Antitrust & competition law

Avalanche Promotion Schemes

Avalanche sales system is abolished by article 17c of Polish Act on Combating Unfair Competition. Organizing and running such scheme poses:
– criminal offence (article 24a of Polish Act on Combating Unfair Competition),
– act of unfair competition (article 17c of Polish Act on Combating Unfair Competition) and
– practice violating collective consumer interests
(article 24 section 2 point 3 of Act on Protection of Consumers and Competition).

Each of above entails different risk and penalties for the entrepreneur that organizes or runs the avalanche sales scheme.

Definition of Avalanche Sales
Definition of the Avalanche Sales Scheme may be found in article 17c of Polish Act on Combating Unfair Competition:
“system consisting of proposing purchase of goods or services by making the purchasers of those goods or services a promise of financial benefits in exchange for persuading other persons to make identical transactions, and such other persons obtaining similar financial benefits due to persuading subsequent persons to participate in the system.”

Key elements to be qualified as Avalanche Sales:
Key elements of the avalanche promotion scheme:
– offer of purchase of goods or service, followed by
– promise of financial benefit (e.g. discount on the purchase price) in exchange for persuading other persons to make identical purchase,
such other persons are promised similar financial benefits due to persuading subsequent persons to make the purchase.

It shall be noted that the system may be qualified as avalanche irrespective whether the participants are consumers or business entities. As s result is shall be underlined that running avalanche promotions abolished even if not directed to consumers.

Penalties and risks
Entrepreneur organizing or running avalanche promotion scheme may be prosecuted and punished from 6 month up to 8 years of imprisonment. Criminal liability is not the only risk associated with running or organizing such system. As it is considered as practice violating collective consumer interests, it may be investigated by Consumer Protection Authority (UOKiK) and punished by penalty of up to 10 % of the turnover. Avalanche sales organizer is also exposed to claims of third parties who may request e.g. damages.

Author team leader DKP Legal Michał Dudkowiak
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