Warsaw, 25^th May 2021

 

Report by the Union of Entrepreneurs and Employers:
The Digital Markets Act is to provide equal opportunities, but it may diminish the quality of services for European businesses and consumers

 

The regulation on contestable and fair markets in the digital sector, known as the Digital Markets Act, tries to address some of the challenges of digitisation and to ensure fair conditions for online competition. The Union of Entrepreneurs and Employers supports all initiatives aimed at improving the competitiveness and functioning of digital markets. We are, however, concerned that the DMA may in practice lead to a deterioration in the quality of digital services for European businesses and consumers, as well as to a slowdown in technological development.

The Union of Entrepreneurs and Employers has repeatedly called for the improvement of the regulatory environment for business. We believe that the way to achieve a high level of competitiveness of our economy is to create an attractive legal-and-institutional framework for companies to function in. We stand by this position also on a per-industry basis and call for no disproportionate burdens to be placed on the digital sector.

Presently, new digital regulations seem to be proposed before enough time to allow for a thorough assessment of the effects of the previous ones has elapsed. This way, not only does the regulatory burden on entrepreneurs increase significantly, thus generating costs and hindering business operations for small European entities in particular, but also legal certainty is reduced discouraging companies from risk-taking, innovation, and investments.

According to Jakub Bińkowski, Director of the Law and Legislation Department at the Union of Entrepreneurs and Employers: “The effects of the introduction of the DMA could be severe for European businesses as well as consumers who make use of digital services. For example, while the ban on the use of business user data is intended to prevent unfair competition, its unintended practical consequences may negatively impact European SMEs, a quarter of which do not have a website. As a result of the ban, the possibilities to use geolocation will become limited, and thus local companies without a website will lose their visibility and potential customers.”

Discussing the effects of the introduction of the DMA, it is impossible to ignore the economic consequences of the pandemic. “In the opinion of the Union of Entrepreneurs and Employers, all necessary measures should be taken to ensure that overregulation does not stifle the growth of the digital sector and does not put the post-crisis recovery in harm’s way. As the ECIPE study shows, Europe as a consequence of introducing the changes proposed in the DMA risk to lose approx. EUR 85 billion of GDP and EUR 101 billion of consumer welfare – that is the equivalent of all the benefits that the EU economy has gained thus far thanks to bilateral free trade agreements,” adds Kamila Sotomska, the Union’s Deputy Director of the Law and Legislation Department.

The dynamic development of digital tools along with free-market competition foster social usefulness of the Internet and consumer welfare. Taking this into account, any attempts at regulatory interventions should be made after prior evaluation of existing regulations. Moreover, the newly designed rules cannot disregard the diversity and variety of the forms of doing business in the digital world. Regulations for the digital market should be designed with caution so that, contrary to the original assumptions, the consumers and service recipients themselves do not lose out on their introduction.

See more: 25.05.2021 Report by the Union of Entrepreneurs and Employers: Digital Markets Act

Warsaw, 10^th May 2021

Survey by the Union of Entrepreneurs and Employers:
Pawnshop market is growing fast

While the number of consumer loans granted by banks and companies specialising in loans is declining, and the government is tightening regulations for the financial industry, the pawnshop sector is booming. According to the first ever report on pawnshops in Poland by the Union of Entrepreneurs and Employers: although pawnshops provide cash loans against a pledge, they are circumventing the provisions of the Consumer Credit Act.

In a survey by the Union of Entrepreneurs and Employers whose completion took several months, its authors evaluated the size of the market in Poland, as well as the motives and opinions of customers making use of pawnshop services, but also found irregularities in the operation of the industry.

These are the key findings of the study:

• There may be as many as 40,000 pawnshops in Poland. For comparison: there are less than 7,000 convenience stores in the popular retail chain whose logo is a green amphibian.
• Almost 4.5 million Poles have made use of pawnshop services, and 1.5 million people used such services during the pandemic.
• As many as 65% of pandemic-times pawnshop customers backed their decision with the fact that their financial situation deteriorated as a result of the lockdown.
• As many as 41% of pawnshop customers used their services, because they had not obtained financing from a bank or loan company.
• Over the last dozen or so months, secured pawn loans have become almost as popular as consumer loans from legal loan companies.
• Pawnshops avoid formal registration and functioning as pawnshops per se and consequently circumvent the Consumer Credit Act, which regulates the relationship between financial institutions and their customers, strengthening the position of consumers. For example, employees of the Union of Entrepreneurs and Employers paid a visit to a pawnshop operating as… a butcher shop.
• In many cases, irregularities were observed, including failure to conform with provisions of the GDPR. Contracts did not contain clauses on the processing of personal data of customers, and the survey also showcases irregularities in the documentation of transactions.
• The valuation of an item accepted in a pawnshop on average amounts to only about 35% of its market value. For example, for a gold neck-chain bought in a store for PLN 490, one can only get PLN 90.
• There are also situations in which customers are not able to read the contract prior to signing it or to withdraw from it later on.
• The lack of clear rules for calculating the cost of a loan is another identified irregularity – it happens that verbally provided information on the cost of a loan is inconsistent with what is ultimately in ink.
• For a pawnshop loan, one has to pay up to 1.5%… a day.

