Transparency and accountability
Hopes for remainder of 2011
Overall, 2010 will not be long remembered for the enforcement of competition law in Portugal. However, some notable developments in the Competition Authority's activities potentially indicate the direction of further developments in competition enforcement, in respect of both the applicable legal framework and the judicial review of the agency's decisional practice.
As well as publishing the results of its monitoring of the telecommunications and fuel sectors, the authority undertook competition assessments concerning the postal sector and the contractual relations between modern distributors and suppliers.
The assessment of the postal sector was intended to inform the consideration of the liberalisation process in Portugal, which was to be completed by the end of 2010, and resulted in a report that presented guidelines for the promotion of competition (for further details please see "Competition Authority plots course for fully liberalised postal sector").
The assessment in respect of distribution and supply was prompted by complaints from several economic operators on the alleged contractual imbalance between modern distribution chains and their suppliers. The authority concluded that the concerns arising in the context of the assessment related not to competition law infringements specifically, but to individual practices that restrict commerce. Several recommendations were issued to the government and to private associations; the authority has sought to encourage competition by promoting a finer balance between the parties involved and incentivising authorities with responsibilities in this sector (for further details please see "Regulator reports on large retail groups and suppliers"). No individual investigations are believed to have been initiated as a result of this study.
The authority also concluded an investigation into the increase in prices in the mobile communications sector which took place in March 2009. It considered that there were no grounds to justify the monitoring of this activity.
Economic problems at national and international level have had a particularly strong influence in dampening merger activity in Portugal, resulting in fewer and less complex transactions. Even so, more concentrations were notified to the authority in 2010 than in 2009. Most did not raise complex competition concerns and relatively few decisions imposed remedies, but some aspects of the rulings illustrate the course of the authority's involvement in merger review.
The shortest timeframe for a first-phase decision without remedies was less than one month(1) - this is in line with the authority's consistent efforts to expedite merger control proceedings. However, in two cases, even though approval decisions with remedies were adopted during the first phase, the procedure lasted approximately six months from filing.(2) One case concerned a transaction that was subject to multiple filings (ie, notifications were also made in other jurisdictions) and the authority did not join the other six national competition agencies in the referral of the case to the European Commission, thus maintaining its competence to assess the case.(3)
For the first time since its creation in 2003, the authority adopted a prohibition decision as a result of the legally binding opinion of the media sector regulator, ERC, which considered that the concentration in question had a negative impact on plurality of the media and diversity of opinion (for further details please see "Competition Authority prohibits merger following media regulator's opposition"). Therefore, the authority prohibited the concentration in order to safeguard the public interest, rather than on competition grounds.(4)
The authority also helped to resolve the implementation of structural remedies by undertakings that participated in a concentration (subject to conditions and obligations) in mid-2008; the authority finally approved the acquisition of the assets to be divested.(5)
Unlike its activities in the field of merger control, details of the authority's actions on restrictive practices are rarely made public. The most recent annual activity report dates from 2008. However, in a recent speech the president of the authority summarised its enforcement activity in 2010, indicating that:
- the authority had made a greater effort to close older infringement proceedings with a view to keeping investigations to less than three years (ie, from the beginning of the enquiry);
- findings of infringement represented approximately 20% of total proceedings; and
- the authority considers that it has continued its normal course of activity, noting that it undertook surprise inspections in the context of the fight against cartels and issued five decisions against infringements.(6)
No detailed public information is released about such decisions, but the authority's press releases mention two interesting cases.
First, the authority found against the Ordem dos Técnicos Oficiais de Contas, the official professional body for the accountancy profession, both for a decision as an association of undertakings that restricted competition and for abuse of dominance concerning the mandatory training for the accountancy profession.
Second, the authority condemned a supplier and retailer of hospital equipment for an alleged retail price-fixing agreement. The authority noted among the attenuating circumstances that the purchaser had cooperated with the investigation (even though it was not eligible for the leniency programme), and that the contract was terminated as a result of the investigation and cooperation.
