On 28 March 2020, the Polish Sejm (lower house of Parliament) adopted the COVID-19 Special Legislation (the so-called Anti-Crisis Shield), i.e. a package of regulations aimed at limiting the negative economic effects caused by the coronavirus epidemic. The new regulations provide, among other things, for increased consumer protection, in particular by combating unfairly high prices of products for which demand has increased sharply during the epidemic, as well as limiting the maximum amount of noninterest cost of consumer credit.
The Senate (upper house of Parliament) will now process the COVID-19 Special Legislation.
1. Maximum prices
Under the new rules, the relevant ministers may determine:
- maximum sale prices, official wholesale margin and official retail margins for medicinal products, medical devices, foodstuffs for particular nutritional uses and biocides that may be used in connection with COVID-19 or that may become unavailable in Poland due to COVID-19;
- maximum sale prices, wholesale margins and retail margins applicable to the sale of all other goods or services essential for the protection of human health or safety or significantly affecting the household maintenance costs.
These regulations raise many doubts amongst entrepreneurs not without reason. First of all such a wide authorization for relevant ministers may prove dangerous. An official margin limitation, in particular with respect to products, which were unjustifiably included in the list of products that are “essential”, in the time of a lowered demand, may have consequences quite different from a goal of the Anti-Crisis Shield, i.e. protection of business liquidity (at the time of publishing of this alert the draft ordinances are still not known).
And whether new law may be effectively enforced? Compliance with the regulations on maximum prices is to be ensured by the relevant sector authorities, i.e. the Pharmaceutical Inspection, the Office for Registration of Medicinal Products, Medical Devices and Biocidal Products, the State Sanitary Inspectorate and the Agricultural and Food Articles Commercial Quality Inspectorate, as well as the Polish Office of Competition and Consumer Protection (the OCCP) and the Trade Inspectorate. Will these bodies be able to verify the whole market and counteract abuses and attempts to circumvent law?
For each case of overpricing products essential for counteracting COVID-19, the abovementioned sector authorities may impose a fine of up to PLN 5,000,000, payable within 7 days based on an immediately enforceable decision.
Additionally, the OCCP may impose a penalty of up to 10% of the turnover generated in the previous financial year on business entities that infringe, even unintentionally, repeatedly or significantly, the ban on applying prices higher than the maximum ones. This applies both to products essential for counteracting COVID-19 and other goods or services of significant importance for the protection of human health or safety or household maintenance costs.
Penalties may also be imposed on business entities that, even unintentionally:
- do not provide information requested by the OCCP or provide false or misleading information;
- prevent or hinder the initiation or performance of the OCCP’s inspections or searches (dawn raids).
In this case, the penalties may amount to up to 5% of turnover generated in the previous financial year, but not more than PLN 50,000,000.
Moreover, the OCCP announced that it would take intense efforts to fight against excessive prices. Employees of the OCCP and the Trade Inspectorate will focus in particular on monitoring prices of food and hygienic products, both in brick-and-mortar and on-line stores. The OCCP will also take actions to combat misleading consumers about characteristics of products that could allegedly cure or prevent coronavirus and COVID-19.
2. Cheaper consumer credits
The new law introduces an algorithm for calculating the maximum amount of noninterest cost of consumer credit. For loans with a repayment period of less than 30 days, the costs may not be more than 5 percent of the total amount of credit. For loans repaid after at least 30 days, the level of noninterest cost may be no more than 15% of the total amount of credit plus 6 percentage points for each year of duration of the credit.
- Example: cost of a loan granted to a consumer, in the amount of PLN 1000 on the basis of existing and new regulations:
Loan period Current cost of the loan Cost of the loan in accordance with the COVID-19 Special Litigation 7 days PLN 256 PLN 50 30 days PLN 275 PLN 155 90 days PLN 324 PLN 165
Consumers may also apply for the suspension of credit repayment. Such “credit holidays” will not be included in the repayment period of the loan and, in consequence, no interest can be charged during the suspension.
The OCCP may impose financial penalties of up to 10% of the annual turnover on lenders who violate these regulations.
3. Deferral of the extension of consumer protection to sole traders
New law postpones the application of the provisions extending consumer protection to sole traders carrying out activities directly related to its activities, provided that they are not of a professional nature. The changes were to apply from 1 June 2020, however, according to the COVID-19 Special Legislation, the new rules will only apply to contracts entered into from 1 January 2021.