• President of UOKiK Tomasz Chróstny has issued first decisions in payment gridlock cases.
• He imposed financial penalties totalling over PLN 470 thousand on Locotranssped and Havi Logistics companies.
• UPS Polska and Galicja Tomaszek avoided the financial penalty by meeting the statutory conditions for mandatory waiver of the penalty, despite the fact that they generated cash gridlocks.

Payment gridlocks are overdue payments - accumulated delays in paying suppliers that affect subsequent entities by disrupting their financial liquidity. This phenomenon may affect both the largest and also smaller market players. When an entrepreneur is late in paying their contractors, the latter are not able to pay their own business partners on time either.

This is a problem experienced by a number of entrepreneurs in Poland. The severity of the threat of payment gridlock at the macro level is strongly linked to the business conditions and economic outlooks of market participants. In times of economic downturn or uncertainty, these may by extremely severe for smaller businesses - increasing business costs, making it difficult to maintain financial stability, or even inhibiting the company’s growth.

- The fight against payment gridlock is of particular importance in times of pandemic, when timely receipt of payments may determine the “to be or not to be” of many entrepreneurs. In 2020, i.e. the first year of the Anti-gridlock Act being in force, I initiated 100 investigations against the biggest debtors. I have just issued the first four decisions in which I imposed sanctions on two companies. In two other cases, the investigation revealed the presence of gridlocks, but the decisions do not include financial penalties in view of the fulfilment of the statutory conditions for mandatory waiver of the penalty - President of UOKiK Tomasz Chróstny says.

Laborious analytical work preceded the issuance of the decisions. In the course of the investigations, the Office analysed, inter alia, the statements of business transactions submitted by the companies, as well as the data contained in JPK_VAT and JPK_WB files, which are the electronic form of tax ledgers and evidence. In the investigations in question, UOKiK reviewed the timeliness of payment by the named entrepreneurs for goods delivered or services performed towards their contractors in the period from February to April 2020. UOKiK examined over 80 thousand invoices documenting the settlements of these companies.

Two decisions with financial penalties

The first decision concerns Locotranssped, a company that provides road freight transport services. The investigation revealed that in the period from February to April 2020 it was in arrears with payments or settled them with delay for the total amount of nearly PLN 24.5 million. The number of contractors to whom the company made late payments amounted to more than 3,500. The contractors who received late payments were mainly Polish carriers - in many cases natural persons conducting business, i.e. entrepreneurs with a weaker market position than Locotranssped.

The other fined company is Havi Logistics, also operating in the freight transport services. The investigation revealed that from February to April 2020, the entrepreneur failed to pay or paid late outstanding amounts totalling more than PLN 155 million. The number of VAT invoices documenting the supply of goods and services for which the company paid late during the indicated period was 4,597.

Amount of financial penalties

The Act provides for precise rules for determining the financial penalty for payment gridlocks. Individual penalties are calculated according to a special formula and their amount depends primarily on the amount owed and delay in payment. The ultimate amount of the penalty is the sum of individual penalties for each outstanding amount owed or paid past its due date. Having applied the formula provided for in the Act, the President of UOKiK imposed over PLN 426 thousand on Havi Logistics (PLN 426,587.62) and over PLN 44 thousand (PLN 44,286.96) on Locotranssped.

- The amounts of penalties have been calculated in accordance with the exact formula indicated in the Act. Our actions, just like financial penalties, are aimed at encouraging entrepreneurs to pay their contractors outstanding liabilities, and above all - to change their future payment practices. I would like to remind you that if an entrepreneur who has already been fined before is excessively late with payments again, it may be subject to a penalty that is 50 percent higher - President UOKiK Tomasz Chróstny stresses.

Two waivers of financial penalty

Pursuant to the provisions on payment gridlock, the President of UOKiK automatically waives the penalty if the value of the benefits that the entrepreneur had not received or had received with delay during the period under scrutiny exceeds the sum of the obligations that the entrepreneur itself had failed to pay or had paid with delay.

