Spain

Introduction

The possibility of settlement agreements, whereby a party acknowledges its participation in an infringement of the competition rules and receives a reduction of the fine in exchange, has long been of interest to competition authorities in Spain. In particular, the Spanish competition authority, the National Commission for Markets and Competition (CNMC), has repeatedly expressed its interest in introducing this procedure into Spanish law.^[2]

The imminent transposition into Spanish law of Directive (EU) 2019/1 (the ECN+ Directive) has provided an opportunity to do so.^[3] Specifically, and among other important changes, the draft law to modify Law No. 15/2007 for the Defence of Competition (LDC),^[4] presented by the Ministry of Economic Affairs and Digital Transformation and the Ministry of Justice on 31 July 2020 (the Draft Law), proposes to make the settlement procedure available to Spanish competition authorities.

Until now, the only real alternative outcomes to a prohibition decision with fines have been decisions to close investigations, finding that no infringement has occurred, or what is known as ‘conventional termination’, in which the competition authorities close a case based on commitments made by the parties. As has been publicly acknowledged by the Spanish competition authorities, however, conventional termination is clearly distinct from the settlement procedure for cartel cases available at the EU level,^[5] and even from the cooperation procedure for other types of infringements that has recently been introduced by the European Commission.^[6] Unlike the settlement procedure, under the conventional termination procedure there is no decision establishing an infringement and no fine is imposed. As such, it is not considered appropriate for cases involving cartels or other serious infringements, while at the same time, the flexibility of negotiated commitments is not normally needed in cartel cases.

Nevertheless, we set out below a detailed description of what is known about the settlement procedure that is expected to be introduced into Spanish law, as well as the experience and practice to date in relation to the conventional termination procedure.

The envisaged settlement procedure

Settlement procedure

There is currently no settlement procedure in place for Spanish competition law infringements. However, on 31 July 2020, the Ministry of Economic Affairs and Digital Transformation and the Ministry of Justice presented the Draft Law amending the LDC. The Draft Law aims to fulfil the obligation of Spain to transpose the ECN+ Directive by 4 February 2021. Among the amendments to the LDC that do not directly derive from the content of the ECN+ Directive, the Draft Law proposes to include ‘Article 50-bis: Settlement procedure’. Once the comments received during the public consultation process (which finished on 15 September 2020) have been digested and any significant changes have been made to the text, the Draft Law will be submitted to the Council of Ministers for approval and its subsequent referral to the Congress of Deputies for its final adoption. The final text is expected to be adopted in early 2021.

Settlement procedure process

The Draft Law proposes to give the Directorate of Competition (the investigative body of the CNMC) the possibility to start a settlement procedure at any time before the end of the investigative phase of sanctioning proceedings relating to Articles 1, 2 or 3 of the LDC. Under that procedure, the parties would receive a reduction in the fine to be imposed in exchange for their recognition of their participation in the anticompetitive conduct under investigation.^[7]

The Draft Law does not propose to include a right for the parties under investigation to request a settlement procedure. Rather, the decision to open the settlement procedure is to be purely at the discretion of the CNMC.^[8]

According to the proposal in the Draft Law, the parties under investigation will be able to approach the Directorate of Competition to express (verbally or in writing) their interest in initiating conversations with the Directorate of Competition aimed at starting a settlement procedure. Indeed, the parties under investigation would be able to make this statement even before the Directorate of Competition has formally started the sanctioning proceedings.^[9]

The Draft Law does not provide an explanation of how the conversations between the parties under investigation and the Directorate of Competition would develop. However, it does specify that the Directorate of Competition shall submit a proposal to the Council of the CNMC (the decision-making body of the CNMC) for it to finally decide whether to grant the parties under the settlement procedure a reduction of the fine that it will impose in exchange for their acknowledgment of their participation in the investigated anticompetitive conduct.^[10]

