SUPREME COURT CLARIFIES CRITERIA FOR CALCULATING FINES FOR BREACHES OF COMPETITION REGULATIONS
In its rulings of 29 January and 5 February 2015, the Supreme Court (“SC”) clarified how to determine the upper limit on fines imposed by the National Markets and Competition Commission (“CNMC”) on companies in administrative proceedings for breaches of competition law.
The SC confirmed that the upper limit on fines imposed on a company established for very serious breaches of competition law is 10% of the total turnover of the company in breach. Consequently, fines should only reach this limit in cases of very serious breaches and not as a general rule. Therefore, the Communication on the quantification of fines published by the CNMC (formerly known as the Spanish Competition Authority, “CNC”) is not compatible with Spanish competition law.
In addition, the SC clarified that the turnover to which these limits apply is the total turnover of all business activities carried out by the company in breach, whether they relate to the breach or not. This interpretation is contrary to the decisions of the Spanish National Court (Audiencia Nacional, “NC”) in several recent rulings.
SUPREME COURT DECLARES EXECUTION OF STATE AID RECOVERY NULL
The SC overruled a decision on the recovery of State aid that had been declared illegal by the European Commission because in the administrative proceedings no hearing was granted to the recipient of the State aid from whom the reimbursement of the aid was sought.
The SC stated that the right to a fair hearing principle is a general principle in Spanish and European Union law, enshrined in the Spanish Constitution and the EU Charter of Fundamental Rights. The absence of hearing for a respondent or a defendant may result in the entire proceedings being declared null.
The consequence of State aid being considered illegal is that the recipient is obliged to reimburse it to the State. However, there is no uniform national procedure in this situation.
The SC confirmed that the obligation to reimburse an aid declared illegal does not exclude the need for administrative proceedings in which the conditions for reimbursing the aid are set out, and during which the defendant or respondent may raise mitigating circumstances.
In its ruling, the SC declared that no administrative proceedings had been followed prior to the adoption of the appealed administrative act. This led to the appeal being brought and the decision of the Council of Alava (Diputación Foral de Álava) to recover certain State aid that were declared illegal being overruled.
SUPREME COURT OVERRULES FINE IMPOSED BY THE CNC ON PHARMACEUTICAL ASSOCIATION FOR COLLECTIVE RECOMMENDATION
The SC clarified that a communication issued by an association that only informed its membres about relevant legislation is not enough to be considered a collective recommendation.
The CNC fined several pharmaceutical associations for sending newsletters to their members. The associations’ actions were seen as a collective recommendation aimed at standardising the conduct of pharmacists in their dealings with laboratories, affecting the generic medicines subject to medical prescription market and the system of reference prices.
The NC reduced the amount of the fines imposed, taking into consideration that the newsletters issued by the associations were not intended for pharmacists but rather for doctors. This confusing situation was created by the new legislation and the fact that the conduct of pharmacists did not affect the market.
Finally, the SC considered that the newsletters did not meet the criteria established by case law to be considered a collective recommendation since they only provided information about the new legislation at a time of confusion created by the newsletters issued by the laboratory itself. In addition, the SC held that it cannot be inferred from the newsletters that they provided either guidelines or recommendations as to how to act or aimed at standardising the professional conduct of pharmacists. Therefore, the SC overruled the fine imposed on the association.
SUPREME COURT OVERRULES INVESTIGATION ORDER THAT AUTHORISED INSPECTION AT COMPANY’S ADDRESS
The SC declared that the investigation order authorising the inspection of a company must contain a compelling reason that by itself makes clear to the company subject to inspection the purpose and scope of the inspection.
The investigation directorate of the CNC carried out an inspection at the headquarters of Unesa under the auspices of an investigation order of the CNC itself, and a judicial writ authorising entry to the premises of this entity.
Unesa appealed the investigation order and the inspection itself, arguing that it violated its fundamental rights, since it did not contain compelling reasons about the evidence of a possible breach or violation that justified the inspection. The judicial writ authorising the entry solely made reference to the investigation order, without any further justification.
The SC declared the investigation order null, stating that it must contain the reasons why the order is necessary in order to protect the rights of affected companies, and that the reasons for the basis of the order sought cannot be drawn from other documents. The order authorising the inspection being declared null resulted in the inspection itself being declared null.
CNMC FINES PALLET MANUFACTURERS FOR PRICE FIXING
The CNMC imposed fines amounting to EUR 4.7 million to several EUR/PALLET manufacturers and the industry association, CALIPAL, for exchanging commercially sensitive information and fixing prices and commercial conditions.
In the resolution it was proven that certain manufacturers of EUR/PAL quality wooden pallets agreed, within the association, to fix minimum prices and commercial conditions, and to adopt measures to hinder the entry of new competitors. The CNMC considered that these conducts constituted a cartel. It also fined some of these companies and the association for their participation in several exchanges of commercially sensitive information.
CNMC FINES COMPANIES AND INDUSTRY ASSOCIATION FOR PARTICIPATION IN CARTEL IN WASTE MANAGEMENT AND URBAN SANITATION SECTOR
The CNMC fined several companies for their participation in a global concerted practice of market allocation in the waste management and urban sanitation sector.
The conduct consisted of signing non-compete agreements regarding existing clients and allocating new clients; exchanging commercial information of a sensitive nature; agreeing to allocate public tenders and concurring to public tenders together as a temporary business association. All these practices constituted a single and continuous breach of competition law.
The CNMC also fined three other associations for their participation in the cartel. They were accused of supporting the illegal conduct of their members by drafting collective recommendations, participating and contributing to market allocation and monitoring compliance with the agreements entered into by their members.