SPANISH MARKETS AND COMPETITION COMMISSION (“CNMC”) ENDS PROCEEDINGS INITIATED AGAINST TELEFÓNICA, VODAFONE AND ORANGE FOR AN ALLEGED ABUSE OF COLLECTIVE DOMINANT POSITION IN THE MARKET FOR WHOLESALE VOICE CALL ORIGINATION SERVICES
The CNMC holds that there is no adequate economic test to determine the existence of a conduct consisting of margin squeeze in collective dominant position cases.
The Investigations Directorate held that Telefónica and Vodafone had a collective dominant position in the market for wholesale voice call origination services in Spain. In order to determine the existence of a margin squeeze, the Directorate applied the equally efficient operator test. This test verifies whether a competitor with the same costs as Telefónica, Vodafone and Orange in the downstream retail market can be profitable taking into account the retail and wholesale prices applied by them. As the test gave negative margins, the Directorate initially concluded that margin squeeze existed.
However, as evidenced by the companies, the equally efficient operator test is suitable to analyse the existence of a margin squeeze in cases of abuse of individual dominant position, but not in cases of abuse of collective dominant position. In view thereof, the Directorate altered its initial assessment and concluded that this test did not take into account that competing wholesale operators could change their host operator (that is, operators with their own network). That factor needs to be taken into account to determine whether the margin squeeze could have had an exclusionary effect.
The Council of the CNMC endorsed this reasoning and closed the proceedings, since it considered that it was impossible to prove the exclusionary effects of the companies’ actions.
CNMC GRANTS INTERIM MEASURES TO A COMPANY ACTIVE IN THE DELIVERY OF MEDICINES MARKET
The CNMC clarified that interim measures can be granted within the framework of a settlement procedure, and granted interim measures consisting in the start of its proceedings being published on the respondent’s website and the respondent had to refrain from communicating certain messages regarding the claimant’s activity.
A company providing a medicines delivery service filed a claim against the Madrid College of Pharmacists (“COFM”) for alleged anticompetitive behaviour, and as an interim measure requested the cessation of such conduct.
The COFM had sent various letters to its members informing them about the possible illegal nature of the claimant’s services. The CNMC therefore initiated disciplinary proceedings against the COFM, which in turn requested the initiation of a settlement procedure.
The CNMC considered that there was evidence that the content of such letters could constitute a prohibited group recommendation and that sending them caused the claimant economic and reputational damages. It therefore granted interim measures consisting of: (i) ordering the COFM to publish the initiation of the proceedings on its website; and (ii) refraining from sending other messages communicating the alleged illegality or allegations regarding the claimant’s activity. The CNMC declared that it was possible to grant interim measures in the framework of a settlement procedure.
CNMC FINES TENERIFE’S TRAVEL AGENCIES AND TAXI DRIVERS FOR PRICE FIXING
The CNMC has fined the Regional Association of Travel Agents of Santa Cruz de Tenerife (“APAV”) and several taxi driver associations and cooperatives for fixing the prices of pre-booked taxis.
The Canary Islands’ regional law fixes the price of pre-booked taxis to guarantee that costs are covered and a reasonable profit is made in the industry. However, these are maximum fees and taxi drivers could reduce the price by cutting into their own margin without incurring losses.
The agreements reached between APAV and the taxi driver associations fixed the price for specific journeys, thus preventing competition in the sector by reducing profit margins.
The CNMC has imposed a fine of EUR 901,550.67 on APAV and EUR 180,999.43 on the associations as a whole. The latter fine will then be individualised for each association on the basis of the proportional estimated returns of the licences held by each one.
SPANISH NATIONAL COURT AND CNMC SHED LIGHT ON THE FINES IMPOSED ON ASSOCIATIONS
In a decision of 21 April 2014, the Spanish National Court held that the criterion to determine the proportionality of a fine imposed on an association should be the resources it has at its disposal. Only when the association is a mere instrument for its members to meet and agree should their turnover be taken into account. The CNMC has also established that, if an association becomes insolvent, payment of the fine should be sought from those companies which representatives were members of the governing bodies of the association, and only if insufficient funds are collected from them should payment be sought from the other members of the association.
The first case analysed concerned a fine imposed on, among others, the Regional Travel Agency Association of Santa Cruz de Tenerife for circulating recommended price lists to its members and for fixing the fees tourist guides charged for excursions between Tenerife and La Gomera Islands. The Spanish National Court held that in light of the data provided about the association’s financial situation, the fine imposed was disproportionate. In order to be able to set a fine on the basis of the financial resources of the association’s members, it must be verified that the association was a mere instrument of its members.
