Enforcement proceedings in dominance in Spain

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The Spanish body empowered to investigate abuses is the NMCC, which is a public law institution. This authority has taken over the competition commission and the main regulatory bodies, the energy regulator (the National Energy Commission), telecommunications (the Telecommunications Market Commission), the rail sector (the Railway Regulatory Committee), the postal service (the National Commission of the Postal Sector), airports (the Commission of Economic Regulation of Airports) and the audiovisual sector (the State Council for Audiovisual Media).

The NMCC is composed of a council consisting of two chambers: the competition chamber (focused on the enforcement of competition law) and the sectorial supervisory chamber (competent in regulatory matters). In March 2017, the Spanish government opened a public consultation to determine whether it is necessary to carry out another reorganisation with a view to virtually doing away with the NMCC by dividing it into two independent administrative authorities. One would be in charge of competition matters and the other of the regulated markets. There are four directorates, namely a competition directorate and three regulatory directorates (the telecommunication and audiovisual directorate, the energy directorate and the transport and postal services directorate).

The SCA, as amended by Act 3/2013, gives the NMCC powers to pursue investigations, resolve and impose sanctions in competition proceedings. The act also confers on the NMCC arbitration functions, consultative powers and the task of promoting competition in the market.

The Spanish commercial courts are also entitled to declare the existence of an abuse as they have jurisdiction to declare the infringement of articles 1 and 2 of the SCA and articles 101 and 102 of the TFEU.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

According to the SCA, the NMCC can impose fines on the economic agents, companies or associations that intentionally or by negligence infringe competition regulation. For these purposes, the SCA classifies the infringements according to their seriousness as minor, serious and very serious. Behaviours that suppose an abuse of dominance can be classified as serious or very serious infringements.

The amount of the fine will depend on the seriousness of the infringement. Thus, the NMCC may impose fines of up to 10 per cent of the total turnover of the infringing company in the preceding business year in the case of very serious infringements and fines of up to 5 per cent of the total turnover of the infringing company in the preceding business year in the case of serious infringements. When the turnover of the infringing company cannot be calculated, the NMCC can impose a fine of up to €10 million.

In addition to the fine that would be imposed on the company, the SCA foresees a personal sanction of up to €60,000 for each of the legal representatives of the company or the members of the management bodies who have participated in the anticompetitive practice. In fact, in 2016 the NMCC issued its first resolutions fining the legal representatives of the companies that were liable for cartels regulations.

The NMCC published a communication on the method of calculating fines deriving from the infringements of articles 1, 2 and 3 of the SCA in February 2009. These guidelines provided a three-step method for quantifying the fines inspired by the methodology used by the European Commission within the scope of Council Regulation (EC) No. 1/2003.

However, the Supreme Court issued a judgment In January 2015 finding that this method was not applicable under Spanish law. In summary, the Supreme Court held that:

• the 10 per cent limit on the annual turnover of the company (or 5 or 1 per cent depending on the seriousness of the infringement) must be understood as the maximum limit within the sanction and is to be determined according to its seriousness; and
• the percentage must be calculated on a company’s total annual turnover and according to the criteria set out in the SCA.

Furthermore, the SCA sets out the criteria that have to be considered in order to determine the amount of the fine:

• scope and characteristics of the affected market;
• market shares of the infringing companies;
• scope and duration of the infringement;
• effects of the breach on the rights and legitimate interest of consumers or on other economic operators; and
• the illicit benefits obtained as a consequence of the infringement.

The SCA also foresees a list of mitigating and aggravating factors (articles 64.2 and 64.3 SCA).

The main aggravating factors are:

• the repeated commission of infringements established in the SCA;
• the role of leader in, or instigator of, the infringement;
• the adoption of measures for enforcing or safeguarding the achievement of the unlawful conduct; and
• failure to collaborate with, or the obstruction of, inspections.

