Spanish Antitrust Law and Practice: An Overview

Juan Jiménez Laiglesia, Alfonso Ois and Gerard Pérez Olmo

DLA Piper

Main regulatory developments

Further to the entry into force of the recently issued Spanish Competition Act 15/2007 (the SCA), the new Spanish Competition Authority (Comisión Nacional de la Competencia or CNC) started its activity in September 2007 with increased enforcement powers and with a clear will to focus on the detection and sanctioning of hard-core restrictive practices.
Such wish for more aggressive enforcement of national competition rules has been notably reflected in the increasing number of investigations that have been initiated by the CNC at its own initiative (ex officio) over the past months. These investigations, most of which are still currently open, cover a wide range of national markets, including the most important, such as telecoms, energy, food, chemical and pharmaceutical.¹ In this context, the recent approval of the Regulation developing the new SCA, through Royal Decree 261/2008, of 22 February 2008 (RD 261/2008), has additionally increased the level of activity of the CNC, and especially as a result of the implementation, from 28 February 2008 onwards, of a new leniency policy in Spain.²
Obviously, it will take some time before being able to assess the impact of this new approach in terms of proceedings initiated or sanctions imposed on companies. However, as shown in the chart below, this year the CNC has opened a significant number of proceedings, many of which were opened ex officio. One assumes that the increasing importance of the proceedings initiated ex officio is closely related to the increasing number of investigations:

Source: CNC’s Annual Reports

The new leniency policy

The Spanish leniency policy³ is inspired, to a very large extent, by the existing leniency policy at the EU level, as applied by the European Commission according to its Notice on this matter dated 8 December 2006.⁴
Similarly to what is provided at the EU level, the CNC shall consider an undertaking or natural person exempt from the payment of any fine that it may have imposed on them due to its involvement in a cartel, forbidden by article 1 of the SCA, when:
(i) it is the first one to provide the CNC with evidence that, in the authority’s view, enables it to undertake a dawn raid or inspection in relation to a cartel, provided that at the time of its submission there is not enough evidence enabling the CNC to initiate such inspection; or
(ii) it is the first one to provide the CNC with evidence that, in the authority’s view, enables it to verify the existence of an infringement of article 1 of the SCA in connection with a cartel, provided that, at the time of its submission, the CNC does not have enough evidence to demonstrate the existence of such an infringement and an exemption has not been granted to an undertaking or natural person by virtue of point (i) above.

The CNC shall automatically refuse any exemption application that is submitted once a Statement of Objections has been issued and sent to a company in relation to its possible involvement in a cartel.
The granting of such an exemption by the CNC is subject to the following conditions, to be met by the company (or, if applicable, the natural person) that has submitted the leniency application.
The applicant must cooperate fully, continuously and expeditiously with the CNC throughout the administrative investigation procedure. Such cooperation obligation implies that the applicant must:
• provide the CNC immediately with all the relevant information and evidence that may be in its possession regarding the existence of the cartel;
• immediately answer any request for information made by the CNC in order to clarify the relevant facts of the case;
• facilitate oral interviews between the CNC and current (and, if feasible, former) executives and employees of the company;
• not destroy, hide or falsify any documents or relevant evidence regarding the cartel; and
• not disclose to any third parties the existence or the contents of the leniency application before the Statement of Objections is sent by the CNC to the affected companies, unless otherwise agreed with the CNC.

The applicant must bring its participation in the alleged infringement to an end at the time that it submits the evidence of the existence of the cartel, except in those cases where the CNC deems it necessary that its participation continues in order to preserve the efficacy of an inspection.
The applicant must neither have destroyed evidence related to the application for exemption nor have disclosed, directly or indirectly, to third parties other than the European Commission or other competent authorities, the existence of its application or part of its contents.
The applicant must not have adopted any measures to oblige other undertakings to participate in the infringement.
Exemption from payment of the fine granted to an undertaking shall also benefit its legal representatives or the members of the management bodies who have taken part in the agreement or decision, provided they have cooperated with the CNC.
The CNC may also reduce the amount of the corresponding fine in relation to those undertakings or natural persons that, without meeting the requirements set out in points (i) and (ii) as indicated above, provide the CNC with evidence of the alleged infringement which represents significant information of added value⁵ with respect to the evidence which is already in the CNC’s possession, and meet the requirements set out above.
Applications for reduction of fines can be submitted even after the notification of a Statement of Objections by the CNC to a company, provided that the evidence submitted by applicants is of real added value.
The level of reduction of the amount of the fine shall be calculated according to the following rules:
• the first undertaking or natural person that fulfils the relevant conditions as indicated above may benefit from a reduction of between 30 per cent and 50 per cent;
• the second undertaking or natural person to fulfil such conditions may benefit from a reduction of between 20 per cent and 30 per cent; and
• successive undertakings or natural persons may benefit from a reduction of up to 20 per cent of the amount of the fine.

