LOCAL MARKETS – DECISIONS OF UOKIK
Imposing high fees for the use of bus stops, onerous contract conditions of the local
water supply monopolist, and even hindering the activities of undertakings in the
cemetery services sector – these are the most common irregularities in the local
markets. From the beginning of the year, the President of UOKiK has already issued
over 30 decisions regarding the communes and communal undertakings
[Warsaw, 5 August 2011] Supply of running water, waste collection, organization of public
transport - these are just examples of services, of which the commune (gmina) must take
care. What is the difference from those provided by a shoemaker, a hairdresser, a tailor?
Above all, they must be universally accessible, of adequate quality, and provided without
interruption, even if they are economically viable. The commune performs these tasks
itself, or delegates them to communal undertakings, in which it holds all shares, mostly
the communal businesses. In many cases, it has a monopoly position - for example, it is
the sole owner of the water supply and sewerage system, manages cemeteries or public
transport - and the competition is virtually non-existent. In this situation, private
companies are often discriminated. In addition, use of the service is based on an
agreement between the recipient, such as a consumer, and a communal undertaking of a
strong market position. This causes frequent abuses in the local markets. – Competition on
local markets has impact not only on local entrepreneurs but also on the national
economy. That is the reason why UOKiK attaches great importance to elimination of
infringements on local markets – said Małgorzata Krasnodebska-Tomkiel, the President of
the UOKiK.
From the beginning of 2011, the President of UOKiK has issued 31 decisions
concerning prohibited practices in the local markets with a total penalty exceeding
PLN 1.1 million. Communes, utility undertakings, communal undertakings do not only
violate the collective consumer interests (12 decisions), using inadmissible clauses, but
also abuse their dominant position (19 decisions). One of the decisions concerned the
undertaking Wodociągi Kieleckie, who obliged the recipients to overhaul the public sewer
connections. The proceedings in this case were initiated based on notification by the
residents. In the course of the proceedings UOKiK found that the operator applies the
provisions, in which it unlawfully charges customers with the costs of emergency
repairs, maintenance, repair and overhaul of connections outside the property. It is
worth noting that pursuant to the law, the repairs outside the property are the
responsibility of water supply undertakings. Therefore, the President of the Office
decided that Wodociągi Kieleckie abused its dominant position, ordered the unlawful
practice to be discontinued and imposed a fine amounting to PLN 113,904.
Abuse of a dominant position in the local market of collective water supply and water
supply
infrastructure
is
a
practice
challenged
in
the
case
of
Wodociągi
Zachodniopomorskie w Goleniowie (WZ). In accordance with the principles by WZ
regarding taking over sections of water mains built by their own resources by the external
investors (legal and natural persons) - investors have transferred the constructed parts of
the network to the undertaking for an amount fixed by it, regardless of the actual cost of
the investment. The Office has determined that this was done on unfavorable for
investors, arbitrarily set financial conditions. According to UOKiK, the mutual settlement
should be proportionate to the expenditure incurred, and also the benefits obtained. The
President of UOKiK decided that Wodociągi Zachodniopomorskie abused its dominant
position and imposed a fine of PLN 34 274. The undertaking ceased the challenged
practices. In its subsequent decision UOKiK also stated that the company infringed the
collective consumer interests by application of regulations contrary to law, and imposed a
fine of PLN 34,074.
The law violation also took place at the market of bus stop management in Zamość, solely
owned by the city. Duties relating to the transport by buses and bus stops are performed
by Municipal Department of Communications. On the basis of the authorization of the city,
it is also entitled to conclude agreements with other carriers, share bus stops with them
and charge for their maintenance. The Office found that as the sole administrator of all
bus stops in Zamość, since 2007 MZK collected high fee from the carriers no matter how
often they used the stops. Inflated rate allowed MZK to finance most of the costs
associated with bus stops maintenance. Such fee was lawful, but should be adequate to
e.g. the frequency of bus stops use. The President of UOKiK decided that MZK in Zamość
abused its dominant position and imposed on the undertaking a fine of PLN 53,062.
The company has discontinued the questioned practice after the provisions specifying the
maximum rates for the use of bus stops came into force.
We also deal with the monopolistic practices of communes in the market of the cemetery
services. The Office found that the Zakład Usług Komunalnych Lubowidzki of Mrągowo
charged fees to other undertakings for setting the burial places - only Zakład Usług
Komunalnych Z.L. Lubowidzki did not have to pay. The children of the owner of the
privileged funeral parlour Z.L. Lubowidzki are the members of the Board, both businesses
are seated in the same building. The practice was particularly unfavorable for the other
undertakings who had to include the fee to the cost of their services and offer them at a
higher price. Consumers were deprived of the choice of other favorable offers. The
undertaking has ceased to use the questioned practice. The President of UOKiK imposed
on the undertaking a fine of PLN 2,480.
At local markets we not only encounter the abuse of market power by communes or
communal undertakings. Often the undertakings violate the collective consumer
interests by introducing prohibited clauses into the applied standard forms. One of the
practices questioned by UOKiK includes a provision entitling the undertaking to terminate
the contract with the consumer without the required legal notice when they fall behind
on the payment for garbage collection, or to inform of change in price of these services
through announcement in local newspapers. By law, the new price list must be delivered
to the consumer so that they could see the current rates. Such practices were applied
among
others
by
Przedsiębiorstwo
Usług
Komunalnych
in
Tyszowce
(Lubelskie
Voivodeship). The President of UOKiK decided that it violated the interests of weaker
market participants and imposed a fine amounting to PLN 3,344. The undertaking ceased
the application of the clauses questioned.
These decisions are not final because they can be appealed against in court.
For many years, UOKiK has in particular been watching the activities of communes and
communal undertakings. Only in the past two months, the President of the Office issued
15 decisions pronouncing breaching the law by them. In accordance with the rules,
communes and communal undertakings are undertakings, because they provide public
utility services. Like other entities, they must obey the law - otherwise, the President of
the Office may initiate proceedings and, consequently, order to change the practice and
impose a fine of up to 10 percent of the undertaking's last year income.
The rules of the applicable antitrust law and the issues of common behavior of the
communes contrary to the rules of free competition have been set out in UOKiK’s
publication: Competition in the Local Markets and the Selected Decisions of the President
of UOKiK the orders may be placed by fax - (+48 22) 826 11 86, e-mail [email protected] or by phone - (+48 22) 55 60 502.
Additional information for the media:
Małgorzata Cieloch, Spokesperson for UOKiK
Department of International Relations and Communication
Pl. Powstańców Warszawy 1, 00-950 Warszawa
Tel. +48 22 827 28 92, 55 60 314
Fax +48 22 826 11 86
E-mail: [email protected]