Spain: National Authority for Markets and Competition
The National Authority for Markets and Competition (CNMC) was created in 2013 through the integration of the former competition and regulatory bodies. This new institutional architecture has expanded the available tools to preserve and promote competition and efficient economic regulation, pooling previous knowledge and experience. The coordination between the different directorates (competition, telecoms, energy, postal and transport services) is allowing us to reach more informed decisions on competition and regulatory issues. Furthermore, our larger size and the greater diversification of activities constitute a solid safeguard for the independence of the CNMC. Four years after the creation of the CNMC, I can proudly say that we are reaping the fruits of this institutional framework.
On the merger side, the CNMC has assessed 371 mergers in the period 2014–2017. Most of them raised no competition concerns, so they were cleared under the fast-track procedure, with which it takes less than one month to give the transaction the green light. Numbers have been picking up recently in line with the recovery of the Spanish economy.
Regarding our activity in the antitrust domain during these four years, the CNMC has been especially active in the detection and prosecution of cartels. This result has been achieved thanks to a mix of proactive ex officio work, a well-functioning leniency programme and the good results obtained in dawn raids. We count on the experience of a skilled and dedicated team of inspectors working in close contact with our IT experts.
Indeed, in the period 2014–2017 the CNMC sanctioned 30 cartels (which represent 55 per cent of the antitrust cases in that period). A third of those cartels were uncovered thanks to our leniency programme which has proved to be very effective, with over 100 leniency applications since it began in 2008. The leniency programme has spurred our institution to carry out more inspections in an increasingly effective manner. In the period 2014–2017 we carried out a total of 32 inspections in 129 companies. In seven cases, inspections deriving from leniency applications allowed us to detect additional competition infringements in neighbouring markets.
In this four year period, the CNMC has imposed fines totalling more than €996.5 million, of which more than 80 per cent correspond to fines on cartels. The highest fine so far (€131 million after leniency exemptions) was imposed in 2015 in the car manufacturers’ cartel. There was a milestone in 2016 as well with the imposition of a fine on senior managers by the competition authority for the first time. The benefits for leniency applicants have also been high. Since the introduction of our leniency programme, total fine immunity amounts to around €200 million and fine reductions have reached €24 million so far.
Moreover, all these proceedings were conducted within a more than reasonable time frame. Indeed, our Competition Act requires that the investigation, after the opening of formal proceedings following an inspection, be carried out within a maximum of 18 months, something which is very uncommon as most jurisdictions do not establish specific deadlines for their investigations.
And yet, not everything has been easy in this four-year period. One of the most serious problems faced by this institution has been the divergent interpretation on fines that appeared in the judgments of the National Court since March 2013. In January 2015, the Supreme Court put an end to a long period of disagreement between the Competition Authority and the National Court. Fortunately, it confirmed that ‘total turnover’ in article 63 of our Competition Act for the calculation of fines refers to the turnover resulting from all economic activities of the infringing company, and not the ‘total affected market turnover’ as the National Court claimed. However, the new Supreme Court’s jurisprudence did have a disruptive effect: it annulled the 2009 ‘Communication on the Quantification of Fines’ which followed essentially the Commission’s Notice on Fines. On the other hand, the Supreme Court considered that the legal maximum of 10 per cent should be interpreted as an upper limit of a range of fines, and not as a cap or a levelling threshold, and this interpretation has forced us to adapt our fining methodology. That is why, in 50 per cent of the cases reviewed in the past years, the courts have ordered a recalculation of the fine. And in some very specific judgments, the courts have also questioned the due process regarding parties’ allegations. Nevertheless, in these last four years, the courts have upheld more than 80 per cent of the decisions as far as the declaration of the existence of an infringement is concerned. At the CNMC we are more committed than ever to strengthen the economic and legal aspects of our decisions in order to facilitate court review and keep this track record, and at the same time we are starting to receive the first judgments upholding the new fining methodology.
On advocacy, the CNMC has been extremely active in the promotion, dissemination, training and analysis of competition and efficient economic regulation. Since the birth of the CNMC, the Competition Advocacy Department has issued 108 regulatory reports (70 draft regulation reports and 34 reports on draft administrative acts), most of them dealing with public procurement, transport, professional services and the agrifood sector. The CNMC so far has also issued four annual reports on state aid and eight sector inquiries with an in-depth economic and legal review of sectors such as fuel retailing, airports and pharmaceuticals. During these four years, we have issued nine market studies with a more targeted approach and some recommendations, for instance regarding rail transport, road transport and intellectual property rights. The CNMC has also issued guidelines concerning the methodology of market studies and the evaluation of public aid.
