UK: The European Antitrust Review 2008 Spain: Cartel Regulation

Last Updated: 8 October 2007
Article by Ramón García-Gallardo

The new Spanish Competition Act entered into force on 1 September 2007 (Law 15/2007, 3 July, on Defence of Competition) (the Competition Act) which replaces former Law 16/1989, 17 July.

The enforcement system is also completed by Law 1/2002 on coordination of competencies between central and regional bodies, adopted in response to a Constitutional Court judgment holding that regional governments are also competent in the field of enforcement (the Law 1/2002).

The new Competition Act aims at reinforcing existing mechanisms and providing the tools and optimal institutional structure in order to protect competition on the market. At the same time, it takes into account the changes introduced at EC level, notably Regulation 1/2003, and the powers of regional governments in this field. The new system is based on the experience gained in the past 15 years in the application of both Spanish and EC law. Law 1/2002 has been slightly amended by the Competition Act in order to reflect some of the new changes.

The Competition Act foresees a transitory period during which proceedings pending before 1 September 2007 will continue to be subject to the old system. The Competition Act will be supplemented by different Royal Decrees covering specific areas. The government has six months to adopt these implementing rules.

Enforcing bodies

The Competition Act reshapes the institutional structure of the central government competition authorities.

Under the old Act, there were two different bodies at central level: Servicio de Defensa de Competencia or Service for Defence of Competition (SDC) and the Tribunal de Defensa de Competencia or Tribunal for Defence of Competition (TDC). The SDC was responsible for initiating investigations, either of its own motion or on the basis of complaints. Whenever it considered that there was an instance of anti-competitive conduct it referred its assessment to the TDC for a final decision, and possible imposition of sanctions.

As from the 1 September, the SDC and TDC have been merged into a new single independent authority, the Comisión Nacional de la Competencia or National Competition Commission (NCC), which is integrated by the chairman, the Council and the Investigation Directorate.

The chairman is entrusted with managerial and representation duties. The Investigation Directorate is in charge of conducting the investigations into cases and preparation of files as well as studies and reports.

The Council, empowered with the final decision-making power, is composed of the chairman of the NCC and six members. All of them will be appointed for a non-renewable six-year term by the government following a proposal by the Ministry for Economics, and after a hearing takes place in the Committee for Economics of the Congress. A majority vote of the Council is required for the appointment of the director of the Investigation Directorate, who is also appointed by the government following a proposal by the minister for economics.

The NCC is controlled by the parliament. It is foreseen that the NCC will draft an annual report and its chairman will appear before the parliament regularly. In addition, the Competition Act sets out a series of provisions on transparency (ie, publication of reports and decisions).

One of the most important changes introduced by the Competition Act is the possibility that certain provisions may be directly applied by the Commercial Courts (ie, prohibition of anti-competitive agreements and abuse of dominant position). Furthermore, the Commercial Courts will be able to award damages based on the Competition Act without requiring a prior administrative decision finding an infringement. This change resolves the existing asymmetry under the old Act between EC law and national law, since commercial courts could apply article 81 and 82 but not the equivalent national provisions. The old system included many obstacles for the development of private enforcement of Spanish competition law provisions.

In view of the increased importance of Commercial Courts, the Competition Act introduces an amicus curiae system inspired in Regulation 1/2003 by which the NCC and the antitrust regional bodies may submit observations regarding the application of the Competition Act.

As already mentioned, enforcement of Spanish competition rules (except for merger control) is shared with the regional governments since the enactment of Law 1/2002 which also sets out some coordination rules. Spanish competition rules can be applied by regional authorities provided the conduct at stake has a regional scope. For this purpose, regional governments have to assume these competencies. To date, nearly all Spanish regions have enacted rules but not all of them have established ad hoc authorities. The Competition Act establishes that the NCC will be under the duty to request a nonbinding report to a regional authority on a particular case regarding the application of the Competition Act provisions or even article 81 and 82 of the EC Treaty, provided there is a significant impact of the infringement on the regional territory.

Finally, the Competition Act confirms that the sectoral regulators (ie, telecommunications and energy) cannot apply the Competition Act provisions, in which case they have to refer the case to the NCC. Nevertheless, sectoral regulators have to draft non-binding reports for the NCC in certain instances. Finally, the Competition Act aims at increasing coordination with the sectoral regulators setting out a mechanism of regular meetings.

Substantive rules: prohibition of anti-competitive agreements and practices

The prohibition of anti-competitive agreements is enshrined in article 1 of the Competition Act. Similar to the analogous provision of the old Act, article 1 prohibits any agreement, decision or collective recommendation or any concerted or consciously parallel practice which have as their object or effect the prevention, restriction or distortion of competition in all or part of the Spanish market, and in particular those that:

  • directly or indirectly fix prices or any other commercial or service terms;
  • limit or control production, distribution, technical development or investments;
  • share markets or sources of supply;
  • apply dissimilar conditions to equivalent transactions in commercial or service relations, thereby placing some competitors at a competitive disadvantage; and
  • make the conclusion of contracts subject to the acceptance of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

It also sets forth a definition of cartel as "a secret agreement between two or more competitors which have as object fixing prices, production or sales quotas, sharing markets including bid-rigging or restricting imports or exports".