The authority has publicly acknowledged that its priority for 2011 is investigations triggered by leniency submissions.(7)
The authority unsuccessfully appealed a March 2010 judgment of the Lisbon Commercial Court, which had reversed the authority's decision to fine Portugal Telecom for abuse of dominance as a result of its refusal to give two competing cable operators access to its underground ducts (for further details please see "Portugal Telecom wins appeal against Competition Authority fine").(8) This was the first time that the authority had appealed an acquittal decision by a court.
However, on June 25 2010 the same court upheld the authority's decision of December 2008 to fine the Association of Bakers of Lisbon for an alleged restrictive practice consisting of an agreement to share information on retail prices for bread. The association's appeal was dismissed (for further details please see "Court upholds controversial fine for information-sharing agreement").
The Court of Appeal upheld the authority's January 2008 decision against four pharmaceutical companies for concerted practices in the market for glucose strip products, which were allegedly undertaken in the context of public bids launched by hospitals. Three companies appealed the decision, and although the Lisbon Commerce Court had previously upheld the authority's decision, the Court of Appeal reduced the fine imposed on one of the companies and declared proceedings to be terminated in respect of another company.
Transparency and accountability
In an effort to increase transparency and accountability in administrative procedures, the authority intends to approve a procedural manual,(9) but there is no public information on the expected timeframe for approval. The authority launched two public consultations, albeit with a limited timeframe for submissions, on remedies in the context of merger control and on the investigation of restrictive practices. In addition, the authority's website is due for improvement.
The availability of information on merger control activity continues to improve: the electronic system for the submission of merger notifications has been upgraded and its application expanded. However, the publication of the authority's annual activity report has been delayed - the most recent report relates to 2008. Moreover, the action plan for 2011 has yet to be published.
Since 2008 the authority has agreed with competition law specialists on the need to reform the Competition Act, but there is less common ground on the scope and aims of the reform. Nonetheless, there seems to be a consensus that the main aim is to strengthen competition culture and increase enforcement, with suggestions being made on substantive and procedural issues relating to restrictive practices and merger control. Although there is no public information on the timeframe for legislative scrutiny of the amendments and no draft has been made available for public consultation, reform is still expected in 2011.
Equally important is the legal framework for judicial review of the authority's decisions. This is being considered as part of a wider package of measures that has been under review in Parliament since 2010. Among other things, the measures include the creation of a specialist court for appeals against decisions by regulatory and supervisory entities (including the Competition Authority).
Even though 2010 was an undramatic year for competition law enforcement in Portugal, there are signs of significant developments in 2011, whether in respect of the legal framework itself or its application by the authority and the judiciary.
The Council of the Competition Authority, the regulator's decision-making body, has concluded the third year of a five-year mandate and still has much to achieve in applying its initial aims in a complex and challenging economic context. However, the government and the authority itself have recently reiterated the importance of prompt and effective competition enforcement, but the prime minister's resignation on March 23 2011 and the near-certainty of general elections in the next few months mean that further immediate steps are unlikely. However, even as Portugal faces further economic challenges, the long-term need for an efficient and robust competition regime remains.
For further information on this topic please contact Margarida Rosado da Fonseca at Morais Leitão Galvão Teles Soares da Silva & Associados by telephone (+351 21 381 7400), fax (+351 21 381 7411) or email ([email protected]).
(1) See, for instance, Charon/Star Assets (5/2010), filed on January 27 2010 and decided on February 19 2010.
(2) See SC Johnson & Son/Sara Lee's insecticides and repellents business (25/2010), filed on June 23 2010 and decided on December 21 2010; and BENCOM/BP Azores Fuel Business (40/2010), filed on August 23 2010 and decided on February 8 2011.
(3) SC Johnson & Son/Sara Lee's insecticides and repellents business.
(4) Ongoing/Prisa/Media Capital (41/2009).
(5) See Press Release 5/2010 on the conclusion of the implementation of the remedies accepted by Sumolis in the context of Sumolis/Compal (22/2008). (For further details please see "Divestiture trustees: a soft drinks merger with a strong aftertaste".)
(6) Speech by the president of the authority, Professor Manuel Sebastião, on January 14 2011, entitled "Good Laws and Good Institutions Make a Good Country" - a contribution to the conference "Europe 2011 - Regulation and Competitiveness".
(8) Decision of December 22 2010.