nature from the original purchase, is illegal. While the bill clearly aims at curbing the activities of large, foreign-owned stores, it does very little to specify what 'services' and 'merchandise' it actually refers to, according to experts.
Repercussions
"In reality, the legal repercussions of the law can affect anything from supermarket promotions to airline frequent-flier programs," Sroczyński said. "This law goes much further than unfair competition laws in other EU countries."
Although UOKiK issued an official statement offering an interpretation of the law, which is not legally binding, it is the only official document that attempts to explain the legislators' intentions. The document criticises the lack of any definitions in the bill and suggests that "it is questionable whether the bill will ever be executed in practice."
One of the major concerns for the supermarkets in Poland is the ban on the sale of gift vouchers as well as the use of such vouchers.
Since they have been introduced on the market, gift vouchers have become very popular with large firms, which purchased them for their employees, particularly around Christmastime. This had clear advantages on both sides: the company could deduct the gift vouchers from their taxes, while employees could do their Christmas shopping for free. Now, panic has set in among supermarket chains and companies alike. For large supermarket networks, this could mean losses of up to €223 million annually.
"Right now we are signing gift voucher agreements with firms until November 9," said Lidia Deja, spokeswoman for the Casino Group, which owns the Geant supermarket chain and the Leader Price discount stores. "They will remain valid for several months and can be used until their expiration date."
"According to our lawyers, the law is unclear, and there is a large margin for interpretation," she said. When asked how her company was planning to generate additional revenue after the bill comes into force, she said the Casino Group hoped that "the chaos will subside somehow."
While supermarkets may be tight-lipped about new strategies, Sroczyński believes they will find a way to make up for any financial losses.
"The supermarkets will find a way around the law - that's what they are hiring the lawyers for," he said. "It will somehow work out in practice. I don't think this is going to be ignored in terms of execution, but I am counting on the intelligence of our courts.
Neither Sroczyński nor Maria Andrzej Faliński, secretary general for the Polish Organisation of Trade and Distribution (POTD) which represents the largest supermarket chains in Poland, perceive the threat from small shop owners as particularly serious.
"I don't think small store owners are going to be very affected by this bill because they operate in a different niche and on a different scale," Sroczyński said.
The bill will affect mostly companies from the EU, which own the majority of the retail outlets with a total area of more than 400 square metres, according to an analysis of the bill prepared by White & Case, and commissioned by POTD. The analysis states that the law may actually be intentionally aimed at entrepreneurs from the EU and is a blatant violation of the Europe Agreement as well as the Polish Constitution.
Contradition
A European Commission document seen by the Business Journal and dated October 9 links the new law and the one in force restricting alcohol advertising as in contradiction with existing EU legislation. The document states it will be the subject of attention by the inter-ministerial team which will require appropriate amendments.
Sroczyński said that in its present form the bill is "incompetent" and a violation of European law. While Poland has agreed to comply with binding international law, which also entails the Europe Agreement, accepting the bill in its present form could put it in danger of being accused of not complying with the binding EU regulations.
EuroCommerce, a trade representative for EU institutions, has issued a warning that Poland may face problems with closing its competition chapter in union negotiations when the law comes into force in its current form.
However Faliński said that the Economy Ministry and UOKiK have issued a declaration of intent of amending the law before it takes effect. According to Faliński, the Sejm could reexamine the law as soon as it resumes work after the local elections.
Even though it is the foreign companies that are accused of setting prices below their margins of profit and practising unfair competition, it is also the same set of companies that has offered employment to thousands of Poles and depends largely on domestic suppliers. Although the criticism of their policies may be a short-term gain for some, the market, and more importantly the customers, will prove who was right.