One of the main features of the Competition Act in this field is the abolition of the system of individual exemptions in line with Regulation 1/2003. Under the new Act, the prohibition described above will not apply provided the same criteria set out in article 81.3 of the EC Treaty are met. Furthermore, the EC Block Exemptions will also apply to those agreements even in the absence of cross border impact. In addition, the government is empowered to adopt block exemptions. It should also be pointed out that the Competition Act repeals the possibility set out in the old Act to authorise agreements justified by public interest and the general economic situation.

The Competition Act also includes a provision whereby findings of inapplicability may be made similar to article 10 of Regulation 1/2003.

Nevertheless, the prohibition set out in article 1 does not apply to conduct that results from the application of a law. However, this inapplicability is without prejudice to the application of the EC competition provisions.

Similarly, the prohibition will not apply to conduct that qualifies as de minimis, according to criteria that will be set out in a Royal Decree. This provision contrasts with the old system, where there was no clear guidance as to when a certain conduct could be qualified as de minimis.

Finally, apart from the fines which can be imposed by the (central or regional) antitrust authorities (see below section on fines), agreements or any other decision prohibited by article 1 shall be deemed void.

Procedure

The Competition Act keeps a two-phase procedure despite the structural changes in the central enforcement bodies: investigation carried out by the Investigation Directorate and the resolution by the Council.

Proceedings are initiated by the Investigation Directorate on the basis of a complaint or of its own motion. Before opening formal infringement proceedings, the Investigation Directorate can proceed with an initial investigation (información reservada). During this preliminary phase the Directorate is empowered to carry out inspections.

Once proceedings have been formally initiated, the investigated companies are heard, and have the option to submit observations regarding the statement of objections. The Directorate’s fact-finding powers have been reinforced in line with Regulation 1/2003 (ie, inspection of homes of directors, managers and other members of staff and the possibility to seal any business premises and books or records for the period and to the extent necessary for the inspection). The Council can adopt interim measures which, contrary to the old Act, do not have a six-month limitation. Once the Directorate has finished its investigation and concludes the possibility of the existence of an infringement, it will refer the case to the Council which will assess the case and adopt a final decision on the infringement and imposition of fines.

The Competition Act reduces (from 24 to 18 months) the maximum length of the procedure (although under certain circumstances this deadline can be extended). A regulation will determine the maximum length of each stage of the procedure (investigation and resolution).

Furthermore, the Competition Act keeps open the possibility of terminating proceedings with a commitments decision, although the period during which commitments may be submitted has been extended and the procedure is more flexible now. Under the new Competition Act, the parties may propose commitments at any time before the case is referred by the Investigation Directorate to the Council. Under the old Act, the parties could not offer commitments after the statement of objections was issued.

Fines

The Competition Act includes for the first time a classification of infringements depending on seriousness (minor, serious and very serious). Cartels are classified as very serious. The fine will depend on the seriousness of the infringement, and the maximum fine will amount up to 10 per cent of total turnover. When turnover cannot be calculated, the Council can impose a fine up to €10 million. In addition, individuals (ie, legal representatives or members of the management body) may be subject to a fine of up to €60,000 (under the old Act the maximum amount was €30,000). The Competition Act also includes new provisions, similar to Regulation 1/2003, that seek to guarantee that trade associations pay the fine imposed on them.

The Competition Act sets out the criteria that are taken into account when calculating the exact amount of the fine (scope and characteristics of the affected market; market shares of responsible undertakings; scope of the infringement; duration; effects of the breach on consumers or any other undertaking; unlawful profit). The Act now lists a series of mitigating and aggravating factors as well.

Leniency

One of the major changes introduced by the Competition Act is a leniency system for both total immunity and reduction of fines in cartel cases. Nevertheless, this system will only enter into force once the implementing regulations have been adopted by the government.

Immunity is reserved for the first company or individual who provides evidence which, in the NCC view, will enable it to carry out an inspection or to find an infringement of article 1. Those who have adopted measures obliging other undertakings to participate in the infringement are excluded. In addition, the applicant is required to: cooperate fully, on a continuous basis and expeditiously throughout the investigation; end its involvement in the alleged cartel immediately following its application, except for what would, in the NCC’s view, be reasonably necessary to preserve the effectiveness of the inspections; not destroy relevant evidence relating to its application and not disclose to third parties other than the European Commission or any other national authorities its intention to submit an application or its content.

Companies or individuals which subsequently provide additional evidence may have their fines reduced (by 30 per cent to 50 per cent for the first undertaking to provide significant added value; 20 per cent to 30 per cent for the second; and a maximum of up to 20 per cent for the subsequent undertakings). Reduction can be granted when the undertaking provides the NCC with evidence of the alleged infringement which represents significant added value with respect to the evidence already in the NCC’s possession. Furthermore, the applicant must meet the cumulative conditions set out above.

If the applicant for a reduction of a fine submits evidence which allows for the establishment of additional facts with a direct bearing on the amount of the fine, the NCC will take such additional facts into account when setting the fine to be imposed on the undertaking which provided this evidence.

Immunity and reduction of fines granted to a company will also benefit its legal representatives or members of management bodies who have participated in the alleged infringement provided they cooperate with the NCC.

In order to protect the effectiveness of the leniency system, the Competition Act establishes that the NCC cannot provide the Commercial Courts with the information obtained via the immunity or reduction of fines applications. This provision affords some protection to applicants in case of damages actions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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