Benefits of the settlement procedure for the parties under investigation

Under the Draft Law, the maximum fine reduction that the Council of the CNMC may offer to the parties involved will depend on when the settlement submission is presented. If the submission is presented before a statement of objections has been notified, a maximum reduction of 15 per cent may be allowed. If it is presented after the notification and before the investigatory phase of the proceedings is closed, the Council of the CNMC may allow a reduction of up to 10 per cent.^[11] In each case, the reduction of the fine for the settlement would be cumulative to any reduction received for participation in the leniency programme.^[12]

This follows the logic of the procedure described below regarding the termination of proceedings with commitments, in which context the CNMC has stated that the earlier the parties make the request, the more likely the authority will agree to the alternative procedure. The rationale is that the saving in the CNMC’s time and resources until that point would reduce as time goes by, while later in the investigation the authority may already have gathered enough evidence to issue a decision, making the collaboration of the investigated parties less relevant and even undesirable.

The Draft Law also proposes to include the legal representatives or managers of the investigated companies that participated in the infringement within the scope of the settlement. In such a case, the legal representatives would see their potential fine reduced by the same percentage as agreed for their respective companies.^[13]

Confidentiality

The Draft Law proposes that a special and separate confidential file be created for the settlement submissions of the parties, as well as for any statements made during the settlement conversations. Other parties to the proceedings will not be allowed to obtain copies of these documents, but would be able to access them so they can submit their reply to the statement of objections and the proposed resolution.

The Draft Law also establishes an exception to allow parties to exercise their rights of defence before national courts. In particular, parties will be able to make use of the information contained in the settlement submission or settlement conversations of other parties to the investigation (1) in cases directly connected to the one for which they were granted access; and (2) only when the judicial review concerns the allocation of a fine imposed jointly and severally on the participants in a cartel, or a decision of the CNMC finding an infringement of Article 1 or 2 of the LDC or Article 101 or 102 of the Treaty on the Functioning of the European Union.^[14]

Follow-on damages claims deriving from settlement decisions

Parties that submit to a settlement procedure expressly recognise the existence of an infringement and their participation in it. In this sense, the LDC states that when an infringement has been declared in a final decision of a competition authority or court, in the absence of proof to the contrary, the existence of an infringement of competition law shall be presumed whenever parties lodge a follow-on damages claim for that particular anticompetitive behaviour.^[15]

However, the Draft Law stresses the importance of keeping the settlement submission confidential and limiting access exclusively to parties that are fined in the same proceedings, and only under very specific conditions, not including for the purposes of preparing follow-on damages claims.

Conventional termination under Spanish competition law

Article 52 of the LDC regulates the ‘conventional termination’ of antitrust sanctioning proceedings.^[16] The procedure to be followed is developed in Article 39 of Royal Decree 261/2008 (the Regulation on the Defence of Competition).^[17] This procedure is regulated under the 2011 Communication on Guidelines for the conventional termination (the Guidelines).^[18]

This method of terminating an investigation into an anticompetitive practice requires that the parties under investigation for an alleged infringement of Spanish competition law submit certain commitments that the competition authority understands to be enough to address the competition law concerns that the practice in question has raised, and to preserve the public interest at stake.

The aim of the Spanish competition authorities with this procedure is, on the one hand, to quickly and efficiently restore, by means of the accepted commitments, the conditions of competition that the investigated conduct has allegedly distorted; and, on the other hand, to enable administrative efficiency by reducing the time taken to resolve the sanctioning proceedings.^[19]

As such, under this procedure the competition authority can decide to end the sanctioning proceedings by making commitments binding on the parties that offered them, without the latter having to recognise their participation in an infringement or enduring a fine.^[20]

Scope of application of the conventional termination procedure

Parties may apply to submit themselves for the conventional termination procedure whenever the sanctioning proceedings started against them relate to an alleged violation of Article 1 (collusive behaviour), Article 2 (abuse of a dominant position) or Article 3 (distortion of competition by unfair acts) of the LDC.^[21] The procedure does not, however, extend to sanctioning proceedings initiated by Spanish competition authorities for other infringements of the LDC, such as infringements related to gun jumping.^[22]

Additionally, there are three other conditions that must be met for the CNMC to consider the possibility of terminating the proceedings with commitments, namely that (1) the negative effects the investigated conduct has caused on competition in the market can be amended; (2) the negative effects of the conduct on effective competition in the market are not irreversible, and have not caused irrecoverable damage that would not be outweighed by possible efficiencies resulting from the commitments submitted;^[23] and (3) it is considered to be in the public interest.