The main mitigating circumstances are:

• the undertaking of actions that bring about an end to the infringement;
• the effective non-implementation of the prohibited conduct;
• the undertaking of actions intending to remedy the harm caused; and
• the active and effective collaboration with the NMCC outside the scope of the leniency programme.

The sanctioning power of the NMCC shall lapse after four years in the case of very serious infringements, and two years in the case of serious infringements. In cases of application of article 101 of the TFEU, the expiration period would be five years. In this regard, it is important to highlight that the term of the lapse shall be counted from the day when the infringement has been committed or, in the case of continued infringements, from when they have ceased.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The NMCC can impose sanctions directly. These ones are classified as administrative sanctions because the process is under an administrative law regime. Courts can enter into competition matters in two cases: appeal process against the NMCC administrative decision, or lawsuits submitted by private individuals before the commercial courts.

What is the recent enforcement record in your jurisdiction?

In 2018, the NMCC has imposed sanctions for dominant abuse in one case, case SAMAD/01/2016 Cementerios de Leganés: In this case, the NMCC sanctioned Servicios Funerarios Funemadrid, SA with €50,000 derived from an abuse of its dominant position in the cemetery market in the town of Leganes, through refusing access on several occasions to certain associated companies specialising in the creation, installation, ornamentation and inscriptions of niches and headstones.

In addition to it, the Spanish courts have published the following judgments:

• Supreme Court judgment 163/2018, Sala de lo Contencioso Sección 3ª, Appeal No. 2808/2015, 5 February 2018, adopting the same position as the National High Court, confirming that the margin squeeze realised by Correos was not proved sufficiently.
• We should also mention the Supreme Court’s judgment 583/2018, Sala de lo Contencioso Sección 3ª, Appeal No. 3568/2015, 10 April 2018, relating to the NMCC case S/0354/11 Oracle 26 February 2013, respectively annulling its resolution and bringing the proceeding back to the NMCC, indicating the existence of a situation of abuse of dominant position in the field of systems management of relational databases. In this case, no sanction as such was imposed on any of the parties, but the Supreme Court has annulled the NMCC’s decision, bringing the case back to this public entity in order for it to investigate and resolve again.
• Supreme Court judgment 1495/2018, Sala de lo Contencioso, Sección 3ª, Appeal No. 4509/2017, 9 October 2018, related to NMCC case S/0391/91 Mobile Phone Calls of 6 March 2014, which confirmed the NMCC’s resolution, declaring the non-existence of a situation of abuse of dominance.
• Supreme Court judgment 1857/2018, Sala de lo Contencioso Sección 3ª, Appeal No. 6552/2017, 20 December 2018 related to the NMCC case S/0248/10 Short Messages, 12 December 2012, confirming the withdrawal of the sanction imposed on the infringing companies, derived from the abuse in their dominant position through charging an excessive price for the use of short messages.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

As a general principle, contracts, or parts of them, entered into by dominant firms that infringe antitrust provisions, including article 2 of the SCA and 102 of the TFEU, can be declared null and void by the relevant courts.

Regarding whether it is a specific clause or the entire contract that is invalidated, both options are possible under Spanish law, depending on whether the clause or clauses found abusive are essential to the contract or not. In this regard, it is important to note that no specific rules exist regarding this particular point. Thus, existing legislation and legal principles from Spanish civil law are to be applied.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Private enforcement is possible, but only for damages claims (see question 32). The NMCC can order a firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract. Decisions from these proceedings can be appealed before the National High Court and the Supreme Court (see question 33).

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

The Council of Ministers approved Royal Decree-law 9/2017, of 26 May 2017, which implements Directive 2014/104/EU on antitrust damages actions into the Spanish legal framework. The transposition has introduced important amendments to the CPA and the SCA.

Private damage claims are available for both direct and indirect purchasers, and the compensation includes the right to indemnification for actual loss and loss of profit, plus the legal interests since the claim was submitted. Note that the amendments to the SCA cannot be applied retroactively, and the amendments to the CPA are only applicable to claims initiated after 27 May 2017.

