The European, Middle Eastern and African Antitrust Review 2017

Portugal: Overview

Vieira de Almeida & Associados

Legal and institutional changes over the past few years gave the Portuguese competition authority (PCA) a new-found strength. The PCA has increased the pace in every field of action and enforcement now runs more efficiently.

In the antitrust field, exchange of information in the banking sector and motor vehicle warranties’ schemes were in the spotlight. Moreover, the recent stream of cases closed through commitment and settlement decisions seems to indicate that the PCA has definitely taken up these tools to speed up the closure of cases rather than following the burdensome ordinary administrative procedure.

On the merger control side, notifications are steadily increasing as a result of the economic situation’s improvement and of the ‘clean exit’ by Portugal of its Economic Adjustment Program. The PCA’s Merger Control Department has been busy with as much as 60 mergers notified in 2015.

As regards public policy, the highlight was the PCA’s June 2015 Study on Competition in the Port Sector focusing on the governance model and cost structure of the sector as well as the liberalisation of the access to port services markets. The sector is considered a crucial driver to the Portuguese economy and the PCA succeeded in bringing the sector to the spotlight and also in engaging civil society in the discussion of competition policy. Over 40 entities submitted observations during the public consultation and countless articles were published in the press.

Institutional developments

After years of institutional consolidation it seems that the PCA is now fully geared up and ready to carve its priorities and policies. In the course of both 2015 and 2016, the PCA has stepped up both the definition of competition policy and enforcement.

In 2016 the PCA announced that it was to prioritise enforcement in public procurement. So far, the PCA has published a best practices guide on preventing bid rigging. The guide mainly aims at empowering public entities with a comprehensive toolbox to identify and prevent bid rigging. However, it is yet to be seen how the PCA will exercise its enforcement powers in this specific field.

On the legislative side the most high-profile subject is the upcoming transposition of Directive 2014/104/EU (the Private Enforcement Directive) into the Portuguese legal order. The PCA was tasked by the Ministry of Economy with the transposition and has since launched a public consultation of the draft Act. The main question for practitioners is whether the Act will succeed in promoting private antitrust litigation that until now remains rather incipient.

Case law

Antitrust

Financial sector under scrutiny

In March 2013, the PCA carried out dawn raids at 15 banks on grounds of suspicions related to exchanges of sensitive information. The investigation was triggered by a leniency application from the London offices of Barclays, followed by a second leniency application by Montepio.

According to press reports, the following banks are under investigation: Barclays, Santander Totta, Banco Espírito Santo, Caixa Geral de Depósitos, Banco Comercial Português, BPI, BIC, Montepio, Banif and Caixa de Crédito Agrícola. This was the first dawn raid publicly reported since the new Competition Act entered into force in July 2012.

The competition authority sent statements of objections to the banks in June 2015. A major legal battle is under way around access to file and the search and seizure powers of the PCA, which the 2012 Competition Act has strengthened in some respects. Serious constitutional questions hang over the seizure of emails which the 2012 Competition Act did not solve. The undertakings under investigation presented to date at least 11 appeals to the Competition, Regulation and Supervision Court (the Competition Court) regarding a number of procedural decisions taken by the PCA concerning access to file, extension of time limits and confidentiality of documents. At the time of writing the procedure was suspended by order of the Competition Court until a much expected ruling.

It is worth noting that in January 2016 the PCA carried out further dawn raids in 13 financial institutions. Press reports suggest that this initiative may be connected with the PCA’s original investigation into the banking sector.

Hard stance on false, inaccurate or incomplete information

In June 2015, the PCA imposed a fine of €150,000 on Peugeot Portugal for providing false, inaccurate or incomplete information in a reply to a request for information in the context of an antitrust investigation.

This was the first time the PCA has imposed a fine on these grounds. In the four months that followed, the PCA has fined two other undertakings on the same grounds.

In July 2015, it was CP CARGA’s turn to receive a fine of €100,000 for failing to provide a complete answer to a request for information addressed by the PCA during an investigation over an alleged abuse of its dominant position. CP CARGA is the freight division of the Portuguese national railroad company and the main investigation, which was later dropped, concerned the market for rail freight transport. The PCA’s decision was later annulled by the Competition Court, which considered that CP CARGA did not willingly breach the duty of cooperation.

Finally, in September 2015, the PCA went on to impose a fine of €150,000 on Ford for providing false, inaccurate or incomplete information in the context of a supervisory proceeding conducted by the PCA.

This line of cases demonstrates that the PCA is apparently willing to take a hard stance on undertakings who fail to cooperate with its investigations. It is also worth noting that these procedures were concluded in record times of three to eight months.

