Portugal: Competition Authority
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The Portuguese Competition Authority (AdC) saw significant results in 2017 in both its enforcement and advocacy activities, having carried out activity in a wide range of sectors across the Portuguese economy. The year saw significant results in terms of a reinforced enforcement agenda, innovative analyses in merger control as well as an active agenda in promoting competition in the economy.
In 2018, the AdC marks its 15th anniversary as the sole competition enforcer in Portugal. The priorities set for 2018 seek to build upon the impressive results achieved in 2017 in pursuit of an ever more efficient and effective role in defending and promoting competition in Portugal.
Reinforced investigative strategy in competition enforcement
In 2017, the AdC imposed €38.8 million in fines in three sanctioning decisions, two regarding investigations into restrictive practices and one for failure to notify a merger. This represents the highest levels of fines applied for breach of competition rules since 2009.
The AdC issued two fining decisions and two commitment decisions in a total of seven decisions regarding anticompetitive practices during the year. Fines were imposed for an agreement not to compete in the respective markets of two undertakings, namely that of electricity distribution and retail distribution, in mainland Portugal and, to a price fixing infringement by an association of undertakings concerning driving licenses.
Also, in response to competition concerns identified by the AdC in the financial sector related to information exchange systems, two business associations responsible for implementing such systems offered commitments to eliminate the negative effect of their practices, which the AdC accepted and rendered legally binding.
In terms of new cases, the AdC carried out a record number of dawn raids in 2017 in 16 investigations (35 premises of 44 entities), an eight-fold increase when compared to the historical annual average. The AdC opened 13 investigations, of which 85 per cent were ex officio procedures.
These results are a reflection of a consistent and strategic investment in human, organisational and technological resources to reinforce the AdC’s investigative capacity. This strategy has been particularly focused on strengthening investigative capacity in the digital environment, namely through improving forensic IT tools and procedures when carrying out dawn raids. In 2017, the AdC made full use of its specialised software and procedures to review and access digital evidence, which also facilitates selection, organisation and the analysis of evidence.
By the end of the year, the AdC was investigating 20 cases of restrictive practices, two for an alleged abuse of dominance and 18 regarding alleged prohibited agreements.
Detecting cartels as a priority of the AdC – bid-rigging in public procurement
The detection and sanctioning of cartels, and in particular cartels in public procurement, has been at the forefront of the agenda of the AdC for several years as part of a strategic dimension of its activity.
In 2017, the AdC made important strides with regards to ex officio detection and leniency. Most notably, changes enacted in the Public Procurement Code granted the AdC with direct and full access to the Public Procurement Portal (BASE Portal) and the Public Works Observatory (Observatório das Obras Públicas), as of 1 January 2018. The access to BASE Portal was operationalised in a memorandum of understanding between the AdC and the Institute for Public Procurement, Real Estate and Construction (IMPIC) which was signed in November 2017. This full and direct access will allow the AdC to extend its activity in intelligence gathering, particularly in public procurement. The data will be analysed by the AdC with quantitative statistical and econometric methods, namely through the application of screens which aim to detect behavioural patterns that indicate collusion.
In the framework of the strategy for public procurement, the AdC also continued its Fighting Bid-Rigging Campaign which reached, in 2017, over 1,300 public procurement officials or others with responsibilities in public procurement. The campaign seeks to raise awareness among public authorities of bid-rigging and efficient design of tenders. The interaction between the AdC and procurement bodies encourages long-lasting relationships of mutual understanding and alignment of incentives in the defence of competition and efficient public spending. It has also gained international recognition, having been awarded an Honourable Mention in the 2016–2017 Competition Advocacy Contest organised by the International Competition Network and the World Bank Group.
The AdC also continued to raise awareness of its leniency programme, an essential tool for competition enforcement. As a means of promoting awareness of the benefits and rules of competition while creating a privileged platform for complainants, the AdC launched the Online Complaints Portal in 2017. This online portal includes information on competition infringements and assists the complaint in making a more robust and informed complaint to the AdC.
