Spain: Cartels

Ramón García-Gallardo

SJ Berwin

The 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.
In addition, the Spanish government has recently adopted Royal Decree 261/2008 of 22 February 2008, for the implementation of the Regulation on Defence of Competition (the Royal Decree), which came into force on the 28 February 2008 and deals with the execution of some essential aspects of the Law 15/2007, such as conduct of minor importance, promotion of competition, and proceedings.
The CNC also recently published provisional guidelines relating to the handling of applications for exemptions and reduction of fines with the aim of serving as a reference for leniency applicants.
The enforcement system is also completed by Law 1/2002 on coordination of competence 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 Competition Act aims at reinforcing existing mechanisms and providing the tools and optimal institutional structure to protect competition in the market. At the same time, it takes into account the changes introduced at EC level, notably Regulation 1/2003 setting out procedures for the enforcement of article 81 and article 82 EC prohibitions, 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.

Enforcing bodies

The Competition Act reshapes the institutional structure of the central government competition authorities.
As from the entry into force of Law 15/2007, a new single independent authority, the Comisión Nacional de la Competencia or National Competition Commission (CNC), is in charge of applying the Competition Act at a national level. The CNC consists of 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 CNC 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 CNC is controlled by the parliament. It is foreseen that the CNC 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. In view of the increased importance of Commercial Courts, the Competition Act introduces an amicus curiae system inspired by Regulation 1/2003 by which the CNC 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) has been shared with the regional governments since the enactment of Law 1/2002 which also sets out some rules on coordination. Spanish competition rules can be applied by regional authorities provided that 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 CNC will be under the duty to request a non-binding 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.
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 CNC. Nevertheless, sectoral regulators shall draft non-binding reports for the CNC in the event of a cartel or misuse conduct carried out in the sector of its competence or at the request of the CNC. Finally, the Competition Act aims at increasing coordination with the sectoral regulators setting out a mechanism for 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 has as its 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 ‘any secret agreement between two or more competitors which has as its 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. Therefore, the prohibition described above will not automatically 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; for example, under the old Act the government adopted Royal Decree 602/2006 implementing the block exemption regulation on late payments information exchange agreements.
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 conducts of minor importance that qualify as de minimis, according to criteria set out in Royal Decree 261/2008. Nevertheless, taking into account past practice and experience acquired in this respect, as well as the European Commission Notices on this matter, the CNC may prepare a Communication to clarify the afore criteria.
Finally, apart from the fines which can be imposed by the (central or regional) antitrust authorities (see the section on fines below), agreements or any other decision prohibited by article 1 shall be deemed void.
It is worth mentioning that under the Competition Act, cartels are administrative infringements and therefore no criminal penalties are provided.

Procedure

The Competition Act keeps a two-phase procedure: 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 non-binding complaint, of its own motion or on the initiative of the Council. Before opening formal infringement proceedings, the Investigation Directorate can proceed with an initial investigation. 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 at any time during the course of the proceedings and without a maximum duration period. 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 states the maximum length of the procedure is 18 months (although under certain circumstances this deadline can be extended). The Royal Decree determines the maximum length of each stage of the procedure (investigation and resolution).
Furthermore, the Competition Act keeps open the possibility of terminating proceedings when commitments are offered, although the period during which commitments may be submitted has been extended and the procedure is more flexible now that previously. The parties may offer commitments at any time before the case is referred by the Investigation Directorate to the Council.

Fines

The Competition Act includes for the first time a classification of infringements depending on seriousness (minor, serious and very serious). Cartels between competing undertakings are classified as very serious. The amount of the fine will depend on the seriousness of the infringement, and the maximum fine will amount up to 10 per cent of the business’s total turnover. When turnover cannot be calculated, the Council can impose a fine up to e10 million. In addition, individuals (ie, legal representatives or members of the management body) may be subject to a fine of up to e60,000. 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 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. This system has been implemented by the Royal Decree, which regulates the procedures for exemptions and reductions of the amount of fines. As previously mentioned, provisionally guidelines were also published providing indications on how to submit leniency applications.
Immunity is reserved for the first company or individual who provides evidence which, in the CNC’s 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 CNC’s view, be reasonably necessary to preserve the effectiveness of the inspections; not destroy relevant evidence relating to its application and not to disclose to third parties other than the European Commission or any other national authorities its intention to submit an application or the content thereof.
Companies or individuals that 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 CNC with evidence of the alleged infringement that represents significant added value with respect to the evidence already in the CNC’s possession. Furthermore, the applicant must meet the cumulative conditions set out above.
If the applicant for a reduction of a fine submits evidence that allows for the establishment of additional facts with a direct bearing on the amount of the fine, the CNC will take such additional facts into account when setting the fine to be imposed on the undertaking which provided this evidence.
At the applicant’s request, both exemption and reduction of fines may be submitted orally, accompanied by the relevant information and evidence, recorded at the CNC premises, with a transcript thereof being entered in the register. No copies of the oral submission are allowed.
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 CNC.

In order to protect the effectiveness of the leniency system, the Competition Act establishes that the CNC cannot provide the Commercial Courts with the information obtained via the applications for immunity or reduction of fines applications. This provision affords some protection to applicants in case of damages actions.
The Royal Decree lays down a summary exemption application in those cases an application for immunity (excluding reduction of fines applications) has already been filed or is going to be filed before the European Commission (where the Commission is particularly well placed and the Cartel causes effects in more than three member states). Likewise, if an application for exemption is submitted before a regional competition authority, this shall give notice to the CNC before resolving.

An extract from The European Antitrust Review 2009