While working on the report “The pawnshop market in Poland – irregularities, consumer protection, systemic risk”, the Union of Entrepreneurs and Employers thoroughly scrutinised this sector. Research showed that pawnshops play an increasingly significant role in the personal finances of millions of Poles.

“A considerable group of consumers have lost access to regulated and supervised sources of obtaining money on the financial market. The reason is simple: these people no longer meet the criteria to be granted cash loans, and as a consequence have been forced to look for alternative methods of obtaining funds. And so, Poles ‘en masse’ went to pawnshops,” says Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers.

Pawnshops everywhere

As of today, pawnshops in Polish cities are easily accessible and basically commonplace. One can easily spot them, pay a visit, and make a trade. These factors mean that pawnshops quickly gain customer interest. Over the period of a year, Poles have noticed and increasing number of people in their personal circles who make use of such services, which is also confirmed by research by Maison&Partners commissioned by the Union. Already 14% of Poles have experience trading an item at a pawnshop, and as many as 5% have used this method of obtaining cash since March 2020, that is, the outbreak of the pandemic. In other words, as many as 1.5 million Poles used the services of pawn shops over the last 12 months. Pawn loans have now become almost as popular as those from regulated loan companies.

According to Professor Dominika Maison, the author of the survey on pawnshop customers, Poles have become accustomed to pawnshops, and many have a rather good opinion of them. “Pawnshops are no longer considered merely a last resort or an act of desperation. In time of loss of earnings or high job insecurity, they have become a convenient and quick form of obtaining cash with no strings attached,” explains Professor Maison.

However, research carried out by the Union’s associates show that entities running pawnshop operations circumvent the provisions of the Consumer Credit Act, and thus, among others, the applicable limits of non-interest costs that are applicable to entities wishing to grant financial loans, but also consumer rights such as the obligation to familiarise customers with the contract prior to signing it or to inform them about the actual costs of the loan.

Pawnshop at the butcher’s

What was really difficult for experts to analyse was the number of pawnshops operating in Poland. It took experts and associates of the Union of Entrepreneurs and Employers several months of efforts to determine the size of this market.

“We thoroughly reviewed existing data, public registers, conducted telephone interviews at points conducting pawnshop activities, and finally visited randomly selected locations. The conclusion is that it is practically impossible to estimate the real number of pawnshops in Poland. Their number may range from 3,000, as this is the number of the relevant Polish Classification of Activity entries, up to 40,000,” claims Piotr Palutkiewicz, co-author of the report.

As the authors note in their report, despite the fact that in the Polish Classification of Activity (PKD), there is a special code 64.92.Z on (among other things) granting secured loans, it turns out that entities operating on the pawnshop market avoid registering under this code. Henceforth, pawnshops avoid to formally function as pawnshops. The Union’s experts visited, among others, a pawnshop, which was registered as… a butcher shop.

Pawnshops overlooked by the watchful eye of the legislator

In the report, the Union of Entrepreneurs and Employers draws attention to the legal environment of the financial system in Poland. The Union’s expert wrote that: “The financial market can be considered overregulated. Therefore, it seems that the liberal requirements for entities wishing to enter a given financial services sector can be evaluated favourably. However, what ought to be pursued are equal opportunities and requirements for enterprises operating on the market. Nevertheless, the legislator selects groups of entities on the financial market on a point-by-point basis and additionally regulates them. As a result, banks or loan companies “enjoy” excessive and frequently amended restrictions. While other entities, such as pawnshops, operate in an unhampered legal environment. This translates not only into the lack of equal opportunities for enterprises, but also into unequal consumer protection on the financial market.”

Pawnshop standards

According to research by Maison&Partners commissioned by the Union of Entrepreneurs and Employers, consumers go to pawnshops without any deeper analysis of the costs of t transactions, either planned or concluded. They do not compare the possibilities of obtaining cash available to them. They act spontaneously. This may pose a risk to consumers, as the finding from the research lead to the conclusion that pawnshops do not have uniform rules with regard to informing about the terms and conditions of transactions or uniform standards of customer service.

The Union’s associates visited more than a dozen Polish pawnshops in order to carry out transactions there. The survey showed a number of irregularities and problems from a consumer protection perspective. These include:

• frequent failure to provide contract templates for inspection by the client prior to signing the document,
• significant discrepancies in the valuations of the pledged items,
• no clear cost calculation rules,
• no clauses on the processing of personal data of customers,
• irregularities in documenting transactions,
• verbal and inconsistent information on the real pawn loan costs.

