Spain: EU & Competition Report 2017: Lack Of Bite

Last Updated: 22 February 2018
Article by Iberian Lawyer

Competition enforcement in Spain has weakened due to uncertainty surrounding the country's competition authority, though it has increased significantly in Portugal – meanwhile, the EU directive on antitrust damages will make clients less likely to apply for leniency

Competition enforcement in Spain has suffered due to the problems endured by the Spanish competition authority. It is now proposed that the National Commission on Markets and Competition (CNMC) be split into two entities in an effort to make it function better. While this is seen as a positive step, partly because the commission is inviting opinions on how it can improve the way it operates, it has also had negative repercussions – the uncertainty surrounding the organisation has meant that its competition enforcement function has not performed as well as would have been expected. However, the EU Directive on antitrust damages claims will generate opportunities for lawyers. Meanwhile, the Portuguese Competition Authority has significantly stepped up its enforcement efforts and carried out a significant amount of dawn raids in the last year.

Jaime Pérez-Bustamante, partner at Linklaters and a member of the firm's partnership board, highlights the implementation of the EU Directive on antitrust damages claims as one of the key developments in the area of EU and competition law in the last 12 months. Meanwhile, Pérez-Bustamante also highlights the long-awaited Court of Justice long decision in the Intel case, which annulled the fine of €1.1 billion imposed to the company in an abuse of dominance case. He adds: "This is the first time that the court has required an effects-based analysis in an exclusivity rebate case." It is anticipated that the court's decision could embolden companies like Google and Apple which have received significant fines from the EU. Google was fined €2.4 billion after a seven-year investigation concluded the company had abused its internet search monopoly. Meanwhile, in 2016, the Irish government was ordered to claw back €12 billion in unpaid taxes from Apple, after the EU Commission ruled that the company's tax arrangements in Ireland constituted illegal state aid.

Another significant recent development, according to Pérez-Bustamante, was the Spanish National Commission on Markets and Competition (CNMC) taking the step of announcing a new policy of imposing fines on individuals involved in competition infringements in cartel cases. However, some lawyers argue that the fines on individuals (which go up to a maximum of €60,000) may be an insufficient deterrent.

DLA Piper partner José María Jiménez-Laiglesia says proposals to split the CNMC into two separate bodies – one focusing on competition and one concentrating on regulating markets – has undermined the organisation as it has restricted its enforcement capability and says that there has been a recognition that "mistakes were made [when six separate entities were merged to form the CNMC] and the CNMC has been losing cases". Casto González-Páramo Rodríguez, partner at Hogan Lovells, said the CNMC has finally opened up and allowed competition law experts to give their opinion on how to "improve the application of competition law". He adds: "This is a remarkable change, there have been public consultations on topics such as merger control procedure and the leniency programme – this has increased interaction with the CNMC."

There now seems to be a "breath of fresh air" at the CNMC, according to Oriol Armengol, partner at Pérez-Llorca. "There are new board members who will hopefully help to smooth over internal conflicts that have adversely affected the institution's work and prestige," he says. Armengol adds that the implementation of the EU Directive on antitrust damages claims will reduce the incentive for clients to ask for leniency. "There could be a decrease in leniency applications, which may result in fewer cartels being discovered," he says.

The view that the EU Directive could reduce the number of clients seeking leniency is echoed by Bird & Bird partner Patricia Liñán. "Leniency is at risk," she says. Liñán adds that there has been a decrease in legal work related to anti-competitive behaviour, partly because of the decrease in the CNMC's activity. However, she adds that the cost to companies of infringing competition law is increasing and therefore it is essential that companies invest in compliance.

Another significant pending issue in the field of competition law is the CNMC's consultation regarding guidelines on imposing fines, says Antonio Martínez, partner at Allen & Overy. "The 2009 CNMC guidelines on imposing fines were set aside in 2015, and now comments are being invited on new guidelines, in which the principle of proportionality needs to be taken into account."

Cuatrecasas partner Andrew Ward says one concern for clients is that some recent European Commission decisions – such as the ruling that the Irish government should recover €12 billion in unpaid taxes from Apple and record fines imposed on Google – could signify a trend towards a more "populist, combative path, compared to the previous approach of seeking solutions through commitment decisions". He adds that, although such decisions appear to give greater certainty, cases like Google do not actually "provide much guidance as to what companies must do in order to comply and as a result do not contribute positively to the development of competition law".

Explosion in cases

Jiménez-Laiglesia says another opportunity for law firms is advising clients on their business practices from a competition perspective. He adds that the amount of work available to competition lawyers is also dependent on the level of M&A activity in the market. Jiménez-Laiglesia also says that, despite the EU Directive on antitrust damages, he does not expect to see an "explosion in damages cases".