The reduction of the amount of the fine corresponding to an undertaking shall be applicable, in the same percentage, to the fine that may be imposed on its representatives or the members of the management bodies that have taken part in the agreement or decision, provided they have collaborated with the CNC.

The relevant leniency procedure

Any applicant for leniency (exemption or reduction of a fine) shall submit its exemption or reduction application before the Cartels and Leniency Unit (CLU) of the Investigation Directorate of the CNC. The applications will only be registered after they are received at the Registry of the CNC. The order of registration will be set up according to the exact date and time of submission of any application in the Registry. Applications will be assessed on a chronological basis, according to their exact time of registration.
The CNC recommends that applicants submit their applications in a sealed envelope, which, after registration at the Registry of the CNC, shall only be opened by CLU officials. Applications shall consist of a form⁶ which should be signed by the applicant plus the relevant information and documentation regarding the existence of the cartel and its main characteristics.
Each leniency application must be submitted in two versions: the original (to be kept by the CNC) and a copy (to be kept by the applicant). Both versions should be marked with an adhesive receipt seal by the Registry of the CNC indicating the exact date and time of reception of the documents. The CNC can also, if requested by the applicant, provide it with a document confirming receipt of its leniency application.
If previously agreed with the CLU,⁷ applicants may also submit oral leniency applications, which shall be recorded at the CNC’s premises. The transcription of the application shall be immediately registered in the Registry of the CNC, indicating the exact date and time of such registration.
Once the CLU receives an exemption application, it will review its contents and confirm to the applicant whether the exemption can be granted. This shall only be confirmed by the Council of the CNC at the end of the investigation procedure and provided that the applicant complies with all the cooperation conditions after submission of the application. If exemption from the fine is not possible (in cases where a previous exemption has been submitted regarding the same cartel, or where the CNC was already aware of the existence of that cartel), the CLU shall allow any applicant to withdraw its leniency application or to submit an application for a reduction in the fine.
The applications for reductions in fines will only be assessed once the exemption applications (and their content) in relation with the same cartel have been reviewed. The applicants for reduction will be informed by the Investigation Directorate of the intention of the CNC to grant any reduction of the fine prior to the end of the infringement procedure.⁸ The Council of the CNC shall only confirm the exact level of reduction in its final decision, provided that the applicant complies with all the cooperation conditions after submission of the application.
All leniency applications and their contents (including the identity of the applicant) shall be treated as confidential information by the CNC, which shall place this documentation in a separate folder when classifying the information corresponding to the relevant case file. The affected companies will have access to the information deemed essential in order to reply to the Statement of Objections formulated by the CNC.
RD 261/2008 also provides for the mechanisms to coordinate leniency applications that have been submitted before regional competition authorities in Spain in cases where these are the competent authorities.⁹

Further issues covered by RD 261/2008: the new short merger notification form

In addition to the new leniency policy, the new competition regulations also provide detailed rules affecting different substantive and procedural issues related to the application of the SCA, among them:
• a new definition of the de minimis conducts, which is also in line with the contents of the EC Commission notice of December 2001 on this matter;¹⁰
• new rules on infringement procedure (powers of investigation, rights of the parties, interim measures, etc);
• new rules on merger control procedure (turnover and market share calculation, assessment of efficiencies, ordinary and short notification forms); and
• new rules on arbitration mechanisms.

One of the most expected developments included in the new competition regulations is the possibility to submit a short merger notification form in those cases where the transaction will have a limited impact on the competitive structure in the market.¹¹ The fact that a large number of transactions need to be notified before the CNC (the new SCA has maintained a national market share-based threshold, to be applied together with a turnover-based one), is somehow ‘softened’ by the introduction of this possibility to use this short form in some cases.
The short notification form can be used for the purpose of notifying concentrations when one of the following circumstances, inter alia, is fulfilled:
• where none of the parties to the concentration is engaged in business activities in the same relevant product and geographic market, or in a market that is upstream or downstream of a market in which another party to the concentration is engaged;¹²
• where the participation of the parties in the market, due to their negligible importance, are not capable of having a significant effect on competition. This will occur when:
• the participants in the concentration do not have a combined market share of more than 15 per cent in the same product or service market at the national level or in a geographic market defined therein, or if they do reach a combined market share of more than 15 per cent and less than 30 per cent, and addition of shares is no greater than 2 per cent; and
• the participants in the concentration do not reach an individual or combined share of 25 per cent in a product market that is upstream or downstream of a market in which the other party to the concentration is active at the national level or in a geographic market defined therein;
• where a party is to acquire sole control of a company or several companies or parts of companies over which it already has joint control; or
• where, in the case of a joint venture, it is not engaged and is not expected to engage in activities in Spanish territory or such activities are marginal. The activities of a joint venture will be considered marginal in Spain if its turnover does not exceed or is not expected to exceed e6 million.