However, the most powerful advocacy tool we have is undoubtedly the possibility to challenge national, regional and local regulations that hinder competition. Indeed, the CNMC is empowered to contest certain governmental administrative acts and regulations before an administrative judiciary if they threaten to introduce barriers to entry or limiting a healthy competition in the marketplace. In this four-year period, the CNMC has challenged six anticompetitive regulations, most of them at the regional and local level, in some cases including internal expert economic reports. The courts have upheld so far six of these appeals and ordered the removal of such anticompetitive regulations.
Looking ahead, the CNMC will endeavour to remain active in all these domains. As far as enforcement is concerned, the CNMC has announced as a major priority the fight against collusion in public procurement. Therefore, we are creating a specialist unit to boost ex officio detection of cartels, especially those affecting bid-rigging in public procurement. Undoubtedly, the interplay between private and public enforcement, and particularly the effect that damages actions might have on the incentives of firms to apply for leniency, has also raised awareness of the need to intensify ex officio investigations as a more proactive approach towards detection of cartels. That is why the CNMC is creating its own economic intelligence unit within the competition directorate to carry out a wide variety of market screening activities, including structural and behavioural screens, and with a special focus in the detection of bid-rigging in public procurement activities. The unit will include staff specialised in quantitative techniques and forensic IT and will be headed by cartel detection experts, with an aim to improving the likelihood of turning these quantitative findings into investigation cases.
However, this unit will not start from scratch. Since the end of 2014, a working group has been devoting a lot of time to the creation of a database with most of the information included in the public procurement platform from the Spanish Ministry of Finance, which includes the majority of public tenders from the national government and some of the regional and local governments. The CNMC has found out that many public procurement officials are unaware of Competition Law or lack enough knowledge to detect indicia of a bid-rigging infringement. What is more, public procurement authorities do not always know where and whom to inform in case of detecting a suspected bid-rigging, nor the consequences of this submission for their tenders. Therefore the CNMC has been carrying out for some time training sessions to inform and improve our relations with these procurement bodies and to set up clear contact points that could help to uncover bid-rigging cases.
In addition to the training of public officials on the subject, public campaigns on the media and collaboration with public administrations have been ramped up. The CNMC also collaborates with police units such as the Guardia Civil in order to share information about possible bid-rigging red flags detected during their criminal investigations. We are also reinforcing our collaboration with other national competition authorities dealing with similar issues to share best practices in this domain, and also with other public authorities in our country to get the necessary access to relevant data from those public tenders that deserve major scrutiny.
The focus will now turn to develop statistical tools and screening techniques to identify collusion patterns using detailed data from these public procurement databases. The new economic intelligence unit will make a deep dive, among other projects, into the development of a software application which uses quantitative indicators to identify collusion patterns and signs of bid-rigging. This application will be used to ‘red flag’ potential markets and infringements that deserve a closer investigation and to complement information from other sources such as our tool for whistle-blowers and complaints.
So far, I can proudly confirm that the performance of this working group has increased the number of complaints, leniency applications and whistle-blowings submitted to the CNMC related to bid-rigging cases and we expect numbers to keep growing in the near future.
The advocacy department of the CNMC will be quite busy in the coming months, with nine ongoing studies (eg, fintech, water supply, public procurement, professional services, pharmaceutical at the wholesale level), as well as several anticompetitive regulations that are expected to be appealed very soon in the road transport and tourist accommodation sectors.
Finally, the upcoming months will also be relevant from a regulatory point of view. The 10th anniversary of the Spanish Competition Act was in 2017. 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 at the same time 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 level playing field.
During this 10th anniversary celebration of the Competition Act we had a good opportunity to review the development of competition law in Spain during the last decade and to set a strategy for the challenges ahead. It seems clear to me that the time has come for some adjustments of the legislation to ensure that 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 discussed, both internally and in seminars with the antitrust community formed by lawyers and academics. Our aim is to ensure an even more effective enforcement of competition rules in Spain and the promotion of a culture of competition that will help to boost economic growth and dampen inequalities, hopefully maintaining the CNMC as one of the world’s top competition authorities. Another important stepping stone for such objective will be the so-called ECN+ Directive proposal, aimed at empowering the competition authorities of the EU to be more effective enforcers and to ensure the proper functioning of the internal market. The ECN+ Directive is expected to be adopted by mid-2018 and will allow European competition authorities including the CNMC to to impose effective fines, to have more coordinated and effective leniency programmes and to have the adequate resources and be sufficiently independent.