The European Antitrust Review 2014 Section 3: Country chapters

Spain: Cartel Regulation

The Spanish Competition Act (Law 15/2007, 3 July, on Defence of Competition) entered into force on 1 September 2007 (the Competition Act) replacing former Law 16/1989, 17 July.

On 5 June 2013, the Spanish government enacted a new Law 3/2013, 4 June, establishing the new Markets and Competition National Commission. The new Authority will merge the Spanish Competition Authority with the seven Spanish sector regulators (the National Energy Commission; the Telecommunication Market Commission; the National Postal Sector Commission; the National Gambling Commission; the Airport Economic Regulatory Commission; the Audio-visual Media Council; and the Railway Regulatory Committee) into one single entity: the Markets and National Competition Commission. The National Markets and Competition Commission will become operational before the 5 October 2013 (four months following the coming into force of the law). However, it is worth noting that the substantive provisions of the Competition Act will not be affected by the new law but only the institutional organisation.

The Competition Act aims to reinforce existing mechanisms and provide the tools and optimal institutional structure to protect competition in the market. At the same time, it takes into account the changes introduced at EU level, notably Regulation 1/2003 setting out procedures for the enforcement of article 101 and article 102 TFEU prohibitions, and the powers of regional governments in this field.

The enforcement system is also completed by Law 1/2002 on coordination of competence between central and regional bodies, adopted in response to a constitutional court judgment holding that regional governments are also competent in the field of enforcement (the Law 1/2002), which has been slightly amended by the Competition Act in order to reflect some of the new changes.

In addition, it is worth mentioning that the following act and guidelines have been adopted after the Competition Act entered into force in order to complete the Spanish legal system on defence of competition:

  • Royal Decree 261/2008 of 22 February 2008, for the implementation of the Regulation on Defence of Competition (the Royal Decree), which came into force on the 28 February 2008 and deals with the execution of some essential aspects of the Law 15/2007, such as conducts of minor importance, promotion of competition, and proceedings;
  • a communication on the calculation of fines, which was published in February 2009; and
  • a communication on conventional termination of sanctioning proceedings following submission of commitments, which was published in October 2011. Cartels are expressly excluded.

It is also worth mentioning that in December 2009, the Spanish Competition Authority published a Guidance Notice on activities of trade associations and compliance with competition law.

In addition, on 21 June 2013, the Spanish Competition Authority published guidelines on the leniency programme, which replace the former provisional guidelines relating to the handling of applications for exemptions and reduction of fines published in February 2008.

Enforcing bodies

The Spanish competition rules (except for merger control) are enforced by the following bodies.

The National Markets and Competition Commission (CNMC)

The former National Competition Commission will be replaced by the CNMC, which will merge the CNC with the different Spanish regulators (with the exception of the National Securities Market Commission). The CNMC will be an independent authority in charge of applying the Competition Act at a national level. The CNMC will consist of the chairman, the council and four different investigation directorates (including a competition directorate). In November 2008, the chief economist post was created. This new figure contributes to the activity of the Spanish Authority with guidance on complex economic issues, in accordance with the usual practice at EU level as well as in other competition authorities.

The chairman is entrusted with managerial and representation duties. The competition directorate is in charge of conducting investigations into cases and preparing files, as well as studies and reports.

The council, empowered with final decision-making power, is composed of the chairman of the CMNC and nine members. The council comprises two chambers: a chamber dealing with competition related matters; and a chamber dealing with regulatory matters. The chamber for competition matters will be chaired by the chairman and composed of another four members. All of the members of the CNMC’s council will be appointed for a non-renewable six-year term by the government following a proposal by the ministry for economics, and after a hearing takes place in the corresponding committee of the Congress. A majority vote of the council is required for the appointment of the director of the investigation directorate, who is also appointed by the government following a proposal by the minister for economics.

The CNMC will be controlled by the parliament. It is foreseen that the CNMC will draft an annual report, and its chairman will appear before the Parliament regularly and at least once a year. In addition, the Competition Act sets out a series of provisions on transparency (ie, publication of reports and decisions).

Commercial courts

One of the most important changes introduced by the Competition Act is the possibility that certain provisions may be directly applied by the commercial courts (ie, prohibition of anti-competitive agreements and abuse of dominant position). Furthermore, the commercial courts will be able to award damages based on the Competition Act without requiring a prior administrative decision finding an infringement. In view of the increased importance of commercial courts, the Competition Act introduces an amicus curiae system inspired by Regulation 1/2003, by which the CNMC and the regional antitrust bodies may submit observations regarding the application of the Competition Act.