Commitments by carmakers in guarantee cases

In June 2013, the PCA opened an investigation on the contracts offered by Peugeot Portugal to its customers. The investigation regarded a clause determining that clients would lose the right to the manufacturer’s guarantee in case they took their cars for maintenance or repair to independent repair shops. Seeking to close the case, Peugeot offered a number of commitments in December 2014. In January 2015, the PCA went on to open separate probes on the same grounds against Ford Lusitana and FCA Portugal (Fiat). Both undertakings presented commitments in June and December 2015, respectively. Finally, in February 2015, the PCA started an investigation against SIVA (importer and distributor of Audi, Volkswagen and Skoda in Portugal) and the company also presented commitments in November 2015. The commitments in each case were submitted to public consultation. The commitments presented by all carmakers are rather similar, which suggests that the PCA played an active role in their design.

The companies committed to:

  • change all agreements and documents preventing customers from taking their cars to independent repair shops for maintenance or repair operations;
  • introduce on their websites, agreements, extended warranty contracts, booklets and any other documents concerning warranties a notice expressly stating that warranties are not subject to the client having repair and maintenance works carried out exclusively within the carmakers’ networks;
  • convey to its network of dealers and licensed repair shops the inexistence of restrictions to the possibility of customers taking their cars to independent repair shops for maintenance or repair operations, and the subsistence of the manufacturer’s guarantee in all cases; and
  • inform their clients of the new wording of the conditions of the guarantee.

All the cases were eventually closed as the PCA accepted the companies’ commitments.

School cartel is grounded by the PCA

In August 2015, the PCA fined five undertakings €831,810 for bid rigging in tenders for Parque Escolar, a public programme aiming at the modernisation of public schools. The five undertakings were active in the market for the rental of pre-fabricated modular constructions used as classrooms and schools’ support services in the schools under works. The investigation was reportedly triggered by a leniency application that led to dawn raids in late January 2014. During the investigation the PCA concluded that the undertakings had put in place market-sharing and price-fixing arrangements.

The settlement procedure, under which undertakings assume liability for the infringement and renounce to their right to judicial review in exchange of a reduction in the amount of the fine, was applied in this case for the first time since the adoption of the 2012 Competition Act. Apart from the successful leniency applicant, all the undertakings were granted a 10 per cent reduction in the amount of their fines as part of the settlement achieved with the PCA, and four of them were awarded further reductions to their fines as they cooperated with the PCA under the leniency programme.

It follows that all the members of the cartel were granted reductions to their fines, thus demonstrating that the PCA currently prefers to streamline procedures through cooperation with the investigated undertakings rather than following the burdensome ordinary administrative procedure (and the judicial battle that may follow).

Mergers

The economic and financial crisis took its toll on mergers and acquisitions in Portugal in the last few years. However, the ‘clean exit’ of Portugal in 2014 from the Economic Adjustment Program agreed in 2011 with the European Commission, the European Central Bank and the International Monetary Fund, and the significant improvement in the conditions of access by the country to financial markets, led to an overall enhancement of the economy. Business activity picked up and the first sign thereof was the increase in the number of M&A operations. The Merger Control Department of the PCA became busy once again and the number of transactions assessed increased accordingly, with at least 60 filings in the course of 2015. Two cases in particular deserve a detailed comment.

A tale of bread and bakery: the dismemberment of Panrico

Panrico is one of the most well-known and cherished brands for Portuguese consumers: the Spanish conglomerate commercialises in Portugal its popular pre-packaged bread as well as a number of industrial bakery products, including doughnuts. In the wake of the financial crisis Panrico’s solvency deteriorated and it was ultimately acquired by Oaktree (an American hedge fund), in 2011.

In 2015, it was announced that Grupo Bimbo would acquire the entire share capital of Panrico. Grupo Bimbo is a Mexican conglomerate, active in both Portugal and Spain where it is a very close competitor to Panrico in the pre-packaged bread market. In October 2015, Grupo Bimbo notified the transaction both to the PCA and to the Spanish watchdog (CNMC). Most probably to address any competitive concerns related with horizontal overlaps, the transaction as notified included a carveout of the business units of Panrico branded pre-packaged bread and bread substitutes, which would remain under Oaktres’s control. Nonetheless, publicly available information suggests that both Iberian watchdogs had concerns regarding competition in the market for pre-packaged bread. Thus, Bimbo withdrew the notifications in Spain and Portugal in November 2015 and February 2016, respectively.

Following the filings’ withdrawal, Oaktree and Grupo Bimbo seemed to have adapted the deal’s structure so as to address the concerns of both the PCA and the CNMC. According to the new structure, Adam Foods, a Spanish Group active in the food sector but not in the market for pre-packaged bread, would buy Panrico’s pre-packaged bread and bread substitutes units. Bimbo’s acquisition of Panrico was once again notified to the CNMC and to the PCA in April and May 2016, respectively. On its turn, Adam Foods notified the PCA of its acquisition of sole control over Panrico’s assets in May 2016.

At the time of writing the procedures before both the CNMC (Bimbo/Panrico) and the PCA (Bimbo/Panrico and Adam Foods/Panrico) were pending.