The second case related to a fine imposed on several associations for fixing and recommending grape prices. The Regional Winemakers Association of Castilla-La Mancha informed the CNMC that it was insolvent and that it would seek payment from its members. The CNMC clarified that when an association is insolvent, payment should first be requested from those companies which representatives were members of the governing body of the association. Only if insufficient funds to pay the fine are collected this way should payment be sought from the rest of the companies that are members of the association and operate in the market. Under no circumstance can payment be sought from those companies that did not follow the association’s decision or recommendation, were unaware of its existence or actively distanced themselves from it.
SPANISH NATIONAL COURT LIMITS LIABILITY FOR VIOLATIONS OF ANTI-TRUST RULES IN TRANSFERS OF UNDERTAKINGS
The Spanish National Court overrides the fine imposed by the CNMC on Rhenus Logistics as universal successor of IHG Logistics Iberia, which it acquired through a merger by absorption. The decision considers that Rhenus Logistics cannot be declared liable for the previous conduct of the absorbed entity given that the acquiring entity made changes to its governing bodies following the merger and had publicly communicated the cessation of its participation in the fined conduct.
In the Transitarios case, the CNMC fined several companies for participating in a cartel that fixed transport prices. Specifically, the CNMC declared that IHG Logistic had participated in the cartel between 2000 and 2007. The entity was absorbed by Rhenus Logistics in 2006. The CNMC declared Rhenus Logistics liable for the violation as universal successor of the absorbed entity.
Well-established EU case law has recognised the possibility of a company other than that which participated in the illegal activity being held liable for payment of a fine under specific situations, including when the legal personality of the infringing entity is extinguished. As such, if the entity merges with a new entity, the new entity may be declared liable for the payment of a fine imposed as a consequence of a prior violation by the absorbed entity. This extension of liability aims to prevent companies from avoiding antitrust legislation through corporate restructurings.
In the case at hand, after examining EU case law, the National Court concluded that the acquiring entity (universal successor of the entity that participated in the cartel) carried out significant changes to the governing bodies of the absorbed entity. These changes led to a communication to the remaining companies in the cartel that the merged entity would cease its participation in the cartel. For that reason, the National Court held that it is impossible to conclude that there existed cohesive management between the absorbed entity that participated in the cartel and the acquiring entity declared liable.
The decision states that the principle of personal and individual liability for the violations and fines establishes the impossibility of considering the acquiring entity liable solely on the basis of the principle of universal succession if cohesive management of the decision-making process between the absorbed entity and the acquiring entity has not been evidenced. Cohesive management could have been found to exist if the parties had not modified the governing bodies of the absorbed entity. However, the change to the governing bodies, together with the public declaration after the merger that the illegal activities would cease, were sufficient to exclude the liability of the acquiring entity.
SPANISH NATIONAL COURT OVERRULES DECISION OF THE SPANISH COMPETITION AUTHORITY IMPOSING A FINE DUE TO EXCESSIVE DURATION OF THE RESERVED INFORMATION PHASE
The Spanish National Court overruled the fine imposed on the Extremadura Iron Storekeepers Union (Unión de Almacenistas de Hierros de Extremadura) after considering that the CNC had altered the reserved information phase, and thus, the term to conduct this stage of the proceedings had expired. As a consequence, the CNC’s action to impose a fine was time-barred.
In this decision, the Spanish National Court stated that preliminary proceedings (diligencias previas) before the opening of sanctioning proceedings are not subject to a term, as long as they serve the objective for which they are justified (i.e., to collect data and initial evidence in order to decide if disciplinary proceedings should be initiated). In such cases, the preliminary proceedings stage has no limitation period and cannot be included within the maximum terms of disciplinary proceedings. However, if preliminary proceedings are used to artificially delay the start of the proceedings, their term must be added to that of the main proceedings.
SPANISH NATIONAL COURT REDUCES FINE IMPOSED ON A COMPANY FOR OBSTRUCTING AN INSPECTION, FOLLOWING ITS COOPERATION IN THE MAIN PROCEEDINGS
The National Court holds that the cooperation of a company with the CNC in the context of disciplinary proceedings could be considered a mitigating circumstance when determining the amount of a fine imposed for providing misleading and inaccurate information during an inspection carried out at the company’s premises.
The CNC alleged that several employees of the company Florencio Barrera e Hijos, S.L. had provided misleading information in various responses to questions made by the CNC inspectors; namely, in relation to the use of private email addresses for professional purposes. It imposed a fine of EUR 9,700 on the company for this reason.
After the inspection, the company submitted a statement to the CNC acknowledging the facts which had led to the inspection and applying for the reduction of the potential fine as a result of its cooperation. As regards the amount of the fine for obstruction during the inspection, the National Court highlighted that the maximum established by law should be adjusted depending on the existence of any circumstances which mitigated responsibility. In the case at hand, the National Court held that the fine imposed should be reduced in light of the party’s open admission regarding the infringement, which was considered a mitigating circumstance.