Regional competition authorities

As previously mentioned, enforcement of Spanish competition rules (except for merger control) has been shared with the regional governments since the enactment of Law 1/2002, which also sets out some rules on coordination. Spanish competition rules can be applied by regional authorities provided the conduct at stake has a regional scope. For this purpose, regional governments have to assume these competencies. To date, nearly all Spanish regions have enacted rules, but not all of them have established ad hoc authorities (eg, Baleares, Cantabria, Asturias, Navarra and La Rioja do not have their own regional authorities). Others have recently closed to the economic crisis (eg, Castilla La Mancha) to cut costs. The Competition Act establishes that the CNMC will be under duty to request a non-binding report to a regional authority on a particular case regarding the application of the Competition Act provisions or even article 101 and 102 TFEU, provided there is a significant impact of the infringement on the regional territory.

Substantive rules: prohibition of anti-competitive agreements and practices

The prohibition of anti-competitive agreements is enshrined in article 1 of the Competition Act. Article 1 prohibits any agreement, decision or collective recommendation, or any concerted or consciously parallel practice that has as its object or effect the prevention, restriction or distortion of competition in all or part of the Spanish market, and in particular those that:

  • directly or indirectly fix prices or any other commercial or service terms;
  • limit or control production, distribution, technical development or investments;
  • share markets or sources of supply;
  • apply dissimilar conditions to equivalent transactions in commercial or service relations, thereby placing some competitors at a competitive disadvantage; and
  • make the conclusion of contracts subject to the acceptance of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

It also sets forth a definition of a cartel as ‘any secret agreement between two or more competitors which has as its object fixing prices, production or sales quotas, sharing markets including bid rigging or restricting imports or exports’.

One of the main features of the Competition Act in this field is the abolition of the system of individual exemptions in line with Regulation 1/2003. Therefore, the prohibition described above will not automatically apply provided the same criteria set out in article 101(3) TFEU are met. Furthermore, the European Commission block exemptions will also apply to those agreements even in the absence of a cross-border impact. In addition, the government is empowered to adopt block exemptions; for example, under the old Act, the government adopted Royal Decree 602/2006 implementing the block exemption regulation on late payments information exchange agreements.

The Competition Act also includes a provision whereby findings of inapplicability may be made similar to article 10 of Regulation 1/2003.

Nevertheless, the prohibition set out in article 1 does not apply to conducts that result from the enforcement of a law. However, this inapplicability is without prejudice to the application of the European Commission competition provisions.

Similarly, the prohibition will not apply to conducts of minor importance that qualify as de minimis, according to criteria set out in Royal Decree 261/2008. Even in the event of hard-core restrictions, the CNMC may decide to waive the application of article 1, 2 and 3 of the Competition Act if, having regard to their legal and economic contest, those conducts are not capable of having a significant effect on competition. The CNMC used this provision contained in article 3.1 of the Royal Decree for the first time in Corral de Las Flamencas on 3 December 2009.

Finally, apart from the fines that can be imposed by the (central or regional) antitrust authorities (see the section on fines below), agreements or any other decision prohibited by article 1 shall be deemed void.

It is worth mentioning that under the Competition Act, cartels are administrative infringements and therefore no criminal penalties are provided. Nevertheless, the Spanish Criminal Code provides a few exceptions where cartel conduct is sanctioned with imprisonment penalties. For instance, article 284 of the Spanish Criminal Code refers to price distortion impeding free competition, providing imprisonment penalties from six months up to two years, together with fines from one to two years; and article 262, which refers to bid rigging in auctions and public tenders and provides imprisonment penalties from one year up to three years, together with daily fines from one to two years and loss of licences for public bidding. Also, article 281 may be applied to unlawful competition conduct consisting of withdrawing raw materials or essential goods from the market in order to limit supplies or distort prices, with an imprisonment penalty of one to five years and fines of one to two years.

Procedure

The Competition Act keeps a two-phase procedure: an investigation carried out by the investigation directorate; and the resolution by the Council.

Proceedings are initiated by the investigation directorate on the basis of a non-binding complaint, of its own motion or on the initiative of the council. Before opening formal infringement proceedings, the investigation directorate can proceed with an initial investigation. During this preliminary phase, the directorate is empowered to carry out inspections. Recently, dawn raids and investigations have proliferated, with the CNMC carrying out inspections in the 2008 to 2012 period in several sectors, such as those of mobile cranes, vehicle rental, freight transport, maritime transport, wine, polyurethane foam, hydraulic pumps, construction, electricity, the food processing industry, gel, cosmetics and so on. Some of those dawn raids occurred after a leniency request was submitted. Recently, the National Audience, in judgments of March 2011 (Consenur), May 2011 (UNESA) and April 2010 (Salvat Logistica), and the Supreme Court, in judgments of 27 April 2012 (Stanpa) and 9 July 2012 (Consenur) have confirmed inspections brought by the Spanish Competition Authority, which were appealed by the investigated parties.