As such, there are certain cases in which a conventional termination will not be accepted:^[24]

• when no viable commitments exist, either to resolve the effects on competition caused by the conduct under investigation, or to sufficiently safeguard the public interest;^[25]
• where the conduct is considered ‘self exhausting’ (i.e., it has already produced all the expected effects);
• as a general rule, where the conduct relates to a cartel infringement;^[26]
• whenever the investigated conduct has had irreversible effects on competition for a significant period, or has affected a substantial part of the market;
• when the alleged infringing parties have been previously held responsible for other similar infringements by any competition authority, or when they have been part of a previous conventional termination for similar behaviour; or
• whenever failure to continue with the ordinary sanctioning procedure would jeopardise the effectiveness and deterrence effect of the competition rules.

Conventional termination procedure before the CNMC

Initiating the procedure

The parties under investigation for an alleged competition law infringement may approach the Directorate of Competition to express their interest in continuing the proceedings with the aim of terminating it with commitments, rather than with a decision that recognises their participation in an anticompetitive behaviour and imposing a fine.^[27] Alternatively, the Directorate of Competition itself may approach the parties to encourage them to pursue such an alternative procedure, either simultaneously with the start of the sanctioning proceedings or afterwards.^[28] Informal contacts before the formal submission of the application for the conventional termination are possible and encouraged.^[29]

The request to start conventional termination by the parties must be presented to the Directorate of Competition before the deadline for response to the statement of objections expires.^[30] However, the Guidelines urge the parties to contact the Directorate of Competition at the earliest possible point during the investigation. As Paragraphs 11 and 20 of the Guidelines state, the CNMC would be more inclined to accept commitments if the proposal is presented earlier in the investigation, as there is less conviction that an infringement has been committed and because the more advanced the stage of the investigation, the more blurred the effect of satisfying the public interest obtained by the prompt completion of the case is.

The application may be submitted by all or only some of the parties under investigation.^[31] However, the application must cover all alleged anticompetitive conduct initially attributed to each requesting party.^[32] It must also state the basic points of the commitments each requesting party is willing to submit, as well as an explanation as to why these would be enough to eliminate the negative consequences of the conduct in the market and be adequate to the public interest.^[33] Parties may abandon this alternative route of termination at any point during the proceedings and then submit themselves to the ordinary sanctioning procedure.

Once the Directorate of Competition has received the request of the parties, it has full discretion to decide whether to accept or reject the application.^[34] However, if it decides to reject the application, it must provide reasons for its decision.^[35] Therefore, the parties under investigation do not have an inherent right to end sanctioning proceedings with commitments, as it is a discretional matter that the CNMC decides on in each case.^[36] If the Directorate of Competition decides to accept the application for a conventional termination, it must state that it agrees to open the procedure before it submits its proposed resolution to the Council of the CNMC. The agreement of the Directorate of Competition does not bind the Council of the CNMC, which remains completely independent to decide on the appropriateness of the early termination.^[37]

The agreement to initiate the procedure aimed at terminating the proceedings with commitments does not automatically suspend the maximum period for issuing a decision (currently 18 months)^[38] but it does have to be notified to all the parties to the investigation, even those that decided not to take this course of action, and it must indicate whether a suspension has been agreed.^[39]