Municipalities at war over waste management control

In November 2014, Serviços Urbanos e Meio Ambiente, SA (SUMA) notified the acquisition of exclusive control over Empresa Geral do Fomento, SA (EGF). SUMA, a joint venture between Mota-Engil and Actividades de Construcción y Servicios, is active in urban cleaning and in the collection, transportation and processing of hazardous and non-hazardous industrial waste. On its turn, EGF was ultimately a public-owned company holding majority stakes in 11 companies holding concessions to operate in the municipal waste management market. EGF operated in 174 municipalities covering 60 per cent of mainland Portugal’s population. While EGF held a majority stake in each company, the remaining share capital was held by the municipalities of the geographic area where the company operated. In March 2015, the PCA decided to start a Phase II investigation due to concerns that the merger would affect competition in the market for the collection of solid waste for which the municipalities are responsible. It bears emphasis that 21 entities, including 11 municipalities, presented comments.

In July 2015, after almost nine months of investigation, the PCA cleared the concentration without remedies as it considered that competition in the markets at stake would not be jeopardised given (i) the low barriers to entry and expansion; (ii) the fact that the regulatory framework in force, and the municipalities monitoring power as EGF’s shareholders, prevented cost allocation between different activities; and (iii) municipalities’ countervailing buyer’s power as adjudicators in public procurement procedures.

At least six of the municipalities appealed the decision to the Competition Court, asking for interim relief. The Competition Court has so far dismissed at least four of the appeals in their entirety. At least one of the municipalities has further appealed to the Lisbon Appeal Court, which has upheld the Competition Court’s ruling.

Judicial review

€9.3 million fine in the bottled LPG market

Following a statement of objections issued in May 2014, the PCA adopted in February 2015 a decision fining three subsidiaries of Galp Energia, a market leader in the Portuguese energy sector, €9.29 million for abuse of dominance in the Portuguese market for bottled liquefied petroleum gas (LPG). This market is estimated at €330 million per year. The alleged practices of Galp Energia consisted in the prohibition of passive sales through the allocation of a certain territory to each of its distributors and the restriction of sales outside of it. The PCA considered that those practices limited intra-brand competition and consequently seriously restricted competitive pressure on distributors. The alleged practices occurred in mainland Portugal as well as in Azores and Madeira, and lasted for at least 15 years in the case of one of the subsidiaries.

Galp Energia subsequently appealed to the Competition Court, which confirmed the PCA’s decision in January 2016. However, it reduced the fine to €4.1 million as the PCA failed to prove that Galp Energia had also breached article 101 TFEU. It bears emphasis that the Competition Court’s ruling found Galp Energia to have acted with quasi-gross negligence (rather than intent).

Galp Energia announced that it will further appeal to the Lisbon Court of Appeal.

State aid

The financial crisis hit the Portuguese financial system hard, with four banks being recapitalised since 2012, one bank being resolved in 2014 and another one in 2015

In January 2013 Portugal notified to the European Commission state aid measures to recapitalise BANIF. BANIF was a mid-level national bank, the origins and activities of which centred on the Portuguese archipelagos of Madeira and the Azores.

The state aid encompassed an injection of capital of €700 million and the subscription of hybrid instruments of €400 million (CoCos). It was provisionally approved by the Commission, subject to the submission of a restructuring plan ensuring, inter alia, its viability. In July 2015, the Commission decided to open a formal investigation.

In December 2015 events evolved at lightning speed as a report on national television leaked a supposed plan to close the bank and calling deposits above €100,000 into question. The following morning BANIF’s shares nose-dived by 27 per cent as the bank was simultaneously hit by a run to deposits. In less than a week the Portuguese government informed the Commission of its intention to resolve BANIF.

Portugal thus notified resolution aid of up to €3 million and re-notified the previous aid as liquidation aid. The new plan encompassed a carveout of sound assets to a ‘clean bank’ which was eventually acquired by Santander, while the more problematic assets remained in BANIF in view of its liquidation. The state aid measures were swiftly approved by the Commission subject to a number of commitments offered by Portugal.

Privatisations

As part of the memorandum of understanding signed within the context of the Economic Adjustment Program in 2011, Portugal committed to proceed with the privatisation of a number of state-owned enterprises. A number of high-profile privatisations have already materialised, notably ANA Aeroportos de Portugal, which holds a 50-year concession to operate the eight main national airports, and CTT, the incumbent postal services operator, both in the course of 2013. The privatisations tend to be closely scrutinised by the European Commission under merger control, state aid and occasionally (as is the case with airlines) antitrust or ownership rules.

In June 2015, 61 per cent of the share capital of TAP Air Portugal, the flag carrier airline of Portugal, was awarded to Atlantic Gateway, a consortium made up by David Neeleman, owner of Brazilian airline Azul, and the Portuguese transport group Barraqueiro. The transaction was filed to the PCA in August 2015, and eventually cleared in Phase I in October 2015. However, in the month that followed, a new government came to power and immediately announced its intention to bring 50 per cent of TAP’s share capital back to the public domain. At the time of writing, it was yet to be seen how the reversion of the sale will be structured in concrete terms.

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