The main changes introduced to the SCA are the following:

• recognition of the right of harmed parties to obtain full compensation for damage suffered;
• the introduction of joint and several liability for all infringers for the damage caused to the harmed parties. Therefore, any harmed party can claim full compensation for damage to any of the undertakings intervening in the cartel. Nevertheless, there are two exceptions to this rule, one relating to SMEs and the other relating to undertakings that are exempted from the payment of a fine owing to their participation in a leniency programme;
• the establishment of a limitation period of five years for actions for damages arising from infringements of competition law;
• the binding nature of any competition infringement declared by a final decision of a Spanish competition authority or court, for the purposes of an action for damages brought before national courts;
• the introduction of the rebuttable presumption that cartels always cause harm and the implementation of certain rules in order to make it easier for claimants to calculate and quantify the damage suffered;
• the implementation of a new consensual dispute resolution regime that has the aim of fostering consensual agreements with infringers; and
• the introduction of the passing-on defence, which establishes that the right to compensation granted to the injured party refers only to the overcharge really suffered and that was not passed on along the supply chain. Moreover, the SCA also sets the possibility for indirect purchasers to claim compensation for the harm caused when direct purchasers have passed on the overcharge generated by the violation of competition rules. The burden of proving such passing-on falls to the claimant, although there is a rebuttable presumption that the indirect purchaser has proved the overcharge if it meets certain criteria.

The changes introduced to the CPA mainly refer to the disclosure of evidence. Not only can the harmed party request such disclosure, in addition the defendant in an action may request the disclosure of evidence by the claimant or third parties in order to prepare its defence, especially if it is planning to apply the passing-on defence. When requesting the disclosure of evidence, it must always be duly justified. In the case of the plaintiff, it must submit a well-founded justification including reasonably available facts and enough evidence to support the credibility of the claim. In the case of the defendant, it must present such justification in relation to its defence.

Although it is too early to say it with certainty, the impact on enforcement activity is likely to be significant. Before this, some relevant damage claims were brought before courts in Spain and damages awarded in the sugar industry or electricity distribution markets, for example.

To what court may authority decisions finding an abuse be appealed?

No appeal by administrative procedure may be lodged against the resolutions and acts of the council of the NMCC and judicial appeals may only be lodged in the terms foreseen in the Administrative Jurisdiction Act 29/1998, of 13 July, before the National High Court. According to such terms, infringing parties may lodge a judicial appeal against the decision of the competition authority within a period of two months starting from the day after the notification of the decision.

In general terms, appealing does not lead to a suspension of the sanctions imposed by the administrative body (NMCC), unless the involved companies justify serious damage stemming from the imminent execution of the sanction and the National High Court accepts these arguments as valid to suspend the payment of the fine.

Appeals against the decision of the National High Court on points of law may be only lodged with the Supreme Court. In this sense, the National High Court is entitled to review the agency’s findings of fact, the legal assessment and penalties. By contrast, the Supreme Court focuses only on points of law unless factual findings are found to be clearly erroneous.

Nonetheless, summarising, we can conclude that there are different rights of appeal, depending on the stage of the procedure, as below.

• Decisions of the Competition Directorate are appealed to the Council of the NMCC. The time frame given is 10 days from the date of notification of the decision.
• Decisions by the Council of the NMCC are appealable before the National High Court within two months of the appellant being notified of the decision.
• Judgments issued by the National High Court may be challenged before the Supreme Court within 30 days If there is a matter of significant legal interest. A significant legal interest is presumed with regard to judgments by the National High Court concerning decisions of regulatory bodies.

Moreover, a government’s decision - from the Council of Ministers or any other ministry - confirming or dismissing a previous decision by the NMCC, when applicable, may be directly appealed before the Supreme Court within two months of the day that the appellant is notified.