After the agreement has been notified to the parties, a dialogue between the parties that agreed to conventional termination and the Directorate of Competition takes place. First, the Directorate of Competition may grant the parties a period of up to three months to formally present their commitment proposal (if they had not already presented it when they submitted their request to start the procedure).^[40] In practice, the Directorate of Competition usually grants the parties a 15-day period to submit their proposal.^[41] If the parties do not submit their commitments proposal by the set deadline, the Directorate of Competition will consider that the parties have withdrawn their request and, thus, the ordinary sanctioning procedure will continue.^[42]

The proposal must: (1) identify all parties that will be bound by the suggested commitments; (2) establish the timescale and geographic scope of the commitments; and (3) include a statement explaining why the commitments are sufficient and adequate.^[43]

The proposal shall then be notified to the Council of the CNMC and a non-confidential version of the proposal circulated to all other investigated and interested parties to the proceedings so that they can submit their observations within 10 working days.^[44] At this stage, the other parties in the investigation, including those that initially decided not to submit an application for the conventional termination, may decide to adhere to the notified commitments or to present their own proposals.^[45]

The role of the Directorate of Competition

At this point of the proceedings, the Directorate of Competition will decide whether the proposed commitments are appropriate. To do this, it may carry out a market test and send requests for information to the (third) parties it considers fit, so as to compile their observations on a non-confidential version of the proposal.^[46] All third parties will be bound by the duty of confidentiality regarding the content of the proposal, as well as any other information to which they have had access because of the request for information by the Directorate of Competition.^[47]

The Directorate of Competition will reject the proposal if it considers that the proposed commitments are insufficient to adequately address and correct the effects the practice in question has had on competition or do not sufficiently safeguard the public interest (even after it has asked the submitting party for clarifications or modifications to the proposal).^[48] However, the communication between the parties and the CNMC will not conclude at that point, as the CNMC will first grant the parties an additional 10-day period to submit a new proposal.^[49]

If the parties that submitted the initial proposal that the Directorate of Competition rejected do not submit a new proposal within the deadline set by the authority, the Directorate of Competition will consider that the parties have withdrawn their request and, consequently, the ordinary sanctioning procedure will continue.^[50]

Similarly, if the Directorate of Competition considers that the new proposal does not meet the required standards, it will end the procedure for a conventional termination and continue the investigation within the scope of the ordinary sanctioning proceedings, notifying all interested parties of that decision.^[51]

If the Directorate of Competition considers that the commitments of the parties comply with the requirements, ensuring the public interest, it will submit them to the Council of the CNMC so that it can make a final decision on the proposal of the parties.^[52]

Final decision of the Council of the CNMC

The Council of the CNMC has three courses of action open to it.

First, it may reject the proposal and order that the procedure for conventional termination be set aside and that the investigation under the sanctioning procedure be continued.^[53]

Second, it may instruct the parties to present the Council of the CNMC with a new proposal with a different set of commitments, which it will be free to accept or, yet again, reject.^[54] If it rejects the different commitments, and if the parties do not submit a new proposal within the deadline the Council of the CNMC sets, they will be considered to have withdrawn their request, and the Council of the CNMC will order the Directorate of Competition to continue with the ordinary sanctioning procedure and will resume – if it was ever suspended – the calculation of the maximum period for the resolution of the sanctioning proceedings from the date of the agreement of the Council of the CNMC onwards, notifying all interested parties.^[55]

If the Council of the CNMC accepts the proposed commitments – either on the first or on subsequent rounds – it will issue a final decision terminating the proceedings.^[56] The commitments agreed between the investigated parties and the CNMC must be clearly included in the CNMC decision that puts an end to the proceedings, and they will be binding on the parties from that date on.^[57] The decision of the Council of the CNMC accepting the conventional termination will have the following minimum content:

• identification of the parties bound by the commitments;
• personal and territorial scope and timescale of the commitments;
• purpose and scope of the commitments; and
• system for monitoring compliance with the accepted commitments.^[58]

Parties to the proceedings may file a judicial appeal against the final decision of the Council of the CNMC within two months of the notification date (even if they submitted the commitments themselves).^[59]

