“Competition in modern economy” was the subject of an international academic conference organised by UOKiK and Adam Mickiewicz University of Poznań on 6 and 7 November 2006

The participants of the conference, i.e. lawyers and economists from Poland and Germany, discussed the problems brought about by the modern economy with regard to the protection of competition. They also pointed to the necessity of economic approach to antimonopoly legislation. The presentations and the discussion concentrated on three groups of problems.

The first group concerned the ongoing economic transformations referred to as “new economy” (globalisation, technological progress) and their impact on the competition mechanisms and objectives of the antimonopoly policy. The participants of the conference pointed to the practical difficulties in assessing the market position of an entrepreneur. In the Act on competition and consumer protection there is a presumption that the market share exceeding 40% should be treated as a dominant position. However, the presumption means that the quantitative assessment of the market position is not sufficient and the qualitative analysis should be applied as well. It is important from the point of view of constructing the entrepreneurs’ strategy. It is often believed that building a strong market position, which requires considerable outlays, is the measure of efficiency. Business logic requires compensating for those outlays, which in practice often means the use (abuse) of the achieved position, e.g. through the imposition of excessive or glaringly low (predatory) prices.

The participants of the conference also recalled the explanation of entrepreneurs’ behaviour based on the game theory and referring to the cooperation in the creation of values (market) and competition (for its division). An example included telecommunications companies and cable television operators which compete with each other but at the same time have the same objective, i.e. to facilitate communication between people and provide access to information. In practice, however, as the participants of the meeting noted, competition and efforts to a establish a strong market position become the superior objective of business entities. Thus the question arises whether the strategy of building competitive advantage may be implemented without getting into conflict with competition protection legislation.

The answer to the above question is not obvious. The example of Microsoft proves that entrepreneurs creating a new economy sector increasingly often use legal means to thwart their competitors’ plans and cause the increase of their operating costs. So far the antitrust policy has been unable to efficiently prevent Microsoft’s monopoly. The fundamental problem here is the conflict between competition protection law and intellectual property legislation. The latter allows the entrepreneur to achieve a temporary monopolistic position with regard to products with a short life cycle, such as computer systems, which may lead to a stable dominant position.

The second theme of the discussion concentrated on the liberalisation of individual sectors of the Polish economy which, in spite of the efforts by the state authorities, remain largely monopolized. The participants of the conference referred to the situation on the Polish telecommunications services market which, despite its formal liberalisation from 2000, is still to a large extent closed to competition mechanisms. It is evidenced by, among others, the ongoing domination of Telekomunikacja Polska (85% share in fixed line telephone market) which results from the long-term presence of the operator on the market, its infrastructure on the territory of the whole country and the strategy it adopted. At the same time, since 2005 the number of fixed line telephone users has been decreasing in favour of mobile telephone users (the number of mobile telephones users was 29.9 million in 2005, which is still significantly below the EU average). The participants of the discussion possitively evaluated the efforts of the Office of Electronic Communications, a new Polish regulator, who aims at opening of the market.

In this context, the discussants also referred to local markets. In their opinion the regulation model in water supply and sewage sector proved to be totally wrong. The municipalities often play a double role - the owner of such enterprises and the regulator, and avoid making difficult decisions on charges and modernisation. The present, cost-based formula for setting prices strengthens the ineffectiveness of the sector. The participants of the discussion mentioned a lot of evidence to that as well as numerous examples of frequent interventions by the Office of Competition and Consumer Protection.

Much space was devoted to the banking sector. It was pointed out that after Poland’s accession to the European Union, the increase in the number of banks was recorded in Poland (as of June 2006 there were 649 banks operating in Poland, including 64 commercial banks and 585 cooperative banks). Upon its accession to the EU, Poland undertook to remove all barriers for operations of foreign entities. As a result the domestic banking sector is dominated by foreign capital which, according to experts, contributed to the increase of competitive pressure, improvement of the quality of services, widening of the offer, introduction of new technologies and modern management methods. On the other hand, it was emphasized that excessive fragmentation of the sector may not be a sufficient incentive for the development of competition since small banks are too weak in terms of assets to compete for customers efficiently.

The third group of presentations and discussions was devoted to the use of economic analysis methods in antimonopoly procedures. The “economisation” of competition protection initiated by the European Commission which aims at enhancing the certainty and objectivity of administrative bodies’ and courts’ decisions gradually permeates to the judicature in spite of certain difficulties. However, the participants of the conference believe that further exchange of views in this regard is necessary.

Summing up, the conclusion which may be drawn from the discussion is compliant with the statement of the present European Commissioner for Competition Neelie Kroes that the object of protection is competition not competitors and its final objective is to prevent damage to the consumers.

Additional information:
Elżbieta Anders, Spokesperson of UOKiK
Pl. Powstańców Warszawy 1, 00-950 Warszawa
Tel. 22 827 28 92, 55 60 106, 55 60 314
faks 22 826 11 86

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