The CNC has adopted, to date, quite a narrow approach in this respect, and tends to accept the use of the short form where the specific circumstances described by RD 261/2008 are met. However, the CNC has also shown itself to be flexible in special cases regarding the possibility to waive the obligation for the parties to provide certain information that is requested in the ordinary notification form, in accordance with article 56.3 in fine of RD 261/2008.
It is expected that as time goes by the CNC will be less reluctant to accept short form in cases of transactions with a minimal impact on the Spanish market even if these cases do not exactly match the examples set forth in RD 261/2008.

Main practical developments in 2008

Abuse of dominant position in the market of electricity generation
The CNC has imposed several fines on a number of electricity generators, such as Iberdrola, Gas Natural and Viesgo, as a result of their involvement in anti-competitive practices, consisting of abuse of their respective dominant positions in the electricity generation markets (which have regional scope) in a situation of ‘technical restrictions’ during specific periods of the year.
According to the CNC, which issued several decisions in respect of these practices,¹³ each of these players intentionally raised the price of the electricity generated during specific periods of the year. These companies carried out these price increases with knowledge of the fact that:
• such an increase of the electricity price would lead to the refusal of its purchase in the national electricity pool, where the market price of electricity was substantially lower in that period;
• this situation would generate a problem of technical restrictions in specific areas of the country, resulting from the imbalance between the national electricity supply and the local demand of electricity;
• this would result in the need to generate an additional amount of energy from power plants located inside the affected areas in order to physically guarantee the supply of electricity in these zones; and
• these companies, which held a dominant position as electricity generators in those specific areas, would be asked to generate such additional amount of energy, being able to sell the electricity at a price higher than the one that would have been obtained had the electricity been sold to the national electricity pool under ordinary market conditions.

Some of these decisions have been quite controversial, with some members of the CNC board voting against the declaration of an infringement by the affected companies. In most cases, the main grounds of these contrary opinions were related to the difficulty of identifying a real dominant position of these companies in the markets of electricity generation in specific local or regional areas affected by technical restrictions during specific periods of the year. According to these contrary opinions, there was no clear evidence of the fact that these companies had total certainty that they would be asked to solve the technical restriction problems affecting the areas where their power plants were located. Such total certainty would be the essential element of a possible dominant position that would allow these companies to act independently of the behaviour of their customers and important competitors in the electricity generation market.

Football broadcasting rights

The CNC has initiated proceedings related to the acquisition and exploitation of football media rights agreements.
On 9 April, the CNC opened formal proceedings against a number of audiovisual operators and football clubs¹⁴ for alleged practices prohibited in article 1 SCA and in article 81 of the EC Treaty. These alleged practices involved the acquisition of nationwide media rights for football events celebrated on a regular basis as well as the exploitation of those rights.¹⁵
The initiation of the proceedings was based on evidence found during the assessment by the national competition authorities of the acquisition by Sogecable of sole control of AVS. While the transaction was cleared subject to certain conditions,¹⁶ the competition authorities noticed the existence of a cooperative agreement between Mediapro and Sogecable with regard to the acquisition and exploitation of the media rights over the Spanish football league (La Liga) and the King’s Cup (Copa del Rey).¹⁷ The contents and duration of said agreement could restrain competition in the audiovisual markets with regard to exploitation of those rights.¹⁸
Furthermore, the proceedings are also based on the existence of several agreements between football clubs, audiovisual operators and brokers. As a consequence of the clauses included in such agreements, the CNC considers that there could be a foreclosure effect on the market for the acquisition of broadcasting rights for nationwide football events celebrated on a regular basis.

