Spain: National Authority for Markets and Competition

The National Authority for Markets and Competition (CNMC), created in 2013, integrates competition and sectoral regulation authorities (energy, telecoms, transport, postal and audiovisual) in order to exploit economies of scale and scope, and to pool the knowledge, expertise and experience of the previous institutions. The new institutional design allows to internalise the debate between competition and regulation thanks to a comprehensive analysis of complex problems that demand coordinated solutions that include ex ante and ex post actions. The results are more coherent and better-grounded decisions thanks to a single decision body. Even if there are ongoing efforts to further reinforce the synergies and to develop a common culture, we consider that the merger has been successful and that the new institutional framework works properly.

Our combined mandate including competition advocacy and enforcement, as well as regulatory supervision in core sectors gives us a greater ability to face current economic challenges such as the digital economy. The CNMC can push harder for a better economic regulation than its predecessors did. Furthermore, the Spanish legislation gives us many ways to foster competitive and well-functioning markets thanks to powerful tools such as those derived from the Single Market Act or article 5.4 of the CNMC Act, which allows us to go to court against regulation that restricts competition without a reasonable justification. Our approach to issues such as the regulation of mobile and wholesale telecom services, the latest developments on the regulation of energy markets, and recent advances in the postal sector supervision shows a broader understanding of the impact of different regulatory options on consumer welfare, our final aim. This wider focus also increases the confidence of firms and the quality of Council decisions.

Notably, 2017 marks the 10th anniversary of the current Spanish Competition legal framework. The enforcement activity of the CNMC continued to be very intense during 2016. The Competition Directorate of the CNMC has devoted particular attention to the sector of telecommunications and pay-TV operators in Spain, new digital markets, intellectual property rights, financial services and professional services. Cartel enforcement remains the top priority of the CNMC in the field of anticompetitive conduct, since cartels constitute the most harmful anticompetitive practices to the economy, both for consumers and undertakings. As a result, in 2016, nine infringement decisions regarding cartels were issued with fines of more than €218 million which accounted for 96% of total fines imposed. After deducting exemptions and reductions applied to leniency applicants (€68.8 million), total fines have been €150 million, which proves once again that our leniency programme is working well.

The case with the highest sanctions (a total of €130 million) involved several manufacturers of absorbent products for incontinence targeting adults (adult nappies), including individual fines imposed on four executives who directly participated in the cartel (case S/DC/0504/14 AIO). The leniency applicant was exempted to pay a €68 million fine. This case originated from the application for leniency of one undertaking involved in the cartel, which led to the detection of this cartel by the CNMC. The Board of the CNMC reached the conclusion that several manufacturers, with the collaboration of the trade association Fenin, had engaged in cartel activity by fixing the prices of adult nappies paid for by the Spanish National Health Service. This case stands out not only for the amount of the sanctions, but also for the long duration of the cartel, its sophisticated organisation and its direct effect on public resources devoted to a serious health problem in Spain which affects 2.5 million people.

Other relevant cases in 2016 include the following:

•  Anticompetitive practices in the market of transport and handling services of valuable goods, in particular, cash (notes and coins), imposing fines totalling €46 million on Prosegur and Loomis (and two of its executives).
• Twenty-three companies active in the manufacturing and supply of cement and concrete were sanctioned a total of €29.2 million for cartel activity consisting in the exchange of commercially sensitive information, market sharing and price agreements between 1999 and 2014.
• Four companies and several executives of these firms were sanctioned for agreements and concerted practices consisting of market sharing, price fixing and the exchange of commercially sensitive information, in relation to the supply of railroad switches to ADIF, the state-owned company charged with the management of most of Spain's railway infrastructure.
• Fifteen companies specialised in international removal services were fined €4 million for putting in place a so-called ‘removal agreement' for more than 15 years through which the companies agreed to fix prices, carve up the market and exchange sensitive information on the international removals services for employees of several Ministries.
•  Following similar decisions adopted in 2015, new cartels of car dealers were sanctioned (dealers of the brand Chevrolet with €1.7 million and dealers of Volvo with €1.2 million).

