COMPETITION LAW AND THE ECONOMIC ACTIVITIES OF PUBLIC BODIES
In the “Express Bus” case the National Competition Commission (“NCC”) determined how competition law applies to public bodies. This case involved an unfair practice complaint against the Madrid City Council and the Autonomous Region of Madrid due to the Municipal Transport Consortium (“MTC”) setting a reduced bus fare for the bus route connecting the city of Madrid to Madrid’s Barajas Airport. The Council of the NCC decided to shelve the proceedings on the ground that the new tariffs set by the MTC were not subject to competition law, since the MTC was not acting as an independent economic operator.
In its decision, the NCC referred to European Court of Justice case law that makes a distinction between public authorities acting as economic operators in the market and those exercising their public powers (ius imperii) as regulators. According to this case law, competition law only applies to public bodies when they act as economic operators in the market, that is, when they are not exercising their public powers. The NCC therefore held that the MTC’s setting of prices for transport services did not fall within the scope of the competition authorities’ sanctioning powers, as this action was intrinsically linked to the public powers granted to the MTC to provide services.
The Council of the NCC adopted a more restrictive approach in this case than in the controversial “Sherry Producers” decision in relation to whether public authority actions can be subject to competition law. We will have to wait for future decisions to find out if this position is upheld.
THE NATIONAL COMPETITION COMMISSION SHELVES TWO ABUSE OF DOMINANCE CASES IN THE TELECOMMUNICATIONS MARKET
The Spanish National Competition Commission (“NCC”) shelved two cases involving an alleged abuse of a dominant position in the telecommunications market due to lack of evidence. In both cases, the Council of the NCC reiterated the high standard of proof required to prove the existence of abusive conduct.
In the first case on shared-cost calls, the NCC investigated an alleged abuse of a dominant position consisting of predatory pricing (selling below cost-price) to drive competitors out of the market. This case was shelved because the Council of the NCC considered that the conduct in question could not exclude competitors from the market.
In the second case on call diversion, the NCC shelved the alleged abuse of a dominant position complaint made against various mobile telephone operators on the basis that there was no proof that third parties had been charged discriminatory tariffs that would give rise to abuse.
The two decisions relating to the telecommunications market are clear examples of the importance of adequate coordination between industry regulators, in this case the Telecommunications Market Commission (Comisión del Mercado de las Telecomunicaciones, “CMT”) and the competition authorities. In fact, in these decisions, the NCC repeatedly referred to the industry regulation imposed by the CMT and the CMT’s reports analysing the parties’ market position and their conduct. We will have to wait until the recently created National Markets and Competition Commission (Comisión Nacional de los Mercados y la Competencia) begins to operate to see if unifying the competition authority and various industry regulators will lead to a different analysis of the conduct of operators in regulated sectors.
SANCTIONS IN THE DISTRIBUTION OF SANITARY AND PLUMBING MATERIALS SECTOR
On 23 May 2013, the Council of the National Competition Commission (“NCC”) sanctioned 22 companies in the distribution of sanitary and plumbing materials sector for their involvement in a series of anti-competitive practices, namely price fixing. The NCC imposed fines exceeding a total of EUR 6.4 million.
The fined companies had entered into agreements for consumers to be charged certain costs. These agreements also set maximum discounts for certain products, and provided for exchanges of information about payment defaults or other commercial data. These agreements aimed to reinforce the companies’ negotiating power with their customers and suppliers and to maintain certain price levels.
The complaint was filed before the Competition Office of the Autonomous Region of Valencia. However, although the practices were carried out mainly by companies based in this region, the autonomous authority shelved the case on the basis that the NCC was competent.
After the NCC inspected the headquarters of several of the companies, three companies submitted leniency applications. These applications were rejected because the NCC considered that the information submitted by the companies brought no significant added value to the information the NCC already had. However, the NCC did award a 10% reduction in the fine imposed on one of the other companies that had actively cooperated with the Investigations Directorate, even though it had not submitted a leniency application. This cooperation seemingly included the submission of particularly useful information before the inspections took place.
The NCC thoroughly examined the concept of economic entity and concluded that three independent companies, among which there were no parent-subsidiary relationships or any common controlling shareholders, formed part of one economic entity. The NCC based its conclusion on the fact that the companies had some shareholders in common, had contracted the services of the same commercial management office (gestor) and what it called “clear indications that they acted in unity”. However, despite declaring that these three companies formed an economic entity, the NCC held that they were three separate legal persons and thus sanctioned and fined them individually, and did not declare them to be jointly liable.
THE NATIONAL COMPETITION COMMISSION’S ACTIONS ARE SUBJECT TO THE PRINCIPLE OF LEGALITY AND PARTICIPATING IN A CARTEL MEETING DOES NOT AUTOMATICALLY CONSTITUTE AN INFRINGEMENT
In 2008 the National Competition Commission (“NCC”) exposed a series of agreements between shower gel producers, under which they agreed to progressively reduce the size of shower gel containers while maintaining the same price. Colomer participated in the first of these meetings where they discussed the possibility of reducing the size of the containers, although it took a passive role and there was no evidence of its involvement in any other meetings.
Despite the resolution proposal issued by the Investigations Directorate (“ID”) recommending that the case against Colomer be shelved, the Council of the NCC was not convinced that the company’s involvement in the first meeting was not an infringement of competition law. However, as the 18-month term that the NCC had to resolve the case was about to lapse, the Council decided to close the case and impose sanctions on the other companies involved (the “Shower Gel Decision”), and ordered the ID to initiate new proceedings against Colomer to investigate its role in the cartel.
In the new proceedings against Colomer, and in a move away from the ID’s opinion, the Council of the
NCC imposed a fine of EUR 170,300 on Colomer for its involvement in the cartel’s first meeting (the “Colomer Decision”).
The Spanish National Court (Audiencia Nacional) issued its decisions on Colomer’s appeals against the Colomer Decision and the Shower Gel Decision on 2 April and 28 June 2013, respectively. Both judgments contain important declarations on the application of competition law, both from a procedural and substantive perspective.
In its ruling of 28 June 2013, the National Court emphasised that public bodies are subject to the principle of legality (that is, the principle that every offence must have a legal basis) and must only act within the scope of their statutory powers. As the Council of the NCC did not have legal grounds to order the opening of a new case to deal with a subject-matter that had already been settled, the National Court annulled the ruling in the Shower Gel Decision that a new case should be opened against Colomer.
The merits of the case (regarding Colomer’s liability) were decided by the National Court on 2 April 2013.
The National Court’s interpretation of the concept of “cartel” is particularly important. It held that “a consensus or an express agreement is an essential element for a cartel to exist”. The court found that there was no such no consensus or agreement by Colomer in this case since it took a passive role in the only meeting it attended. The Colomer Decision was thus fully annulled.