Once proceedings have been formally initiated, the investigated companies are heard and have the option to submit observations regarding the statement of objections. The directorate’s fact-finding powers have been reinforced in line with Regulation 1/2003 (ie, inspection of homes of directors, managers and other members of staff and the possibility to seal any business premises and books or records for the period and to the extent necessary for the inspection). The council can adopt interim measures at any time during the course of the proceedings and without a maximum duration period. Once the directorate has finished its investigation and concludes the possibility of the existence of an infringement, it will adopt a motion for resolution, granting the parties another opportunity to submit their observations. The directorate will then refer its motion, together with the observations submitted by the undertakings, to the council, which will assess the case and adopt a final decision on the infringement and imposition of fines.

The Competition Act states the maximum length of the procedure as 18 months (although under certain circumstances this deadline can be extended). The Royal Decree determines the maximum length of the investigation stage at 12 months.

Furthermore, in line with article 9 of the EC 1/2003 Regulation, article 52 of the Competition Act keeps open the possibility of terminating proceedings when commitments are offered, provided that these commitments remedy the anti-competitive effects generated by the investigated conducts and public interest is sufficiently guaranteed. The parties may offer commitments at any time before the observations submitted by the undertakings are referred by the investigation directorate to the council. In this respect, the CNMC published in October 2011 a notice setting out guidelines on termination by commitments on infringement proceedings which establishes the criteria applied by the CNMC for granting or rejecting requests for commitments in ongoing procedures. The CNMC sets out the criteria it takes into account when deciding to allow an opened infringement proceeding to be terminated subject to the submission of certain commitments. According to these Guidelines, cartel conducts fall outside the scope of the termination request.

Furthermore, under the Spanish competition rules there is no cartel settlement instrument similar as such provided at EU level by Commission Regulation 622/2008.1

Fines

The Competition Act includes a classification of infringements depending on seriousness (minor, serious and very serious). Cartels between competing undertakings are classified as very serious. The level of the fine will depend on the seriousness of the infringement, and the maximum fine will amount to up to 10 per cent of the business’s total turnover. When the turnover cannot be calculated, the Council can impose a fine of up to €10 million. In addition, individuals (ie, legal representatives or members of the management body) may be subject to a fine of up to €60,000. The Competition Act also includes provisions, similar to Regulation 1/2003, that seek to guarantee that trade associations pay the fine imposed on them.

The Competition Act sets out the criteria that are taken into account when calculating the exact amount of the fine (scope and characteristics of the affected market; market shares of responsible undertakings; scope of the infringement; duration; effects of the breach on consumers or any other undertaking; and unlawful profit). The Act lists a series of mitigating and aggravating factors as well.

In January 2009, the former CNC published a communication on the calculation of fines, with the purpose of developing and publicising the criteria of the new disciplinary regime, in which a calculation of sanctions over three different phases is implemented.

In the first phase, a basic amount of the fine – between 10 per cent and 30 per cent of the infringer’s sales volume in the affected markets – is set depending on the dimension and characteristics of the affected markets, the infringer’s market share and the scope of the infringement, as well as its duration and effects. In the second phase, aggravating or mitigating circumstances will be taken into account increasing or decreasing the basic amount by 5 per cent and 15 per cent, depending on the circumstances.

Finally, the fine will be adjusted so as not to exceed 10 per cent of a company’s total revenue, which is the threshold set by law as the maximum limit.

Still under the scope of the former Competition Act, the former CNC, on 12 November 2009, levied the highest fine so far for a total amount of €120,728,000 in the so-called ‘cartel of the decennial liability insurance’. However, the fine was subsequently annulled by the National Audience in different appeals brought by the appellants. The judgment of the National Audience may be subject to appeal before the Supreme Court.

Leniency

The Competition Act introduced a leniency system for both total immunity and reduction of fines in cartel cases. This system was implemented by the Royal Decree, which regulates the procedures for exemptions and reductions of the amount of fines. As previously mentioned, the Spanish Competition Authority recently published on 21 June 2013 guidelines on the leniency programme.