These cases reveal renewed efforts of the Competition Directorate of the CNMC to boost its fight against cartels in 2016, particularly in two ways. First, sanctions to managers for breaching the law gained momentum by imposing 15 individual sanctions totaling €147,150. Even though this legal provision entered into force in 2007 under the current Competition Act, it has not been used until now and is proving a powerful deterrent in the fight against cartels. Second, the Competition Directorate is devoting strategic resources to fight bid rigging (that is, restrictive agreements between competitors who bid for contracts - competition for the market), a project started in 2015. To this end, a working group inside the Competition Directorate was created to collect information about bid rigging cases and to conduct screening tests with this information in order to detect such cases, provide training to tendering bodies to help them detect indicia of bid rigging, etc. Indeed, the working group has organised 14 training sessions, with the participation of over 750 civil servants actively involved in public tenders. In addition, a checklist has been released to disseminate bid-rigging detection tools among bidding bodies to encourage their collaboration with the CNMC, and there is a lot of ongoing work regarding screening techniques that would allow ex officio detection of bid rigging in public tenders.

Apart from cartels, the CNMC has sanctioned other prohibited practices under the Spanish Competition Act. Among these, it should be noted that six companies active in the market for turrón, a typical Spanish nougat dessert, were sanctioned more than €6 million for reaching agreements for the exchange of information on prices, customers and other commercially sensitive data.

In the area of intellectual property, the CNMC fined the Spanish Commercial Broadcasting Association (AERC) €190,000 for having carried out anticompetitive practices. This association tried to put pressure on entities that manage intellectual property rights (AGEDI and IEA) by promoting non-payment of invoices for the broadcasting rights as a boycott. In addition, the AERC sought to distort the negotiation of a new agreement with these companies, which collected the fees for the commercial broadcasting of phonograms to be paid by its associates. Thus, as of April 2011, in compliance with the recommendations of AERC, a large part of its associates stopped paying for several months to the management entities, with the consequent loss of revenue by AGEDI and the AIE.

In 2016, there was only one decision on abuse of dominant position in the market for automatic washing machines maintenance. The CNMC sanctioned Istobal for its refusal to supply spare parts and technical information to independent technical assistance services (SAT) which were not part of its authorised network without justification, as well as for geographical market segmentation.

The CNMC also issued a fine of €53,597 to Urban Science for providing incomplete, incorrect, misleading and false information in the course of an investigation; and almost €2 million to Viajes Halcón, SA and Viajes Barceló (travel agencies) for breaching a previous decision of the Competition Authority.

As for judicial review, in 2016 there have been 66 Supreme Court (TS) judgments related to 22 different cases. The TS granted the appeal of the parties in five cases corresponding to three different decisions of the Spanish authority (7.6%). Moreover, three judgments of the Court of First Instance (AN) annulled previous decisions of the competition authority (4.5%). In the remaining cases (88%), the substance of the competition authority's decision was upheld but a new calculation for the fine was ordered following a previous court decision of 2015 annulling the fining methodology traditionally used. It is relevant to mention that each appeal and judgment corresponds to one sanctioned company, so that a single case of the competition authority involving several undertakings gives rise to as many judgments as companies that challenged the decision.

Regarding merger control, 104 mergers were notified in 2016, compared to 91 in 2015 and 84 in 2014, thus consolidating the growing trend in the notification of these transactions. Of 102 operations resolved, 96 were authorised in the first phase without commitments and five were authorised with commitments provided by the parties. The pre-notification procedure was used in 94 of the 104 operations, a fact that demonstrates the usefulness of this instrument for both the notifying companies and the CNMC. Moreover, 54 transactions were notified using the simplified procedure, thus reducing the workload and the reporting requirements for the notifying parties and speeding the approval of these mergers.

Noteworthy operations include Bimbo/Panrico (where disinvestments in both production facilities and distribution networks were required to allow a new operator to compete effectively in the loaf bread market) and Gas Natural's acquisition of liquefied petroleum gas network assets (which required specific commitments by Gas Natural to allow competition in the retail market of natural gas). The CNMC also reviewed several mergers in digital markets where platforms are present (such as Just Eat/La Nevera Roja in the food delivery sector, or Daimler/Hailo/MyTaxi in the urban transport sector).

In the latter cases, the transactions related to the so-called two-sided markets (online intermediation platforms) where the parties defended that the mergers were non-reportable on the basis of broad product market definitions. The CNMC concluded that the affected product markets were narrower than those proposed, given the specificities of online intermediation services, which limited substitutability with other traditional services. In any case, when assessing the effects of these operations on effective competition, the decision took into account the competitive pressure exerted by traditional services, as well as the potential global growth of these new online intermediation markets.