The CNC releases its report on football broadcasting rights

On 11 June, the CNC published a comprehensive report on the football broadcasting rights market.¹⁹ The purpose of this report is to analyse the currently existing models for acquisition and exploitation of such rights in Spain from a competition perspective, as well as to compare them with other models existing at the European level. While the report has nothing to do with the proceedings previously mentioned, it is expected to grant operators a higher degree of legal certainty when self-assessing agreements or practices related to football broadcasting rights.
The main conclusions of this report are:
• As regards the acquisition of football broadcasting rights, the CNC states that the system currently in place in Spain, which requires the consent of both clubs playing every match, constitutes an important advantage for any buyer holding the majority of the rights over the clubs.²⁰ This fact, together with other elements such as the long duration of the contracts and their exclusivity clauses, increases the risk of market foreclosure situations.
• The current system also favours the existence of a single pool managing most or all of the broadcasting rights (AVS). The fact that this pool is vertically integrated in a leading audiovisual group leads to potential difficulties for third parties to access this important content.
• The CNC reflects the existence of alternative systems, such as: those organised on a match-per-match basis, giving preference to the rights of the hosting club (arena rights); or the ‘centralised management’ of the broadcasting rights by a specific entity with no interests in the downstream audiovisual markets. The second system is considered a reasonable one by the CNC, provided that certain conditions are imposed on the licensing of rights to interested users.
• However, as long as no specific system is imposed by the applicable laws, the CNC is not aiming to oblige the set-up of any of these alternative systems. According to the CNC, private operators in the affected markets (mainly football clubs and audiovisual players) are entitled to organise the acquisition of rights and the system for broadcasting them. They shall therefore assess the compatibility of their agreements with corresponding competition laws.
• Furthermore, it must be highlighted that the Report finds that neither the current model prevailing in Spain nor the alternative models assessed sort out all competition concerns, mainly because they do not avoid the risks deriving from the creation of dominance, coordination between operators and vertical integration.
• In any event, should the currently existing system remain unchanged in the future, the CNC recommends that certain rules are followed in order to ensure that competition law is not infringed in this market and that access to the broadcasting rights is ensured to any interested party under objective, transparent and non-discriminatory conditions. These recommendations cover, among other issues, the duration of the acquisition contracts, conditions for renewal of these contracts and minimum requirements for reasonable exploitation of the rights by any managing pool (either under auction mechanisms or under direct sale relationships with end-users).²¹

BP and Repsol: the first second-phase concentration under the new Act

On 1 April the CNC issued a decision by virtue of which it authorised without conditions the inaugral second-phase concentration notified under the new SCA. The case is also relevant because, although the Investigation Directorate proposed the authorisation of the concentration in the first phase, the Counsel decided not to authorise it at that point and to initiate the second phase of the proceedings. This is interesting in that it shows certain independence between the bodies constituting the CNC.
Furthermore, it must be highlighted that two more practical issues arose during the proceedings:
On the one hand, the time limit for the CNC to review the case was suspended until a report was issued by the Spanish Energy National Commission, as provided by the new SCA. This brought uncertainty over the length of the time limit of the first phase of the proceedings.
On the other hand, it was the first time that the Investigation Directorate ordered the issuance of a market test during the first phase of the proceedings. However, this was not enough to convince the Counsel to authorise the concentration at that stage.
The object of the notified transaction was the incorporation of a company (Newco) by BP Oil España, SAU (BP) and Repsol Comercial De Productos Petrolíferos, SA (Repsol) that would provide into-plane services and aviation fuel supply services in airports located in mainland Spain and the Balearic Islands (Spain). BP and Repsol would hold 50 per cent each of Newco’s share capital.
According to the CNC’s resolution, Newco would be a company through which two competitors that are present in the market of aviation fuel supply would cooperate in the provision of certain services that are necessary in order to supply fuel to final clients. The CNC stated that the creation of Newco could potentially affect several markets, such as: aviation fuel into-plane services, management of airports’ fuel storage facilities (IGCC) and the vertically integrated market related to aviation fuel supply.
The CNC considered that it was not likely that the notified concentration could hamper the effective competition in the relevant markets. However, it highlighted that there might exist competition problems as a result of the vertical integration between both into-plane and fuel supply services resulting from the liberalisation process that has been carried out in Spain in order to implement the Council Directive 96/67/EC of 15 October 1996 on access to the ground-handling market at Community airports. In this respect, the CNC pointed out that the current regulation of these sectors is yet not complete and, therefore, competent authorities should take measures in order to avoid potential competition problems in the future.
In the market related to into-plane services, the CNC pointed out that the licences of BP and Repsol do not coincide in any airport in mainland Spain, which means that the disappearance of a competitor as a result of the concentration shall not have any direct effect on the ‘in the market’ competition of into-plane services in any particular airport. However, this did not mean that the concentration would not have any impact on the structure of the airports where Newco shall provide into-plane services, to the extent that fuel suppliers generally stock up from companies integrated into their own groups.
One of the potential obstacles to competition could be the participation of BP and Repsol in the share capital of CLH (the former monopolist of the into-plane services market), parent company of CLH Aviación, which is one of their main competitors in the into-plane services market. The CNC understood that it was more likely that such financial stake (5 per cent and 15 per cent respectively) could imply an obstacle to competition when: shareholders operated in the same or connected markets; they held a significant stake; and the structural link between both parties might affect their economic incentives and, therefore, modify their competitive strategy. However, the CNC considered that it was not foreseeable that the concentration could strengthen the parties’ prospect to coordinate CLH’s commercial strategy. To such end, the CNC took into account, inter alia, the fact that neither BP nor Repsol participated in the management of CLH Aviación and they did not have access to relevant information related to the latter.
As regards the competition conditions ‘for the market’, the CNC considered that, provided the competitive pressure of CLH, the concentration did not generate potential risks in relation to into-plane services and management of IGCCs located in mainland Spain and Balearic Islands.
Finally, the CNC stated that the vertical integration deriving from the concentration was limited and only represented less than 10 per cent of the demand of aviation fuel for mainland Spain and Balearic Islands in 2006.
Furthermore, taking under consideration the fact that the shareholders agreement executed by BP and Repsol expressly obliged them to provide into-plane services in transparent, objective and non discriminatory conditions, the CNC agreed that the aim of the concentration was not to discriminate third parties and, in principle, was not foreseeable that it could damage competition in into-plane services market.

