November 2012

COMPETITION AND EUROPEAN UNION LAW


 THE SPANISH COMPETITION AUTHORITY PUBLISHES A REPORT ON COMPETITION IN THE FUEL SECTOR IN SPAIN

 THE SPANISH COMPETITION AUTHORITY FINES THE REPRESENTATIVE OF A TRADE ASSOCIATION FOR STATEMENTS MADE ON PRICE INCREASES

 THE SPANISH GOVERNMENT SUBMITS A PROJECT TO SET UP A NATIONAL COMMISSION FOR MARKETS AND COMPETITION

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THE SPANISH COMPETITION AUTHORITY PUBLISHES A REPORT ON COMPETITION IN THE FUEL SECTOR IN SPAIN

On 15 October 2012, the Spanish Competition Authority (“CNC”) published a report on competition in the motor fuel market in Spain.

This report analyses the competitive situation of the fuel markets in Spain to highlight the fact that the gross distribution margin of oil companies is one of the highest in the European Union. On the basis of this analysis, the CNC proposed a number of measures to increase competition at all levels, including among others:

a. Concerning logistics and the activity of Compañía Logísitca de Hidrocarburos (“CLH”), the monopolist company in charge of managing the national oil pipeline network, the CNC suggested:

1. Increasing the independence of CLH in relation to companies active in the fuel refining and fuel marketing segments in Spain. At present, all the national operators are shareholders of CLH and exert a certain degree of influence without being subject to any exception or incompatibility.

2. Increasing the regulations on the monopolistic activity of fuel transport, in particular in relation to access to network tariffs. The CNC intends to limit the freedom enjoyed by CLH when fixing the network tariffs.

3. Reinforcing the control exercised over the storage activity thereby ensuring access to it and facilitating the installation of alternative storage systems.

b. In the context of wholesale distribution, the opening of new fuel refining facilities was proposed in order to increase the offer available to current operators.

c. As regards retail distribution, the CNC proposed:

1. Facilitating the opening of new petrol stations. It was suggested to limit the number of concessions to companies that control or have the capacity to decisively influence the management of a substantial part of the petrol stations in a given geographic area (similar to the control of radio stations).

2. Reducing the duration of exclusive supply agreements and in particular, regulating the maximum duration of such contracts where the supplier is an operator with significant power in the distribution of motor fuels to petrol stations.

3. Banning resale price recommendations to petrol stations made by suppliers with significant power in the distribution of motor fuels to petrol stations and limiting the exercise of voting rights and presence in governing bodies of competing companies.

4. Fostering transparency to reduce search costs for consumers and to reinforce their capability to compare prices between petrol stations.

This is the third report published by the CNC on the fuel sector in recent years (it published another in June this year and another in 2009). As with the previous ones, the latest report has been strongly criticised.

It is particularly relevant that the CNC drafted this report in response to an express request from the State Secretariat of Economy and Assistance to Companies. This request was made in the context of a study that is being conducted by the Ministry of Economy on competition in the motor fuel sector, especially in the light of the recent price variations. The Ministry of Industry, Tourism and Trade has already announced its willingness to follow these recommendations. Although the CNC publishes business sector reports from time to time, it is rare to issue reports at the request of a public body in the context of a potential amendment of the regulations on the business sector.

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THE SPANISH COMPETITION AUTHORITY FINES THE REPRESENTATIVE OF A TRADE ASSOCIATION FOR STATEMENTS MADE ON PRICE INCREASES

On 19 January 2011, the President of the Tourist Council of the Spanish Confederation of Trade Organisations (“CEOE”) made some statements in the context of the International Spanish Tourism Fair (“FITUR”) in which he suggested increasing prices in Spanish hotels to bring them in line with other European markets. These statements were followed by an interview in the digital edition of the financial newspaper “Cinco Días” in which the representative suggested a price increase of 6% or 7%.

The Spanish Competition Authority (“CNC”) considered that these statements constituted a collective price recommendation because they proposed a joint course of action among competitors. This would be contrary to article 1.1.a of the Spanish Competition Law (Ley de Defensa de la Competencia, LDC”). The competition authority followed the criteria of previous decisions and took into account (i) the content of the statements (with a direct message to prompt a joint response); (ii) their level of coverage (it was made in the context of a specialised forum attended by businesspeople and professionals alert to any professional recommendations); and (iii) the position and responsibility of their author. Consequently, the CNC imposed a fine of EUR 150,000 to the CEOE and EUR 50,000 to the author of the statements.

This is the first time since the entry into force of the LDC that the CNC has imposed a sanction on an individual for a breach of competition law. However, it is not the first time the CNC imposes a penalty on the representatives of infringing companies. The first case of this kind dates back to 1993 (Case 322/92). Since then, at least five decisions have been issued in the same vein. In all those cases, the penalty was imposed on the director, as well as on the company, when the director had an active role in the conduct under investigation.

In this case, in addition to starting the first precedent under the current regulatory framework, the CNC incorporated two novelties in relation to the way in which this power was exercised under the regime established by the previous law:

a. For the first time, the penalty imposed on the representative of a company was based on his own statements. In previous cases, the statements were made in the context of previous actions carried out by the association or undertaking he/she represented.

b. This decision also introduced the possibility of imposing a penalty on an association for an omission. This omission would include the failure to publicly distance oneself from the statements made by the representative.

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THE SPANISH GOVERNMENT SUBMITS A PROJECT TO SET UP A NATIONAL COMMISSION FOR MARKETS AND COMPETITION

On 19 October 2012, the Official Gazette of the Spanish Parliament published the legislative bill to set up the national commission for markets and competition (the “Project”). The law intends to create a single body in Spain to carry out the duties of seven business sector regulators (airports, energy, telecommunications, postal communications, rail transportation and audiovisual media).

According to the Project, the purpose of the reform would be the institutional rationalisation of the Spanish public authorities, saving costs and creating synergies derived from the coordinated action of the different regulators. The Project is controversial and seems to have raised some concerns in the European Commission. The CNC itself has published a report recommending certain amendments.

The new body would have supervision, arbitration and consultation powers. Its role in the context of competition law would be particularly relevant. Although the reform does not amend competition laws significantly, it substantially modifies the institutional scenario for their enforcement and introduces some fields in the procedure and duties that may be relevant in applying competition law. For instance, it increases the inspection powers of all the officials in the institution.

The publication in the Official Gazette of the Parliament initiates the legislative process to pass the law. As no particular difficulties or significant amendments are expected before its approval, the new body is expected to be operative sometime in 2013.

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The information contained in this Newsletter is of a general nature and does not constitute legal advice