Effective and efficient merger control – a focus on detecting gun jumping
In the field of merger control in 2017, the AdC adopted a total of 54 decisions in a wide variety of markets and issued a sanctioning decision for failure to notify a merger.
The year was also marked by the SIBS/UNICRE merger, ultimately withdrawn by the parties in Phase II following an AdC draft prohibition decision. The draft prohibition decision of the AdC on the acquisition of the merchant acquiring business of UNICRE by SIBS considered that the acquisition would strengthen the barriers to entry and competition in the market, which could ultimately lead to a monopoly in the Portuguese payment system, and consequently cause serious harm to merchants and the final consumer.
Among the priorities of the AdC is the detection of gun jumping and failure to notify a merger. In 2017, seven investigations were opened. A sanctioning decision with a fine of €38,000 was issued to the Vallis Group for implementing a merger without prior notification to the AdC through which the group acquired sole control of 32 Senses, a network of dental care clinics.
For 2018, the AdC maintains a strong focus on efficiency and streamlined procedures, maintaining a focus on effectiveness of decisions.
Consolidating practice and procedures through success in judicial review
Judicial review has been a consistently positive indicator of the robustness of AdC decisions in recent years. In 2017, the AdC continued to demonstrate a strong track record of proving its cases in court which provides credibility as an enforcer. These results reflect a priority of continuous improvement in the quality of decisions, both in terms of due process and substantive analysis, with appropriate internal checks and balances.
In 2017, of the 19 court rulings on AdC decisions regarding both procedural matters and substantive issues, the courts ruled in favour of the AdC in 17 proceedings. The AdC had a 100 per cent success rate in substantive issues concerning infringements of competition law, and a total success rate of 89 per cent success rate, including procedural matters related to access to file and the handling of complaints. There were six interlocutory decisions, all favourable to the AdC.
Since 2012, the success rate in court of the AdC has risen from approximately 50 per cent to an impressive 89 per cent in 2017. This improvement results from a strategy to implement sound and transparent investigations as well as internal checks and balances both in terms of legal and economic reasoning.
The Lisbon Court of Appeal upheld the decision of the Competition, Regulation and Supervision Court (TCRS) which ruled in favour of the AdC against the National Association of Pharmacies and three undertakings of the same group, confirming the abuse of dominance (margin squeeze) in the markets of commercial data from pharmacies and of market studies based on these data, reducing the fine for having considered that the requirements for parental liability were not satisfied.
The Lisbon Court of Appeal upheld the AdC decision against three companies forming part of Galp Energia Group for anticompetitive practices in the Portuguese bottled liquid petroleum gas (LPG) market. The court maintained the fine of €4.1 million imposed by the TCRS, in a previous judgment. The AdC investigation in 2015 found that Galp Energia forbid its distributors from selling bottled LPG outside their allocated territory, thereby stifling intra-brand competition between these distributors.
In the scope of merger control, the Supreme Court of Justice confirmed the clearance decision of the AdC of a merger concerning the acquisition of sole control of Empresa Geral do Fomento, SA by Serviços Urbanos e Meio Ambiente, SA. This decision puts an end to the litigation against the clearance decision of the AdC initiated in 2015.
Promoting competition in the market
In parallel to its activity as a competition enforcer, the AdC is also a vocal advocate for competition in the Portuguese economy. By promoting a competition culture, the AdC seeks to promote awareness among stakeholders of the benefits of competition for economic growth, innovation and competitiveness.
In 2017, the AdC issued 15 opinions on draft legislation and regulation including on energy, telecommunications and air transport sectors, waste management, as well as two recommendations. The AdC responded to five public consultations on regulated sectors, out of which four were launched by the Energy Services Regulatory Authority and one by the National Authority for the Fuel Market. The AdC also issues two opinions on draft legislation regarding the LPG sector and one opinion regarding a draft governmental ordinance imposing a maximum rate of discount on prices to final consumers by pharmacies
The AdC also published two in-depth studies with recommendations on the industry of bottled LPG in mainland Portugal and the provision of natural gas to industrial consumers.