Follow-on damages claims deriving from a decision under the conventional termination procedure

Individuals that have suffered damages because of the investigated – and potentially anticompetitive – conduct may submit a civil claim to the Spanish commercial courts, arguing the alleged non-contractual civil liability of the infringer.^[60] However, because there is no official recognition of an infringement in a conventional termination decision, the plaintiff in those civil actions will need to: (1) prove the existence of the anticompetitive behaviour that breaches the LDC;^[61] (2) prove the effective causation of damage and the causal link between the alleged infringement and the damage suffered; and (3) quantify the damage allegedly endured. Therefore, the chances of the plaintiff succeeding are significantly lower than in cases where the proceedings have terminated with a sanction or in leniency cases that result in the immunity of some parties.

Commitments accepted to date by the CNMC

Commitments that may lead to the conventional termination of sanctioning proceedings may be behavioural (e.g., termination of certain agreements), structural (e.g., divestiture of certain assets) or a mixture of both.^[62] The commitments that the CNMC has accepted thus far are outlined below.

Article 1 LDC cases

The first ever conventional termination decision of the CNMC was issued in 2015.^[63] The case concerned an alleged price-fixing and market allocation agreement in the market for assessing qualification for the Club for Management Excellence’s Recognition of Management Excellence. The CNMC accepted the following commitments:

• to subscribe to new contracts in which any element leading to the alleged price-fixing and market allocation practices are eliminated;
• to terminate any commercial relationship with those parties that refused to terminate the original contracts or to sign contracts containing the amendments;
• to eliminate any reference to recommended quotas for certification entities; and
• to commit to agree on the targets between the parties bilaterally, and not as a multiparty agreement.

In 2016, the CNMC investigated the alleged imposition of retail prices and designated suppliers on franchisees.^[64] The accepted commitment was the modification of the concerned contractual documentation, clarifying the procurement policy and pricing policy of its franchise systems for it to be compliant with competition law.

In 2017, the CNMC investigated certain agreements with distributors that allegedly prevented them from distributing the investigated undertaking’s branded products that had not been manufactured in Spain.^[65] The CNMC only accepted the restriction concerning one specific product type manufactured by one particular company in the United Kingdom. This commitment applied to existing and future contracts, and to any judicial proceedings deriving from them.^[66]

The newest conventional termination decision of the CNMC was published in early 2020.^[67] It concerned the alleged restriction of online sales, online advertising and cross-selling, and the imposition of post-contractual non-compete obligations on the franchisees of the investigated party.^[68] The CNMC agreed to the following commitments:

• to eliminate the post-contractual non-compete clause in the franchise contracts;
• to clarify the requirement for prior approval of the internet addresses used by distributors; and
• to remove the ban on cross-selling between dealers and franchisees.

Article 2 LDC cases

In 2015, the CNMC investigated the alleged configuration of a non-transparent system of discounts and tariffs for music content for television broadcasts, as well as the application of abusive conditions on television operators, which allegedly distorted their ability to freely determine their music content.^[69] The accepted commitments were the following:^[70]

• to apply discounts to the licensing of copyrights affected by the investigated conduct, based on objective, transparent and non-discriminatory criteria;
• to approve a single standard contract for the licensing of the above-mentioned rights;
• to terminate agreements relating to musical content with television operators; and
• to establish a compensatory mechanism to offset the effects caused by the investigated conduct.

In 2017, the CNMC issued a decision investigating the alleged establishment of contractual conditions with wholesale distributors that hindered the entry of new competitors into the market.^[71] The CNMC accepted the commitments to remove the most-favoured nation clause, the early termination clause and the prior notification obligation from the affected contracts, as well as the commitment not to increase the percentages of the compensation reduction clause established as penalty for early termination of contracts.

In 2018, the CNMC investigated the alleged application of discriminatory conditions to new internet pay-TV entrants in the wholesale distribution of certain products.^[72] The CNMC agreed to a conventional termination when the investigated party committed to offer internet pay-TV operators a wholesale distribution model based on fair and non-discriminatory terms compared to those enjoyed by the incumbent operators.