If there is an increase in competition damages claims, the risk for competition lawyers is that competition work could go to litigation departments in future, "which may impact partners' income in non-lockstep firms", says Pérez-Bustamante. According to González-Páramo Rodríguez, in the event of a rise in antitrust damages claims, an issue for major law firms could be conflict of interest in that leading firms will often be involved in cases as a defendant.

Lawyers say clients are now concerned about potential damages claims and the associated reputational impact. In general, awareness of competition law among clients in Spain is on the increase. Another opportunity for law firms is the introduction of a new law related to public procurement, Armengol explains. He adds that the new law will bring about an amendment of the Competition Act that will enable the CNMC to prevent companies involved in bid-rigging from being awarded public procurement contracts by the Spanish state.

Some major companies have in-house legal teams focusing on competition law, according to Martínez. He adds that some in-house departments ask law firms to provide them with training on competition. Meanwhile, Uría Menéndez partner Alfonso Gutiérrez says state aid cases may create business opportunities for lawyers in the future. He adds that some clients are recruiting competition lawyers for their in-house teams to "reinforce competition compliance and culture."

Law firms are providing "more preemptive advice" for clients in relation to competition law, says Ashurst partner Rafael Baena. He adds that it is difficult to tell if there has been an improvement in "competition culture" within companies because the CNMC has been less active.

There is greater awareness of competition law among clients which is good news for competition lawyers, says one partner. However, lawyers report that "behavioural work" is in decline due to the decline in the CNMC's activity. Yet more clients are now investing in competition compliance programmes, particularly due to the risk of facing a criminal investigation, according to Baena.

The role of external lawyers in helping to ensure clients do not infringe employment law is still very important, says Ward. "Specialist outside counsel have a breadth of [competition law] expertise that in-house lawyers will rarely have," he says. Ward believes lawyers in private practice are better placed to benchmark clients' competition compliance programmes against industry best practice and adds that although smaller organisations specialised in compliance programmes have emerged, full-service law firms have a "significant advantage due to their access to colleagues specialised in data protection, white collar crime and employment law".

Some competition-related legal work is becoming more commoditised, says Martínez. However, he adds that clients also require more sophisticated advice where the impact of technology is limited and a lot of partner involvement is required as it concerns the interpretation of human behaviour. In general, clients want more information on legal costs and more efficiency from a technological perspective, Baena says. He adds: "Competition law is not a commodity, a lot of expertise is really important to avoid risks."

Portugal: Greater enforcement

In Portugal, the main development in 2017 from a competition perspective has been the Portuguese Competition Authority (PCA) significantly increasing its enforcement efforts, says MLGTS partner Joaquim Vieira Peres. "Throughout the year, the authority carried out extended dawn raids in the retail distribution, insurance, driving schools and rail maintenance sector," he explains. However, the authority's actions have been controversial, Vieira Peres adds. "It imposed a fine of €38 million on energy company EDP and supermarket operator Continente for entering into a joint promotional campaign, which the authority viewed as including a horizontal non-compete agreement similar to a cartel," he says. "The theory of harm of the case is very questionable and the decision has been appealed, but the authority's views on joint promotional agreements – which are similar to agency agreements – and on the concept of 'potential competition' are cause for concern."

PLMJ partner Ricardo Oliveira echoes the view that the Portuguese competition authority's enforcement activities have been unprecedented. "It [the PCA] has carried out nearly 40 dawn raids over the past year, which is far in excess of what we've seen during prior years," he says. "The sectors targeted include retail, insurance, railway maintenance, driving instruction and transport." Oliveira says such activity is generating significant opportunities for law firms.

Decisions in pending cases related to dawn raids carried out by the PCA are keeping law firms busy, says Cuatrecasas partner Ricardo Bordalo Junqueiro. "On the other hand, some landmark competition authority investigations have moved forward which is a positive development, considering the PCA's reputation for taking a long period of time to investigate cases."

Competition in the market for EU and competition-related legal service has never been greater, according to Oliveira. "There is an increasing number of law firms developing capabilities to pitch for top-tier competition work," he says. "This trend has been reinforced by the perception that the regulator's activism will open up significant opportunities for high added-value work."

At the EU level, one of the biggest recent developments has been the leading truck producers' cartel case that has led to "multiple follow-on claims by countless parties, in particular in German courts, which is probably the first real pan-European judicial claim of its sort", says Luís Romão, senior associate at CMS Rui Pena & Arnaut. He also highlights the European Commission's e-commerce sector inquiry and the subsequent cases it has brought against some retailers in relation to business practices that restrict competition and limit consumer choice.

EU and competition lawyers in Portugal face a number of challenges connected to global trends, according to Margarida Rosado da Fonseca, of counsel at DLA Piper ABBC. She adds: "For example, growing protectionism and screening of foreign investment, coupled with increased state aid in countries where it is not scrutinised – unlike within the European Union - meaning therefore, there is not a level playing field. These challenges require more pragmatism on the part of lawyers and awareness of clients' businesses to facilitate legal solutions which suit them best and take into account the overall perspective."

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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