As for advocacy, it is worth highlighting the work carried out in 2016 to improve public bidding by providing advice on how to design transparent and competitive public bids to different ministerial departments and bidding bodies. The Advocacy Unit also issued a market study on the distribution of fuels through unattended service stations, as well as a good number of reports on various legislative proposals (from taxi local regulations to inspection of vehicles services). During 2016, six economic reports assessed the effects and costs for consumers of restrictions on competition that have been challenged before the courts by the CNMC.

Likewise, the CNMC regularly intervenes through amicus curiae briefs before civil courts and administrative courts, in the context of private cases, both submitting written observations and providing requested information.

In the international arena, last year the CNMC successfully organised the annual meeting of the Cartel Working Group of the ICN in Madrid, with more than 275 participants from 66 jurisdictions. Attending the workshop were almost 200 international delegates from more than 50 jurisdictions; 134 representatives from Competition Authorities; and 61 representatives from non-governmental organisations, including 10 panellists from the CNMC. A total of 27 expert meetings were held: three plenary sessions, 10 mini-plenary sessions and 14 workshops. As a novelty, two workshops were held in Spanish. The main topic of the meeting was enhancing cartel enforcement with three sub-topics: strategies and techniques of investigation; public and private enforcement of competition rules; and sanctions and tools for deterrence.

The Conference was a unique opportunity to share experiences and knowledge among experts, both public and private, in the fight against cartels around the world and to make more publicly known to the international competition law community the huge effort made by the Spanish competition authority in this domain.

The CNMC continued to have an intense international activity in other fora during 2016, deepening its active engagement both in the European Competition Network (ECN) and in the meetings of other international organisations (OECD, Latin American Forum). This activity was supplemented with bilateral meetings with European neighboring counterparts (French and Portuguese authorities) and with training, cooperation and exchange activities with other jurisdictions. In addition, the CNMC signed a statement of intent with the Trade and Competitiveness Unit of the World Bank on mutual assistance.

In view of the above, we could say that 2016 has been a year of continuity in the development of an already successful policy in the fight against cartels, effective merger control and an active advocacy policy. It was also a relevant year as regards international activity, as we hosted one of the top annual top events of the competition community: the ICN cartel workshop. But 2016 will also stand out as a year in which the CNMC consolidated its activity; used, for the first time, new powerful tools such as sanctions on individuals; and boosted new initiatives regarding the fight against bid rigging which will have a positive impact on public resources in the coming years. Advances in the communication of the institution activity through the internet, social media, the CNMC's blog and other more traditional communication tools were also remarkable.

The CNMC's successful enforcement record in 2016 has enhanced its reputation and strengthened its de facto independence. But it is also true that the CNMC has often had to establish its credibility in opposition to big interest groups and to the government. We are all well aware of the difficulties of this task. This does not mean that we are satisfied with the situation. Among our future priorities would be to make sure we impose sanctions that are dissuasive enough and to reinforce the CNMC's autonomy in the use of its budget without undue restrictions from the government, and this is especially crucial in the area of human resources. It would also be convenient to remove some legal constraints to the internal organization of the authority.

Finally, we will soon be celebrating the 10th anniversary of the Spanish Competition Act which came into force in July 2007. Since its inception, the Spanish Competition Authority has successfully established itself in the eyes of consumers, businesses and the public sector in Spain as well as in the international arena. The role of the CNMC has been particularly crucial for Spain´s economic recovery, fostering competitive markets that contributed to the current healthy growth and fiscal consolidation while fighting anticompetitive practices that were harming our society in a particularly difficult moment. But the role of competition policy in Spain will remain extremely relevant as we face new challenges stemming from the global economic environment, the development of new markets and ways of doing business and the continuous need for a leveled-playing field.

The 10th anniversary celebration will offer a valuable opportunity to review the development of competition law in Spain during the last decade and to set a strategy for the challenges ahead. Indeed, our 2007 Competition Act has proved to be very effective particularly in the fight against cartels. Yet it seems that the time has come for a review of the legislation to ensure the CNMC is equipped with the best toolkit to conduct effective investigations. Introducing settlements or developing a fine-setting methodology that combines proportionality and dissuasion are just a few of the things that are being internally discussed at this stage and that will probably be subject to public consultation in the coming months. Our aim is to ensure an even more effective enforcement of competition rules in Spain and the promotion of a culture competition that will help maintain the CNMC as one of the top world Competition authorities.