“The standards of customer service and protection differ from the practices applied on the regulated financial market. For example, in some cases, customers were unable to familiarise themselves with contracts or later withdraw from them,” sums up Marcin Nowacki.

Experts of the Union of Entrepreneurs and Employers add in their report: “The issue of spreading a protective umbrella over consumers is raised every single time when works on new regulations of the financial market take place. Therefore, the question arises whether the abandonment of the regulation of the pawnshop market is the intention of the legislator or whether the pawnshop sector is simply invisible from the point of view of law and consumer protection.”

It’s an expensive service

The Union of Entrepreneurs and Employers indicates in the report that pawnshop loans are primarily characterised by very high costs. The percentages fluctuate within a very wide range: from 0.66% to over 1.5% per day. In addition to the amount of interest, the real cost of the transaction is the difference between the market value and the valuation of the items at the pawnshop. Customers declare in the research that they receive on average PLN 224 less than they assumed they would before finalising a transaction. However, they do not negotiate for a higher valuation. As a result, the average valuation of an item handed over to a pawnshop amounts to merely about 35% of its market value.

“Our survey of pawnshop customers showed that money often has a subjective value. It does happen that customers decide to pledge an item, without the intention to buy it out, for 30% of its value, and – surprisingly – they are often satisfied with such a transaction. This is due to the fact that from their subjective point of view, which takes into account more than just financial issues, the transaction was beneficial, because, for example, they did not care about that item. They needed money immediately or did not want to have any obligations in the form of instalments or any additional costs resulting from not paying back on time, including debt collection,” explains Professor Dominika Maison.

Car as collateral

According to the report by the Union of Entrepreneurs and Employers, numerous pawnshops accept high-value items and real estate as collateral, such as a car garage, parking space, refrigerated trailer or agricultural tractor.

“Our associates were able to pawn a luxury passenger car. However, the valuation of the pawnshop was PLN 50,000 lower than in the car vendor’s advertisement,” adds Piotr Palutkiewicz.

The report by the Union of Entrepreneurs and Employers is the first ever study and description of such comprehensive scope dedicated to this market in Poland. The full text of the study is available at: https://tiny.pl/rv9fr.

Warsaw, 15^th May 2021

 

Commentary of the Union of Entrepreneurs and Employers on the Polish Deal

 

The Polish Deal is an exceptionally anticipated document, the presentation of which had been postponed several times. Having discussed today the general assumptions of this programme manifesto, we conclude that – in areas of particular interest to entrepreneurs – it does not contain any ground-breaking solutions.

In the Polish Deal, we fail to find the awaited proposals regarding the legal and institutional environment for business, while the issue of legal uncertainty – a key barrier to investment at the moment – is not even mentioned. The proposed measures presented in the section “Good climate for enterprises” are as a matter of fact recycled ideas that were previously announced or solutions that have been underway for some time. Part of them, such as the introduction of the institution of a family foundation or the extension of “Estonian CIT”, are of course beneficial for entrepreneurs; however, these proposals were already known and described in the past. Therefore, the Polish Deal does not introduce any major novelties in the field of entrepreneurship.

Certainly, two key components of the programme deserve approval, and these are: increasing the tax-free amount to PLN 30 thousand and the second tax threshold to PLN 120 thousand. Both laudable decisions are of the most rational nature and adjust these amounts to the economic reality in which wages have been steadily growing for years.

Unfortunately, these solutions are accompanied by a proposal for changes in the scope of health insurance, that is, the introduction of a model of a uniform premium in the amount of 9% of total income, which would not be tax deductible. Therefore, in practice, the Polish Deal may lead to an increase of burdens for some taxpayers.

Nevertheless, there are certain solutions discussed in detail that were announced during the conference and which are praiseworthy. In this respect, one must mention, among others, the changes regarding the possibility to build a house with an area of up to 70 sqm on request. In smaller towns, this may solve the housing problems of Polish families to a high degree. It is important that the regulations introducing this change directly indicate that the possibility of building in line with this procedure also applies to residential all-year-round houses.

The announced “liquidation of junk contracts” (civil-law contracts) raises serious doubts. If we are to understand that the government means to equate premiums for all types of contracts, this will result in a considerable reduction in the flexibility of forms of employment on the labour market. While we see the need to intervene in the scope of limiting tax arbitration, we would consider its proper form to be a general reduction of the tax wedge on remuneration earned under various employment contracts.

The trend towards digitisation that is evident in the Polish Deal is commendable both in terms of the healthcare system and other public services. It will be one of the greatest challenges ahead for the years to come – it is therefore advantageous that the topic of digitisation is particularly highlighted in the National Recovery Plan and the discussed programme document.