Notes

1 In this respect, it is useful to consult CNC’s regularly updated website section on press releases.
2 The impact of implementation of this new policy was reflected in the fact that no less than six leniency applications were submitted on 28 February 2008, the first day the new leniency rules were applicable. It must be stressed that from 1 January to 31 July 2008 the CNC has reported investigations in five different economic industries.
3 This new leniency policy is regulated by articles 65 and 66 of the SCA and articles 46 to 53 of RD 261/2008. The CNC has recently published specific guidelines in this respect, which are available on the CNC website (www.cncompetencia.es).
4 OJEU No. C 298, of 8.12.2006, p. 17-22.
5 The CNC shall assess, in each particular case, the added value of any evidence provided by an applicant; in this assessment, the submission of evidence that enables to establish additional facts with direct repercussions on the amount of the fine shall be taken into account when determining the amount of the fine corresponding to such undertaking or natural person.
6 The CNC has included this form as Annex I of its provisional guidelines to leniency applicants, which are available in the CNC website.
7 The applicants must contact the CLU (tel: +34 91 536 9058 or +34 91 536 9024) and request prior authorisation for this oral submission.
8 Depending on the case, applicants shall be informed by the CNC in this respect when receiving the Statement of Objections or the Proposal of Final Decision on the case.
9 Article 53 RD 268/2008.
10 OJEC No. C368, of 22 December 2001.
11 See article 56 of the SCA and article 57 of RD 261/2008.
12 For the time being, the authorities have adopted a narrow approach in this respect. This has led to refusal of the use of short form when an overlap is registered in the parties’ activities in markets broader than national markets (even where no overlap is registered at a national level in Spain).
13 Two decisions were issued in 2008 in cases 624/07 (Iberdrola) and 625/07 (Gas Natural). Previously, similar decisions were issued in respect of these practices in 2006 (Case 602/05, Viesgo) and 2007 (Case 601/05, Iberdrola Castellon).
14 Sogecable, SA, Audiovisual Sport, SL, Mediaproducción, SL, Televisió De Catalunya, SA, TVC Multimedia, SL, Televisión Autonómica Valenciana, SA, Televisión Autonómica De Madrid, SA, Caja De Ahororos Y Monte De Piedad De Madrid and 38 first and second division football clubs.
15 It must be recalled that the conditions imposed by the Resolution of the Council of Ministers of 29 November 2002 (Case Sogecable/Via Digital) expired in 2007. In addition, it is not clear whether or not the conditions imposed by the Resolution of the Council of Ministers of 23 March 2007 are enforceable, due to the uncertainty about whether the acquisition by Sogecable of the sole control of AVS has been carried out.
16 Resolution of the Council of Ministers of 23 March 2007.
17 It must be stressed that there are quite a number of legal conflicts between the parties to the agreement regarding its interpretation and even its validity.
18 In fact, the former Court of Competition (currently, the Council of the CNC) requested the Service of Defence of Competition (currently, the Directorate of Investigation) to initiate proceedings to determine the extent of such an agreement and its potential effects on the concerned markets.
19 The report was published on 11 June 2008 on the CNC’s website: www.cncompetencia.es.
20 In this regard, it must be stressed that the CNC council takes the view that the broadcasting rights belong to the football club organising the match, that is, the home team.
21 The specific recommendations are contained in section 5.2.2 of the CNC Report.

An extract from The European Antitrust Review 2009