This was the case for two companies: the courier company UPS Polska and the manufacturer of home appliances and equipment, kitchen furniture and the owner of electronics stores – Galicja Tomaszek.

The President of UOKiK determined that in the period under review (February-April 2020), UPS Polska failed to settle cash benefits in the amount of more than PLN 22.2 million. In turn, the sum of delayed receivables of Galicja Tomaszek towards its business partners amounted to slightly over PLN 15 million. At the same time, during the period under investigation, both entrepreneurs evidenced that they had failed to receive, or had received after the due date, receivables for larger amounts.

Are the decisions on gridlocks final?

The subjects of the decision may apply to the President of the Office for Competition and Consumer Protection for reconsideration of the case or file a complaint with the Provincial Administrative Court in Warsaw.

Need for legislative changes

Ongoing proceedings have demonstrated the need to clarify regulations that are expected to positively contribute to improving the liquidity of small and medium-sized enterprises. One of the issues observed is that some entrepreneurs have attempted to evade responsibility. An example is the use of the rationale enshrined in the Act, which obliges the President of UOKiK to waive the imposition of a financial penalty if the entrepreneur is a victim of a gridlock itself. This is a reasonable and legitimate idea that was meant to protect companies affected by gridlocks. However, some companies take advantage of this provision to evade responsibility. For example, a company whose business purpose is to procure goods for the capital group from external contractors may, despite being significantly in arrears in payment, evade a penalty as its related parent company deliberately delays payment due.

- Unfortunately, in the proceedings that are currently underway, we have noticed that some entrepreneurs are using legal tricks to evade their obligation to pay their counterparties which is based on evident honesty or social justice. Therefore, we have to improve the regulations so as to eliminate the loopholes that allow unreliable entrepreneurs to delay and prolong proceedings, and sometimes to avoid penalties that are to motivate them to pay on time - President of UOKiK Tomasz Chróstny underlines.

Similarly, the statutory rationale obliging the President of the Office to refrain from imposing a financial penalty on an entrepreneur does not take into account a number of material circumstances: e.g. the fact that an entrepreneur who simultaneously generates payment gridlock and is a victim of it itself, may be in a very good financial condition. Deliberate generation of gridlocks as a source of gratuitous financing of business activity may thus get away with it under existing legal provisions.

When does the President of UOKiK step in

The President of UOKiK may intervene if the sum of outstanding payments due owed by an enterprise within 3 consecutive months is at least PLN 5 million (as of 2022 this amount will change to PLN 2 million). This applies to arrears under invoices issued after 1 January 2020 or earlier, if their payment has become due after 1 January 2020.

What is the penalty?

                                 ICP (penalty) = COV x n/365 x SI

ICP – ndividual cash penalty for an unsettled payment obligation or a payment obligation settled past its due date,

COV – value of an unsettled payment obligation or a payment obligation settled past its due date,

n – number of days of delay,

SI – statutory interest for late payment in commercial transactions, determined as at the date of issue of a decision imposing an administrative cash penalty.

Visit the website dedicated to payment gridlock

Examples of penalty calculation for specific amounts owed as well as the most important information regarding the competencies of the President of UOKiK as regards payment gridlocks can be found on a website launched specifically for this purpose. What are gridlocks, when can the President of UOKiK deal with them, how can I report an enterprise which fails to pay and who can do that? These and many other questions and answers can be found at www.zatoryplatnicze.uokik.gov.pl

Gridlocks in the agri-food sector

In 2020, the President of UOKiK has also investigated excessive delays in payments as part of the proceedings concerning practices related to the abuse of superior bargaining position by nearly 100 largest entities from the agri-food industry. Following this intervention, the majority of entrepreneurs disbursed the outstanding money to their suppliers for a total amount of nearly PLN 600 million and removed the questioned provisions from their trade policies and concluded contracts.

Additional information for the media:

UOKiK Press Office
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