The complexity of the political programme under discussion, which concerns both economic issues and those related to public services, the healthcare system or pro-family policies (exceptionally important from the point of view of the problematic demographic situation), makes its detailed analysis time-consuming. In view of the above, the Union of Entrepreneurs and Employers will present a comprehensive position on the Polish Deal on Monday of the following week.

 

See more: 15.05.2021 Commentary of the Union of Entrepreneurs and Employers on the Polish Deal

Warsaw, 5 May 2021

 

EESC Activities Report no 3/21

 

Marcin Nowacki, President of the European Enterprise Alliance and Vice-President of the Union of Entrepreneurs and Employers, and Tomasz Wróblewski, President of the Warsaw Enterprise Institute, are members of the European Economic and Social Committee (EESC), an EU advisory body which represents employers’ and employees’ organisations in the EU lawmaking process. We present a summary of their activities in March 2021.

On 24-25 March, the EESC plenary session held a debate with the participation of the EU Commissioner for Neighborhood and Enlargement Olivér Várhelyi on “‘Enhancing the accession process – A credible EU perspective for the Western Balkans“.

In addition, during the plenary session, the EESC discussed the trade policy challenges for economic recovery after the COVID-19 crisis with Executive Vice-President of the European Commission Valdis Dombrovskis.

On 1 March, Marcin Nowacki attended an extraordinary meeting of the EESC’s Employers’ Group with C During the debate, Members of the Employers’ Group expressed concern that in recent months new regulations had been adopted that would increase the bureaucratic burden for companies, especially for SMEs. According to the EESC, companies need less bureaucracy, not more. Commissioner Breton explained that the ‘one more, one less’ principle of symmetrically introducing and removing administrative burdens in the same policy area is only the beginning of reducing bureaucracy as part of the Better Regulation agenda.

Moreover, in March this year Marcin Nowacki participated in the meetings of the Section for Transport, Energy, Infrastructure and the Information Society (TEN), as well as the Section for External Relations (REX). The subject of the March meeting of the TEN Section was, among others, discussion of the Opinion on the single European Railway Area, as well as a debate on the Opinion on the report on the State of the Energy Union Report 2020 and Assessment of National Energy and Climate Plans.

Moreover, during the meeting of theREX section , section members discussed, among others, EU relations with the Western Balkans..

Regulatory activity

Tomasz Wróblewski is rapporteur for the EESC opinion on the European economic and financial system: fostering openness, strength and resilience. On March 26, the first study group meeting devoted to this topic took place.

Useful links

• OPINION ECO/544
• European economic and financial system: fostering openness, strength and resilience

Marcin Nowacki has been appointed as a member of the EESC study group on roaming on public mobile communications networks within the Union. The current Regulation (EU) No 531/2012 regulating the above matter will expire on 30 June 2022. The focus of the study group is to provide an opinion on the proposal to extend the validity of the regulation, as well as to adjust the maximum wholesale charges with a view to ensuring the sustainability of the service retail roaming services at domestic prices, introducing new measures to increase transparency and ensure that you are fully satisfied with using your telephone abroad as at home in terms of quality of service and access to roaming emergency services.

More information about the EESC

What is EESC?

The European Economic and Social Committee (EESC) is an EU advisory body comprising representatives of employers’ and workers’ organisations and other interest groups. It issues opinions on EU issues to the European Commission, the Council of the EU and the European Parliament, thus acting as a bridge between the EU’s decision-making institutions and EU citizens.

What does the EESC do?

It gives the interest groups a formal say on EU legislative proposals. Its three key tasks are to:

• Ensure that EU policy and law are reflect to economic and social conditions in the Member States.
• Engage in dialogue with employers’ and workers’ organizations from all member states.
• Promote European integration and participatory democracy.

What is the EESC composition?

The EESC has 329 Members from all EU Member States, who are appointed for a renewable five-year term of office. Members are nominated by national governments and appointed by the Council of the European Union. They are independent and perform their duties in the interest of all EU citizens. The number of Members per country is in proportion to the country’s population.

How does the EESC work?

The EESC is consulted by the European Parliament, the Council of the EU and the European Commission on a variety of subjects. It also issues opinions on its own initiative.

Members work for the EU, independently of their governments. They meet 9 times a year. Opinions are adopted by a simple majority vote.

Meetings are prepared by the EESC’s specialized sections and the consultative commission on industrial change. The EESC’s specialist think-tanks (known as ‘observatories’) track the progress of EU strategies.

The EESC keeps in touch with regional and national economic and social councils throughout the EU – mainly to share information and discuss particular issues.

 

See: 05.05.2021 EESC Activities Report no. 3/21