Immunity is reserved for the first company or individual who provides evidence, which, in the CNMC’s view, will enable it to carry out an inspection or to find an infringement of article 1. Those who have adopted measures obliging other undertakings to participate in the infringement are excluded. In addition, the applicant is required to:

  • cooperate fully, on a continuous basis and expeditiously throughout the investigation;
  • end its involvement in the alleged cartel immediately following its application, except for what would, in the CNMC’s view, be reasonably necessary to preserve the effectiveness of the inspections; and
  • not destroy relevant evidence relating to its application and not disclose to third parties other than the European Commission or any other national authorities its intention to submit an application or the content thereof.

Companies or individuals that subsequently provide additional evidence may have their fines reduced (by 30 per cent to 50 per cent for the first undertaking to provide significant added value; 20 per cent to 30 per cent for the second; and a maximum of up to 20 per cent for subsequent undertakings). Reduction can be granted when the undertaking provides the CNMC with evidence of the alleged infringement that represents significant added value with respect to the evidence already in the CNMC’s possession. Furthermore, the applicant must meet the cumulative conditions set out above.

If the applicant for a reduction of a fine submits evidence that allows for the establishment of additional facts with a direct bearing on the amount of the fine, the CNMC will take such additional facts into account when setting the fine to be imposed on the undertaking that provided this evidence.

At the applicant’s request, both exemption and reduction of fines may be submitted orally, accompanied by the relevant information and evidence, recorded at the CNMC premises, with a transcript thereof being entered in the register. No copies of the oral submission are allowed.

Immunity and reduction of fines granted to a company will also benefit its legal representatives or members of management bodies who have participated in the alleged infringement, provided they cooperate with the CNMC.

In order to protect the effectiveness of the leniency system, the Competition Act establishes that the CNMC cannot provide the commercial courts with the information obtained via the applications for immunity or reduction of fine applications. This provision affords some protection to applicants in case of damages actions.

The Royal Decree lays down a summary exemption application in cases where an application for immunity (excluding reduction of fines applications) has already been filed or is going to be filed before the European Commission (where the Commission is particularly well placed and the Cartel causes effects in more than three member states). Likewise, where an application for exemption is submitted before a regional competition authority, notice shall be given to the CNMC before resolving.

On 27 January 2010, the former CNC published its first Resolution originating from a leniency application, which had unveiled a cartel in the bath and shower gel manufacturing sector. The proceedings had been initiated on the same date the leniency programme first came into effect. On that day, two of the cartel participants, Henkel and Sara Lee, submitted respective statements to the CNC disclosing the existence of the cartel and their participation, as well as the involvement of Puig, Colgate and Colomer. The CNC levied fines totalling €8 million, with Henkel receiving a complete waiver thanks to the leniency programme and Sara Lee receiving a 40 per cent waiver.

To date, there have been over 10 fining decisions deriving from a leniency application, the last two relating to the so-called cartel of polyurethane foam manufacturers in March 2013 and paper products cartel in February 2013.

So far in most of the cases the first leniency applicant has always benefited from 100 per cent immunity from fines, the second leniency applicant has been awarded in most of the cases a 40 per cent reduction and to date there has not been a successful third or successive leniency applicant.

Notes

  1. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:171:0003:01:EN:HTML.

SJ Berwin LLP

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Ramón García Gallardo
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www.sjberwin.com

SJ Berwin’s EU and competition department has extensive experience in EU and member state level competition-related matters, including merger control; infringement proceedings, in particular relating to abuse of dominant positions and cartel arrangements; litigation, including judicial review; as well as applications for injunctions and damages. SJ Berwin represents clients in a number of significant cases before the European Commission and national competition authorities, the national courts, the European Court of Justice and the Court of First Instance in Luxembourg, as well as the courts of other member states.

This includes advising on notifications, compliance programmes, fines, leniency applications and strategy, handling on-site inspections, and subsequent investigations by the authorities (including advising on the first criminal competition investigation conducted by the UK Serious Fraud Office into the pharmaceutical industry).

SJ Berwin’s EU and competition department has been a core practice area of the firm since its establishment. The department is widely recognised as one of the leading practices in EU regulatory and competition law, operating from Brussels, London, Madrid, Milan, Munich and Paris. Three times voted ‘Competition Team of the Year’ in the UK Legal Business Awards, the team regularly features in the Global Competition Review’s ‘GCR 100’, a survey of the world’s leading competition practices.

SJ Berwin’s EU and competition practice spans not only competition law but also a broad range of other areas of EU law, which includes an active regulatory practice in pharmaceuticals, telecoms, energy and chemicals, an established trade law practice and a cutting-edge EU/competition law litigation practice before both national and EU courts.

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