The past year also saw the continuation of the AdC competition impact assessment project, including a partnership with the Organisation for Economic Co-operation and Development (OECD). This joint project seeks to assess restrictions on competition in laws and regulations affecting 13 liberal professions and the transport (road and maritime) sector by using the OECD Competition Assessment Toolkit. Four high-level meetings were held in 2017, 140,000 pieces of legislation identified (laws, regulations and decrees), and 1,600 selected for analysis. This project also included several bilateral meetings with stakeholders from the public and private sectors, and four workshops on capacity building. The project also seeks to build capacity with the AdC and the Portuguese public administration on competition impact assessment of public policies.
The project, which culminates in July 2018, will include OECD recommendations for promoting competition in these markets as well as AdC Strategic and Implementation Plans, as well as guidelines on competition impact assessment.
Reaching out to stakeholders
Promoting a culture of competition and raising awareness of the benefits, but also the rules, of competition is an important dimension of the work of the AdC. During 2017, the AdC held several workshops aimed at reinforcing institutional cooperation with sector regulators, notably with the Portuguese Securities and Markets Commission, the Institute for Public Procurement, Real Estate and Construction, the Central Bank and the Portuguese Authority for Mobility and Transport. These workshops focused on the activities of the AdC, its recent achievements in competition law enforcement and on opportunities for cooperation between the AdC and regulators in their respective sectors.
The AdC also held seminars and widespread mailing campaigns to increase awareness among the business community of the rules of competition and of the advantages of a competition culture in Portugal. The AdC Guide on the Promotion of Competition for Business Associations that identifies the do’s and don’ts for business association was the object of several seminars with the business community.
In addition to raising awareness of the benefits and rules of competition, the AdC also seeks to promote dialogue and debate regarding competition issues. In 2017, the AdC held a public seminar series that brought nationally and internationally renowned experts on several fields of competition law and economics to the AdC Abel Mateus Competition Library. Following this, the AdC launched ‘CompCast – Competition Talks’ to share conversations with national and international experts on key topics concerning competition. The CompCast – Competition Talks are available on the AdC website.
As a means of increasing transparency and engaging stakeholders, the AdC created a monthly bilingual newsletter was created that reports on the main activities of the AdC, including decisions, studies and recommendations, events and other advocacy initiatives.
Reinforcing international cooperation – 2017 Porto ICN Annual Conference
During 2017, the AdC was particularly active on the international front, building on its commitment to international policy and enforcement cooperation. In 2017, the AdC hosted the Annual Conference of the network in Porto, from 10 to 12 May. Over 600 high-level representatives from over one hundred jurisdictions and international organisations (OECD, European Commission, World Bank, UNCTAD, among others) attended the event, including the European Commissioner for Competition, Margrethe Vestager. Margarida Matos Rosa, the president of the AdC, Andreas Mundt, chair of the International Competition Network (ICN), and Manuel Caldeira Cabral, Minister of Economy, chaired the opening session of the event. The AdC continued its active engagement with international networks including the European Commission, the ICN, the OECD, UNCTAD and others.
As a competition enforcer, the AdC has brought significant results to light in 2017 in the detection and sanctioning of anticompetitive practices, and also in competition advocacy. For 2018, the priorities of the AdC will maintain a clear focus on cartels and anticompetitive agreements with impact on the final consumer. The AdC will also be closely following developments which emerge from the digital economy, in both competition enforcement and advocacy. Promotion of a competition-friendly regulatory environment and of a competition culture in Portugal will also be a priority for the AdC, along with a renewed commitment to transparency and due process, as has been consolidated in its activity.