Article 3 LDC cases

In 2016, the CNMC investigated an alleged hindrance of the activity of competitors through the unfair means of communicating to customers misleading or denigrating information about the activities of their rivals with the intention of eliminating competitors from the market.^[73] The CNMC found these commitments merited the conventional termination of the proceedings:

• to refrain from making any similar statements in the future;
• to send a letter to the investigated entity’s commercial network, advising of the CNMC decision;
• to publish a practical competition law compliance guide in the entity’s internal newsletter, which included guidelines for communications with clients; and
• to send a letter to affected parties retracting the misleading statements that resulted in the sanctioning proceedings.

Finally, in 2018, the CNMC investigated an alleged use of deceptive marketing strategies to direct the customers of the investigated entity (active in the natural gas sector) from its regulated marketer to the free marketer.^[74] The accepted commitments were as follows:

• to refrain from including any information that involved directing customers to the free marketer in invoices and communications with customers; and
• for five years, to send a report biannually to the CNMC stating the specific actions taken to comply with the proposed commitments.

Regional competition authorities

Regional competition authorities, when dealing with a case that affects their territory exclusively, are entitled to initiate sanctioning proceedings and even decide to proceed with a conventional termination procedure.

In this regard, the Spanish competition law enforcement system is based on a decentralised model, whereby the power to apply Articles 1, 2 and 3 of the LDC in matters that affect only one territory are exclusively those of the competition enforcement agency of the autonomous community concerned.^[75]

Currently, eight autonomous communities^[76] have competition agencies with an investigative and a resolutory body, four autonomous communities^[77] have investigatory bodies and the CNMC is in charge of issuing final decisions, and five autonomous communities^[78] do not have any competition authorities.

Cases are allocated between central and regional competition authorities based on two elements: (1) the main point of connection of the case (i.e., the territory affected by the investigated conduct), and (2) additional specific connection points (to determine whether the investigated conduct may have an effect on the supra-regional market).^[79] Thus, the central competition authority (i.e., the CNMC) is not hierarchically above the regional competition authorities, but rather operates in a parallel manner to them, each within their territorial jurisdiction.

This decentralisation has, however, inevitably yielded a somewhat heterogeneous interpretation and application of the competition legislation.^[80] Hence, the law envisages several mechanisms to coordinate the enforcement of competition law by regional and central Spanish competition authorities. This coordination of powers that fall within the scope of enforcement of the CNMC and those transferred to the regional agencies is set out in Act No. 1/2002.^[81]

Specifically, the Directorate of Competition of the CNMC may take part in the proceedings before any regional competition authority, as an ‘interested’ party, and therefore is also entitled to submit its observations in cases in which the regional authority is following the conventional termination procedure, provided it does not exceed the limits of its power in a way that damages the effectiveness of the exercise of the powers vested in the regional authority.^[82] Moreover, the Directorate of Competition is entitled to judicially challenge the final decisions by the regional competition authorities.^[83]

Conclusion

The possibility of terminating antitrust sanctioning proceedings with commitments has long existed in Spain, but it has seldom been applied and it is not available in cartel cases.^[84]

The settlement procedure, on the other hand, is exclusively or mainly available for cartel investigations and it has proved to be very successful in all jurisdictions in which it has recently been introduced, such as Portugal and France, and at the EU level.

The much-anticipated introduction of the settlement procedure into the Spanish legal order will no doubt require some test runs before all stakeholders can reap the benefits of this tool. This is particularly the case because the proposed Spanish model envisages the possibility of applying it not only to cartel cases, but to any type of infringement of Articles 1, 2 and 3 of the LDC.

At the outset, a mechanism that allows both parties involved to terminate a case in an expeditious and coordinated manner seems like an appealing option for all parties involved, in particular taking into account the increased relevance of corporate compliance programmes as well as the impact of damages claims on leniency programmes.

Notes