Government presents White Paper on Competition Reform

Written by Edurne Navarro y Sergio Baches. Published in International Law Office

April 18, 2005

On January 20 2005 the Spanish minister of economy presented a white paper on the reform of Spanish competition law. With this initiative, the Spanish authorities aim to start a public debate on various proposals which, if adopted, would lead to the largest reform of Spanish competition law since the Competition Act entered into force in 1989.

The main aim of the reform is to overcome deficiencies in the current institutional and procedural framework. This would allow the authorities to prosecute more effectively the most serious antitrust infringements and help harmonize the Spanish competition system with recent changes to EU competition law (in particular EU Regulation 1/2003). The white paper also considers reform of the Spanish merger control rules, and proposes that Spanish courts and judges be empowered to apply Spanish competition law.

With regard to the enforcement bodies, the reform proposes merging the Defence of Competition Service (the investigatory body) with the Defence of Competition Tribunal (the decision-making body) into one entity: the National Commission for the Defence of Competition. The purpose of the merger would be to:
  • speed up proceedings (sometimes criticized for being too lengthy);

  • avoid unnecessary repetition of certain formalities (eg, the proposal and submission of evidence);

  • overcome jurisdictional disputes that have previously arisen between the service and tribunal; and

  • simplify infringement procedures by removing the internal appeal process (ie, appeals brought to the tribunal against the service's decisions on issues such as confidentiality) so that the commission's decisions can be appealed directly before the administrative courts.

The white paper suggests that a leniency/immunity programme be introduced in the antitrust enforcement system, harmonizing Spanish competition law with EU and US competition law.

The Spanish authorities also want to amend the exemptions system. At present, agreements restricting competition that do not benefit from a block exemption regulation must be notified to the competition authorities in order to request an individual exemption. The white paper proposes to replace the notification system with a self-examination system (in line with EU competition law).

In addition, the white paper deals with one of the most debated topics among antitrust law practitioners and scholars: the application by the ordinary courts of Spanish competition law. Under the current framework, Spanish courts are entitled to hear cases on Article 81 and 82 of the EC Treaty and, if applicable, to award damages for infringements of such, but lack jurisdiction to apply the equivalent provisions of the Spanish Competition Act. The white paper states that the courts should have jurisdiction to apply the Spanish Competition Act in a dispute between private parties, declaring agreements that are contrary to Spanish antitrust regulations null and, if requested, granting compensation for damages. Under the current system, damages actions for antitrust infringements can be brought before the civil courts, but only if the Defence of Competition Tribunal has made a final and binding decision that an infringement has occurred (ie, after all appeals have been ruled). This makes it extremely difficult to bring damages actions, since plaintiffs must wait a long time before filing them.

Another key aspect of the white paper is the proposal to reform the Spanish merger control rules, which are frequently criticized because of the close link between the service and government, and the difficulties this creates. It is proposed that final merger decisions be taken by the future commission solely on the basis of competition criteria, without prejudice to the ability of the government to veto or amend the decision to clear or block a merger in exceptional cases (eg, involving public safety, plurality in the media, the protection of the environment or competitiveness of national industries). The white paper also suggests treating all full-function joint ventures (concentrative and cooperative) as concentrations, adopting the same definition of 'concentration' established in Article 3 of the EU Merger Regulation (139/2004/EC). It also questions whether the 25% market share threshold should be maintained in the new Competition Act as a triggering event for notification. In addition, it proposes amending the undertakings system, which is based on the imposition of conditions by the government in second phase investigations, so that parties are themselves allowed to submit undertakings to the authorities during the second phase.

With regard to state aid, the white paper proposes increasing the control Spanish antitrust authorities exert by enabling them to analyze the effects, prior to concession, of any state aid on the market and draw up reports or make specific recommendations on aid granted. It indirectly suggests that the commission should be able to challenge the granting of state aid that may appreciably restrict competition before the administrative courts. However, the white paper does not propose setting up a system of control in Spain similar to that regulated under Articles 87 to 89 of the EC Treaty.

Companies and other interested parties had until March 20 2005 to submit their comments on the white paper. After reviewing these comments, the Ministry of Economy will draw up a bill (possibly around September or October 2005), which will be debated in Parliament. The new act could enter into force in 2006.